```

[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]

 
   TRANSFORMING THE DEFENSE DEPARTMENT: EXPLORING THE MERITS OF THE 
              PROPOSED NATIONAL SECURITY PERSONNEL SYSTEM

=======================================================================

                                HEARING

                               before the

                     SUBCOMMITTEE ON CIVIL SERVICE
                        AND AGENCY ORGANIZATION

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 29, 2003

                               __________

                           Serial No. 108-40

                               __________

       Printed for the use of the Committee on Government Reform

  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                                 ______

88-735              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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Internet: bookstore.gpr.gov  Phone: toll free (866) 512-1800; (202) 512�091800  
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota                 ------
MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont 
                                         (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director

         Subcommittee on Civil Service and Agency Organization

                   JO ANN DAVIS, Virginia, Chairwoman
TIM MURPHY, Pennsylvania             DANNY K. DAVIS, Illinois
JOHN L. MICA, Florida                MAJOR R. OWENS, New York
MARK E. SOUDER, Indiana              CHRIS VAN HOLLEN, Maryland
ADAH H. PUTNAM, Florida              ELEANOR HOLMES NORTON, District of 
NATHAN DEAL, Georgia                     Columbia
MARSHA BLACKBURN, Tennessee          JIM COOPER, Tennessee

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                    Ronald Martinson, Staff Director
                John Landers, Professional Staff Member
                          Chris Barkley, Clerk
            Tania Shand, Minority Professional Staff Member

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 29, 2003...................................     1
Statement of:
    Chu, David S.C., Under Secretary for Personnel and Readiness, 
      Department of Defense; and Dan G. Blair, Deputy Director, 
      Office of Personnel Management.............................    12
    Harnage, Bobby L., national president, American Federation of 
      Government Employees, AFL-CIO; and G. Jerry Shaw, general 
      counsel, Senior Executives Association.....................    89
    Walker, David M., Comptroller General of the United States, 
      U.S. General Accounting Office.............................    56
Letters, statements, etc., submitted for the record by:
    Chu, David S.C., Under Secretary for Personnel and Readiness, 
      Department of Defense, prepared statement of...............    15
    Davis, Hon. Jo Ann Davis, a Representative in Congress from 
      the State of Virginia, prepared statement of...............     3
    Harnage, Bobby L., national president, American Federation of 
      Government Employees, AFL-CIO, prepared statement of.......    92
    Shaw, G. Jerry, general counsel, Senior Executives 
      Association, prepared statement of.........................   140
    Walker, David M., Comptroller General of the United States, 
      U.S. General Accounting Office, prepared statement of......    60
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California, prepared statement of.................     7

   TRANSFORMING THE DEFENSE DEPARTMENT: EXPLORING THE MERITS OF THE 
              PROPOSED NATIONAL SECURITY PERSONNEL SYSTEM

                              ----------                              

                        TUESDAY, APRIL 29, 2003

                  House of Representatives,
          Subcommittee on Civil Service and Agency 
                                      Organization,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Jo Ann Davis 
(chairman of the subcommittee) presiding.
    Present: Representatives Davis of Virginia, Murphy, Waxman, 
Norton, Davis of Illinois, Watson and Cooper.
    Staff present: Chad Bungard, deputy staff director and 
senior counsel; Ronald Martinson, staff director; John Landers, 
professional staff member; Heea Vazirani-Fales and Vaughn 
Murphy, legislative counsels; Chris Barkley, clerk; Phil 
Barnett, minority chief counsel; Christopher Lu, minority 
deputy chief counsel; Tania Shand, minority professional staff 
member; Earley Green, minority chief clerk; Cecelia Morton, 
minority office manager; and Teresa Coufal, minority assistant 
clerk.
    Mrs. Davis of Virginia. A quorum being present, the 
Subcommittee on Civil Service and Agency Organization will come 
to order.
    Thank you all for joining us today. We are here to discuss 
the Defense Department's proposed National Security Personnel 
System, which is part of the larger Defense Transformation for 
the 21st Century Act. In terms of both size and scope, this 
personnel proposal, which affects nearly 700,000 civilian 
employees of the Pentagon, or about one-third of the Federal 
Government's non-postal civilian work-force, is among the most 
important matters that will come before this subcommittee this 
session.
    I called this hearing to give the members of this 
subcommittee an opportunity to learn more about this 
legislation and to question the Defense Department and the 
other stakeholders about the implications of this proposal, and 
I want to get to our witnesses as quickly as possible.
    Clearly, there are questions that are on everyone's mind, 
foremost among them being the issue of whether Congress should 
give the Defense Department flexibilities that exceed those 
granted to the new Homeland Security Department just a few 
months ago. I know many of our witnesses also want to address 
that topic.
    I begin this hearing with an open mind. We must find a way 
to recruit, reward and retain our most talented employees and 
to get the most out of the Federal work force. And the Defense 
Department, given its unique mission and the necessity for 
civilian employees to work hand in hand with the brave men and 
women who wear the uniform of our armed services, certainly has 
personnel needs that are different from the rest of the Federal 
Government. But as we all know, pay-for-performance will not 
work without a strong personnel management system, one that is 
understood and accepted by employees and their supervisors. I 
appreciate the Pentagon's decision to publish much of this 
information in the April 2 Federal Register, and I'm sure we 
will have questions dealing with these best practices in 
addition to the language of the legislation before us.
    I want to thank all of our witnesses, but now I'd like to 
go to my ranking member, Mr. Danny Davis.
    [The prepared statement of Hon. Jo Ann Davis follows:]

    [GRAPHIC] [TIFF OMITTED] T8735.001
    
    Mrs. Davis of Virginia. Do you have an opening statement, 
Danny?
    Mr. Davis of Illinois. Thank you very much.
    Madam Chairwoman, I, too, want to welcome the witnesses as 
we begin this session. We started this session working in a 
bipartisan manner to educate ourselves about how to best go 
about reforming the Civil Service. Since March 5, there have 
been four Civil Service-related hearings in which we have heard 
from over 30 witnesses and sat through hours and hours of 
testimony. What I've gleaned from the experts who took time out 
of their schedules to testify at these hearings is that 
performance management systems and employee input are 
imperative to any Civil Service reform proposal. This was 
crystallized for us at the joint House and Senate hearings on 
Civil Service reform where, on a bipartisan basis, we, 
Democrats and Republicans alike, applauded Chairman Voinovich 
when he stated in response to GAO testimony about the 
President's Human Capital Performance Fund that the importance 
of performance management systems that the worst thing that 
could happen is that you get started with this thing, and then 
it is a disaster, and everybody points to it and says, I told 
you so. It wouldn't work.
    For those of us who've been through the mill, this is 
something you've really got to spend a lot of time in order to 
do it right. Here we are today at a rushed hearing, ignoring 
the advice of over 30 witnesses, and preparing to give the 
Department of Defense the authority to do what we were not 
willing to give the President the authority to do 3 weeks ago. 
If we're not going to spend the time to do it right, then why 
the hearings? Why the witnesses? Why the countless hours of 
testimony?
    The legislative proposal that we're considering today and 
which is scheduled to be marked up on Thursday was delivered to 
Congress only 2\1/2\ weeks ago. In the human capital section of 
the legislative proposal, it says that DOD's proposal is based 
upon the Department's civilian human resources strategic plan. 
Just last month, GAO reviewed DOD's civilian human resources 
strategic plan and essentially declared it woefully inadequate. 
The GAO report stated, ``the human capital strategic plans GAO 
reviewed for the most part lacked key elements found in fully 
developed plans. Most of the civilian human capital goals, 
objectives and initiatives were not explicitly aligned with the 
overarching mission of the organization. Consequently, DOD and 
the components cannot be sure that the strategic goals are 
properly focused on mission achievement.''
    And the report goes on and on. This weak foundation is what 
the legislative proposal is based on.
    Are we moving this legislation because it is good 
government, or because it is politically expedient? DOD, by its 
own admission, stated in response to GAO's comments that we are 
obligated to point out that a significant portion of the review 
concentrated on strategic planning activities in the early 
stages of development. This is exactly the problem with moving 
this legislation so quickly. The proposal has no performance 
management system or safeguards to protect against abuse. And 
there was no employee input in the development of the proposal. 
This proposal will impact 700,000 civilian DOD employees, and 
employee representatives first saw this legislative proposal 
earlier this month, about the same time DOD was briefing 
congressional staff on it.
    My staff has reviewed the April 2 Federal Register notice 
on DOD's nine demonstration projects, which DOD says is the 
basis for their legislative proposal and in which they state 
provides the opportunity for employee comment. I do not 
consider responding to a Federal Register notice adequate 
employee input in the development of a plan, not to mention 
that what appeared in the Federal Register in no way resembles 
what is being considered by the subcommittee today.
    In an article in Sunday's Washington Post, a spokesman for 
Chairman Tom Davis explained that we are rushing to hold this 
hearing and markup because, ``the train is leaving the 
station.'' Mr. Davis feels like we either drive it or get run 
over by it. This train may be leaving the station, but, if the 
Government Reform Committee is to drive it, I'd rather do so 
down the track leading toward good government rather than 
political expediency. By the end of this week, we'll know which 
track this committee is on.
    I welcome the witnesses, Madam Chairwoman. Thank you very 
much.
    Mrs. Davis of Virginia. Thank you, Mr. Davis.
    And we are also joined the by the ranking member of the 
full committee Mr. Waxman.
    Mr. Waxman, do you have an opening statement?
    Mr. Waxman. I do. Thank you very much, Madam Chair. I'd 
like to thank you for holding this hearing. Without question 
the administration's proposal to rewrite rules for civilian 
employees of the Department of Defense is an important issue 
and one that merits careful consideration by our committee. 
That's why I was troubled to learn last week that the bill to 
exempt the Department from the Civil Service laws was to be 
rushed through the committee tomorrow, just 1 day after the 
introduction of the legislation. The markup has now been 
delayed 1 day. That's helpful, but it is still not the right 
way to consider a piece of legislation that will directly 
affect 700,000 civilian employees at the Department of Defense 
and indirectly affect 2 million other Federal employees.
    At the Volcker Commission hearing last month. I read a 
quote from Tom Friedman, the columnist with the New York Times. 
Mr. Friedman's quote is worth keeping in mind as we consider 
reforming the Civil Service System. Mr. Friedman wrote, ``Our 
Federal bureaucrats are to capitalism what the New York Police 
and Fire Departments were to September 11, the unsung guardians 
of America's civic religion, the religion that says if you work 
hard and play by the rules, you'll get rewarded, and you won't 
get ripped off. So much of America's moral authority to lead 
the world derives from the decency of our government and its 
bureaucrats and the example we set for others. They are things 
to be cherished, strengthened and praised every single day.''
    Unfortunately, the Bush administration has hardly done its 
part to cherish, strengthen and praise Federal employees. Since 
day 1 of this administration, there has been a relentless 
attack on the Civil Service. Federal jobs have been given to 
private contractors, who are often unsupervised and unable to 
perform the jobs as efficiently or effectively. Attempts have 
been made to slash annual pay increases for Federal employees. 
Financial bonuses have been given to political appointees 
instead of career employees. And now we have an effort by the 
administration to completely strip Federal employees of basic 
Civil Service protections.
    It's incredible that the group of employees the 
administration has chosen to target this time are Defense 
Department employees. These are the same employees who saw 
terrorists crash an airplane into their headquarters. These are 
the same employees who made enormous sacrifices to support the 
military effort in Iraq.
    What's truly remarkable is the sweeping nature of the bill 
before us. It gives the Secretary of Defense a blank check to 
undo in whole or in part many of the Civil Service laws in the 
U.S. Code. These provisions have been adopted over the past 
century to ensure that our Federal Government did not become a 
patronage system.
    This bill goes well beyond the flexibilities that Congress 
gave the Homeland Security Department last year. Among other 
things, this bill gives supervisors complete discretion to set 
salaries and allocate raises. It removes the statutory 
requirement that layoffs be based on performance and seniority, 
rather than favoritism. It allows DOD to require employees to 
work overtime or on holidays and weekends without any 
additional pay. It denies employees their current right to 
appeal unfair treatment to the Merit Systems Protection Board. 
And, it strips employees of their collective bargaining rights.
    Now, the administration will say I've distorted what 
they're planning to do, but read their bill. After all, you've 
had it for 24 hours. Read that bill.
    I would hope we would have order, Madam Chair.
    Everything I've suggested is possible because this bill 
before us is a blank check. We don't know what the Defense 
Department is going to do. DOD is asking to be exempted from 
the Civil Service laws but isn't telling us what kind of 
personnel system it's going to adopt. Given the Bush 
administration's track record on Civil Service issues, there's 
no reason to think that DOD's new system will be a fair one. 
There's almost no reason to think that the new personnel system 
will be a good one.
    Last month GAO issued a report summarizing its review of 
DOD's civilian strategic plan, presumably a blueprint for any 
personnel system that DOD might adopt. GAO found the plan to be 
completely lacking. That hardly inspires confidence for what 
DOD might do if we give them this enormous authority.
    As I said at the full committee hearing last month, I 
believe that we should be considering Civil Service reforms, 
but this is not the way to do it. I urge my colleagues to slow 
down this runaway legislative train and give this bill more 
careful consideration.
    Thank you, Madam Chair.
    Mrs. Davis of Virginia. Thank you.
    [The prepared statement of Hon. Henry A. Waxman follows:]

    [GRAPHIC] [TIFF OMITTED] T8735.002
    
    [GRAPHIC] [TIFF OMITTED] T8735.003
    
    Mrs. Davis of Virginia. We will have order, please.
    Thank you, Mr. Waxman.
    Are there any other Members who wish to make an opening 
statement?
    Ms. Norton. If I may, Madam Chairwoman.
    Mrs. Davis of Virginia. Ms. Holmes Norton.
    Ms. Norton. I appreciate this hearing, Madam Chairwoman; 
indeed I guess we ought to be grateful for this hearing. And if 
I may say so, Madam Chairwoman, I appreciate the careful way in 
which you laid out the agenda for the committee in the 
beginning of the session, and I recognize that you and Mr. 
Davis are under some pressure to move this bill in the way you 
are, and I regret that puts us all under pressure. I don't 
think this starts--this kind of fast track starts with this 
subcommittee or committee, but perhaps above your pay grade. 
But, the rest of us do have questions to ask, for example, why 
we are putting on a fast track huge changes unprecedented in 
100 years for one-third of the civilian work force? We've got 
to ask the obvious question: What is the emergency? Because, 
nobody would move with this speed for this many Federal 
employees affecting this many operations of the Federal 
Government unless there were some palpable emergency.
    Indeed I have to ask about the emergency in light of the 
fact that the DOD hasn't reformed itself yet. We are told that 
Mr. Rumsfeld wants the civilian part of the work force to be 
reformed. Well, should it be reformed before he's got in place 
the reforms he says he wants to make in the Department of 
Defense, especially since we are given security reasons for 
this action today?
    I am not unsympathetic at all with necessary changes in the 
Department of Defense on both sides, military and civilian. In 
this region we lived through September 11. I think we'd have to 
be brain dead not to look at every part of the defense 
establishment after September 11 to see what should be changed. 
Moreover, I am particularly sympathetic with the notion that 
Mr. Rumsfeld espouses that he wants to move some of the support 
jobs now in the military to civilians, whether to contractors 
or to civilian employees, he says, because that would be less 
expensive. I say also because I do not think we can live 
through another major conflict where we snatch people out of 
their jobs in the Reserves and in the National Guard and send 
them abroad as we have with the consequences on their families 
and on their communities. All of this, it seems to me, should 
be on the table. But why should it be on the table with this 
speed, swept up so that it, in fact, gets no significant 
scrutiny?
    Why are we ignoring the only precedent on the table, the 
big, fat Homeland Security Department model? Now, if you want 
to reform a big part of the work force, the first thing you 
would do, it seems to me, is reform a smaller part of the work 
force and see if that works--see what works and what doesn't. 
Whether it was intended or not, that's exactly what you might 
regard the Homeland Security Department, and yet, the ink is 
barely dry there, and this legislation goes beyond, in many 
respects, what the Homeland Security Department is allowed to 
do; this in spite of the fact that at a joint hearing with the 
Senate, the GAO testified that for pay performance alone, you 
had to have a credible and validated system in place as far as 
GAO was concerned in order to avoid huge problems.
    Moreover, I can't understand this fast track for another 
reason. Mr. Voinovich said at that joint hearing just a couple 
of weeks ago that bill wasn't going to go anywhere. He said the 
failure to have in place for--pay-for-performance, the credible 
system, meant that bill just wasn't going anywhere. He was the 
chairman of the Senate committee. Why do we rush things through 
the House, knowing full well that in this democracy it takes 
two to tango, and that the Senate, in effect, has already said 
this kind of reform needs to be slowed down until we have in 
place the predicates for reform?
    One of the things I asked my colleagues to do is to ask 
themselves if a major business was to effect such a huge 
overhaul in its business, how would it do it? Would it, for 
example, bypass the only personnel experts on board? In this 
case the likelihood of bypassing OPM is great and, in fact, is 
allowed, and all for something vaguely called national 
security. Hey, wait a minute. We've lived through that word 
before. And one of the things we're not going to do is to allow 
that word to be impenetrable. National security should not be 
enough to throw up in the air the work force, yell out national 
security, and figure that everybody understands what you're 
doing. This is structural change of the government itself, and 
I believe you are putting the government at risk when you 
proceed recklessly without the kind of scrutiny one would 
expect even of a small part of the work force.
    The waivers in almost half of the major chapters of section 
5 that are allowed here are mind-blowing, that you could waive 
all the due process and appeal rights, all the collective 
bargaining rights. Well, what kind of government are you trying 
to create? In whose image? In part or in full, six other 
chapters that were not waivable in the Homeland Security Act 
are waivable here. You could do reductions in force not only 
setting aside tenure, but setting aside efficiency and 
performance rating? Well, then, how are you going to do the 
reduction in force? What standard are you going to use? It's 
not time on the job, it's not efficiency, and its not your 
performance rating. This sounds like a cruel joke, and I think 
that whatever is pressing it needs to have somebody press the 
other way.
    My own experience in government with a very troubled 
agency, obviously a microagency compared to the Defense 
Department, several thousand employees at the Equal Employment 
Opportunity Commission, was, however, that I had to change the 
agency at least as much, and I would grant you more, than you 
are trying to change the DOD because it had to be changed from 
the bottom up, every system tossed out and put in place. And my 
own experience tells me you don't do that from a blueprint. You 
do it from experience and experimentation. You work on parts of 
the system, shake out the problems, and then you go to larger 
and larger parts of the system.
    We had to rebuild that agency. We had to move all the 
lawyers and the investigators who were in different parts of 
the country together. We had to move it from an expense 
litigation-oriented system that produced few remedies to a 
system based more on mediation and settlement, where the 
remedies went up, and, whereas we had a dozen different 
agencies, we took three in different parts of the country until 
we were sure that we were not creating a problem greater than 
the problem we are trying to solve.
    And this morning I am going to want a guarantee that you 
are not doing precisely that: creating in our military 
establishment a bigger problem than the problem we are trying 
to solve, because if you are doing that, my friends, you are 
putting the U.S. Government at risk.
    Thank you, Madam Chairwoman.
    Mrs. Davis of Virginia. Please, let's keep order so we can 
get to our witnesses here.
    Are there any other Members who would like to make an 
opening statement?
    Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Madam Chairwoman. I will be very 
brief because I know others have covered my concerns.
    But first I'd just like to emphasize again and question the 
need to move ahead at such a rapid pace on something that 
obviously will affect so many lives and will set potentially a 
precedent for other agencies. So, I see no reason why we should 
rush through something that will affect over 700,000 civilians 
at the Department of Defense, many of whom are my constituents. 
Congresswoman Eleanor Holmes Norton raised many of these 
issues, and I want to associate myself with her remarks.
    I also question the need to move forward at this time until 
we've seen the results of the experiment that the Congress just 
enacted a short time ago with respect to the new Department of 
Homeland Security. And it seems to me we need to see how that 
process works, how the changes in the personnel system in that 
Department work before we start a wholesale reorganization of 
another department.
    So I don't want to prolong this. I want to get to the 
witnesses. I want to thank you, Madam Chairwoman, for the 
opportunity to make an opening statement.
    Mrs. Davis of Virginia. Thank you, Mr. Van Hollen.
    I think since so many have said it that I need to make a 
statement with regards to the expediency in which we had to 
hold this hearing. I regret that we had to do it so quickly; 
however, unfortunately, if you notice, it is not a stand-alone 
bill. We are having the hearing on portions of the bill that 
are being marked up in Armed Services next week, and in order 
to make sure that we had a hearing under what I felt was the 
jurisdiction for this matter, we had to do it very quickly this 
week. And I do appreciate each one of you showing up today to 
hear our witnesses.
    I ask unanimous consent that all Members have 5 legislative 
days to submit written statements and questions for the hearing 
record, and that any answers to written questions provided by 
the witnesses also be included in the record. Without 
objection, it is so ordered.
    I also ask unanimous consent that all exhibits, documents 
and other materials referred to by Members and witnesses may be 
included in the hearing record, and that all Members be 
permitted to revise and extend their remarks. Without 
objection, so ordered.
    It is the subcommittee standard of practice to ask 
witnesses to testify under oath, so if you will, Mr. Blair and 
Dr. Chu, if you will both stand, please.
    [Witnesses sworn.]
    Mrs. Davis of Virginia. Let the record reflect that the 
witnesses have answered in the affirmative.
    Our first panel is here to represent the administration, 
and we're fortunate to have Dr. David Chu, the Under Secretary 
of Defense for Personnel and Readiness. We also have Dan Blair, 
the Deputy Director of the Office of Personnel Management.
    Dr. Chu made it back from England just in time to be with 
us this morning, so we're delighted that you are able to be 
here to testify. You are recognized first for 5 minutes, Dr. 
Chu.

STATEMENTS OF DAVID S.C. CHU, UNDER SECRETARY FOR PERSONNEL AND 
  READINESS, DEPARTMENT OF DEFENSE; AND DAN G. BLAIR, DEPUTY 
            DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT

    Mr. Chu. Thank you very much, Madam Chairwoman. I very much 
appreciate the opportunity you have given the Department of 
Defense and the Office of Personnel Management to provide this 
testimony this morning and to explain the authority we'd like 
to seek from the Congress.
    We also want to thank the Congress for its earlier actions 
in giving the Department of Defense significant demonstration 
authority to conduct experimentation in alternative personnel 
systems over the last 20 years. The Department of Defense, as 
some here may be aware, currently has nine such demonstration 
projects operating. They cover 30,000 employees and 
specifically respond to the issue that I think Mr. Owens is 
concerned with.
    There is a substantial base of long-standing, practical 
evidence about the kinds of change we would propose to make. 
Indeed, the OPM has independently surveyed our personnel. Its 
findings are contained in the Summative Evaluation for 2002 
that looks at the response of the employees themselves over the 
course of those demonstrations. What that evidence indicates is 
that employees are more satisfied and, therefore, more 
productive as a result of the changes that have been made. 
That's also true if you look at OPM's most recent survey of the 
entire Federal Government, and you look at the employees who 
are in the demonstration projects as opposed to all other 
employees, and again you will find a higher level of 
satisfaction in our work force.
    It is for this reason that a year ago, over a year ago, in 
March 2002, this Department began a review of the lessons 
learned from the 20 years of demonstration projects we have 
been running. Those lessons, as you indicated, Madam 
Chairwoman, are summarized in the April 2 Register notice, 
because the intent of the Department is, in fact, to utilize 
the authority Congress has given us on a broader scale that 
will largely apply to our acquisition work force.
    One conclusion you can reach from that review is not only 
do these demonstrations point the way ahead to a much more 
effective Civil Service for the future, but that we would like 
the authority to extend those practices to the entire 
Department of Defense, and to learn from those areas where the 
demonstration authority did not quite reach the level we might 
need, and to propose the additions that we have recommended in 
this larger transformation bill.
    The questions that you have raised this morning in this 
subcommittee go to why we want this, and why we want this at 
this particular juncture in history. I think there is a single 
word that summarizes our case for change, and this is 
transformation; that is, the need to reshape American military 
forces to meet the needs of the early 21st century, the needs 
that were driven home to us on September 11, the needs that 
were driven home to us in operations that have taken place 
since then. We recognize that people are at the heart of the 
ability of the Department of Defense to perform, and it is the 
quality of those people, the rules under which they operate, 
that are essential if we are going to succeed in the future.
    We view this as one force, a force of uniformed personnel, 
Active and Reserve, and a force of civilians, both civil 
servants and contractors. It must be a force that is agile; it 
must be a force that is responsive to fast-paced, changing 
circumstances in the world outside the boundaries of the United 
States.
    We believe we have a good set of civil servants to a large 
extent despite the rules under which they have to operate, not 
because of those rules. That is, I think, underscored by the 
results of the Brookings surveys of a variety of Federal 
agencies last year, which alone among the Federal Government 
pointed to the Department of Defense civilians as being more 
mission-oriented and more satisfied a year after the first 
Brookings surveys were done. You think about the rules under 
which this Department operates. They really go back in their 
intellectual history to the late 19th century. As some others 
have observed this morning, they are often over 100 years old 
in their origins. The U.S. Government was a very different 
creature in that period. It was largely an administrative set 
of processes for which civil servants were responsible. The 
modern Defense Department, of course, dates from the Second 
World War when the United States emerged on the world scene as 
a great power. That's a very different set of mission 
responsibilities, and it is to that different set of mission 
responsibilities that the powers sought in this legislation are 
directed.
    We need to move perhaps as many as 320,000 military billets 
from uniformed status to civil status of one sort or another. 
One of the principle reasons they are in military status today 
is that's a much more flexible set of work rules than 
characterizes the Civil Service. We'd like to consider the 
Civil Service as an alternative. We would not only wish to 
think about contract employees as the direction we should go. 
Likewise, we will, over the next 10 to 15 years, have to hire a 
new generation of civil servants to replace the roughly half of 
our work force that in that period of time will retire. And 
above all, we would like to meet the demands of our own 
employees, which have been reiterated in survey after survey, 
that the reward systems in the Department of Defense, like in 
other Federal agencies, should better reflect the actual 
performance of the employees, not simply their longevity.
    This is, as some of you have noted, a bill that is very 
much oriented along the lines of the homeland security bill the 
Congress enacted last year. It does contain some new elements. 
Most specifically, we would like to commit to and we would like 
the statute authority to undertake national bargaining with our 
unions on human resource issues. At the moment under current 
statutes, we must bargain every issue on a local level. Let me 
give you an example of what that produces.
    The Congress has properly been upset at the abuse of travel 
and charge cards by Federal employees. We are trying to get the 
right to garnish the salaries of employees who do not pay their 
travel card bill. We have 1,366 locals in the Department of 
Defense. The last administration began the process of that 
bargaining. We still have 200 locals to go in finishing that 
task.
    But there are also important provisions in here that deal 
with our ability to hire more experienced workers, older 
Americans, if you will, to hire experts and to hire more 
promptly. In a word, we are ready to proceed, Madam Chairwoman, 
if the Congress is willing to give us the authority.
    We believe we need a strong Civil Service in the Department 
of Defense as a matter of national security. We have 20 years 
of demonstration experience that backs up the proposals here 
that have been summarized, as you noted, in our April 2 Federal 
Register notice. We have over a year of in-depth review of that 
experience. We are ready to meet the kinds of criteria that the 
Comptroller General would set out as necessary for a successful 
pay-for-performance system. We seek your help in making sure 
the Department of Defense Civil Service is a model for the 
Nation and a model for the world. Thank you.
    Mrs. Davis of Virginia. Thank you, Dr. Chu.
    [The prepared statement of Mr. Chu follows:]

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    Mrs. Davis of Virginia. Mr. Blair, no stranger to this 
committee, has already testified before us twice, and we really 
appreciate it, and we thank you for coming today, and you're 
recognized for 5 minutes.
    Mr. Blair. Thank you, Madam Chair, Mr. Davis, members of 
the committee. Thank you for including me in today's testimony 
and list of witnesses. I feel particularly privileged to join 
my colleague Dr. Chu from the Department of Defense to talk 
about ways for the Department to reach even higher levels of 
performance for their civilian employees.
    These past few weeks and months we've been awed by the 
performance of those who serve in the uniform of our Nation, 
and we cannot thank them enough for their sacrifices that they 
have made. And so those sacrifices serve as an especially 
fitting backdrop for our topic today, and that's the 
Department's more than 635,000 civilian employees, civil 
servants in the finest traditions of American public force. 
They are a far less visible, but no less important component of 
the Department's awesome total force. They, too, perform 
magnificently in support of our troops, and indeed many were 
actually deployed in the Gulf. And these dedicated, rarely 
acknowledged, and sometimes maligned public servants deserve 
our thanks as well. They actually delivered.
    Today DOD seeks legislation to transform the way it manages 
its civilian employees as it confronts the challenges of the 
21st century. In doing so, we believe the Department's 
proposals represent another effort to provide badly needed 
human resources flexibilities so that a critical agency with a 
crucial mission can deliver results and secure the Nation.
    The proposal is patterned after the landmark Homeland 
Security Act. The bill is intended to afford the Defense 
Department wide latitude to design human resources system 
tailored to its needs. It allows the Department and OPM to work 
collaboratively with the major DOD unions and rewrite many of 
the rules that govern DOD's civilian employees. DOD will be 
able to take its already successful efforts at broadbanding and 
pay-for-performance and extend them throughout the Department.
    We find this truly exciting, and DOD can lead the way at 
changing the conversation from what the Director of OPM Kay 
Coles James has called what my pay increase will be next year 
to what my--excuse me--from what the pay increase will be next 
year to what my pay increase will be. We look forward to 
continuing our partnership with DOD as they pursue further 
innovations, along with the opportunity to continuing creating 
systems that adapt to changing conditions while maintaining 
merit, and that is something OPM is committed to. We take our 
responsibility to work with DOD and establish a new system 
through joint regulation very seriously.
    Again, thank you for this opportunity, and I will be happy 
to answer any questions.
    Mrs. Davis of Virginia. Thank you, Mr. Blair.
    The first question I have is for both of you, and I'd like 
to hear from you, Director Blair, first after I ask the 
question.
    Last summer and fall administration officials declared at 
that time merger of two existing agencies with different 
personnel rules and labor agreements necessitated the 
extraordinary flexibilities they were seeking for the creation 
of a new department. They said the new human resources 
management system it would create could be a model for the rest 
of the government. That new system was supposed to be created 
with stakeholders' input and oversight by Congress.
    We haven't even seen a sliver of a new model at DHS as of 
yet, and we are being presented with an argument from DOD that 
we must now authorize the administration to proceed on its own 
with even greater delegations from the Congress. You already 
have a fully formed Department at DOD, and you just prosecuted 
a very successful foreign military expedition with thousands of 
support staff, both employees and contractors.
    Wouldn't it be wise for Congress to wait and to see how DHS 
makes use of these flexibilities before we make similar changes 
that affect an additional over 600,000 Federal employees? How 
do you justifiy this legislation coming at this time, and don't 
just--please don't tell me a matter of national security, 
unless you can back that up with specifics that show me how 
national security is currently being harmed by the provisions 
of Title 5, like the chapter on training. And, Director Blair 
I'd like to hear from you first.
    Mr. Blair. Well, let's remember the entity we're talking 
about. Last summer we were talking about a new department which 
was going to be comprised of 22 different agencies and 
departments, over 108 different subcomponents thereof. It 
definitely needed flexibility in order to bring itself 
together, and we are in the process of bringing about the 
design. We're working collaboratively, as Congress intended, 
with our union partners in this process.
    The DOD is different. Dr. Chu just referenced that DOD was 
born after World War II, and it has 20 years of demonstration 
project experience. It has extensive experience in pay banding 
and pay-for-performance. They are two entities, and I don't 
think it's necessary at this point to wait for one entity to be 
up and running before we pattern DOD's reform proposals after a 
new department--after the new ones who will be taking place at 
a new department.
    Mrs. Davis of Virginia. Secretary Chu.
    Mr. Chu. My turn?
    Mrs. Davis of Virginia. Your turn.
    Mr. Chu. Thank you, ma'am.
    First, as you yourself emphasized, this is already a fully 
formed department. We do have, as my colleague Dan Blair 
underscored, significant experience in the issues that are at 
stake here. In fact, we've been in consultation with our 
colleagues in the Department of Homeland Security to share with 
them the lessons that we have learned in these earlier 
demonstrations.
    I think I also want to emphasize that the Department of 
Defense has an extraordinary reach of experience in personnel 
management. We do, after all, manage, under the jurisdiction of 
the Armed Services Committee on which you sit, the military 
personnel systems, which are even larger in character. We have 
1.4 million reservists, 1.3 million Active Duty individuals. 
And I think most observers agree that this is done with great 
success, as we've seen in the current operations, and this is a 
tribute, I think, in the end to the excellence of personnel 
management, the experience we bring to the table in this 
regard. I do think we can help lead here.
    We believe we need to move forward because the 
transformation process, as a matter of urgent military need, 
should go forward.
    Mrs. Davis of Virginia. Thank you.
    Dr. Chu, your proposal would allow the administration to 
write and rewrite a lot of Title 5's personnel programs. The 
general idea would be that DOD and OPM would work together on 
the new rules. The two agencies would have to agree.
    Here's my concern: When the two agencies don't agree, the 
Secretary could overrule OPM or might not even consult with 
OPM, effectively eliminating the current checks and balance 
systems if the Secretary declares it's essential to national 
security to regulate unilaterally.
    The Department of Homeland Security does not have this 
power. The NSPS proposal provides that if the Secretary 
certifies that an issuance or adjustment is essential to 
national security, which, by the way, is not defined in the 
act, the Secretary can waive the requirement that the 
regulations establishing or adjusting a human resources 
management system be issued jointly with OPM, subject to the 
direction of the President.
    In my experience, conflict is an inherent feature of 
bureaucracy, and any official given a way out of that conflict 
will be sorely tempted to take it. National security is almost 
broad enough to be meaningless as a way to constrain the 
Secretary of Defense, and, after all, we are discussing a 
national security personnel system. So what constitutes 
``essential to the national security?'' What does ``certify'' 
mean. I mean, there's some holes in here that I need clarified 
that I don't find in the legislation.
    Mr. Chu. First, Madam Chairwoman, let me emphasize, we 
intend to consult with our OPM colleagues. We have already done 
so. And, in fact, as I would emphasize, much of the design of 
this system derives from OPM studies and OPM's reviews, 
including OPM surveys of our demonstration project. So we 
ground our efforts really in OPM's intellectual leadership over 
the last many years.
    To this specific provision--I think there are three reasons 
for the provision. First, as you yourself hint in your 
question, there is the issue of governance. There is a question 
here, I think, of whom does the Congress hold responsible for 
national defense, and I think the answer to that question is 
the Secretary of Defense. And as all good organizational 
principles argue, he or she needs to be vested with the 
authority necessary to carry out that responsibility.
    Second, as you suggest, there will be, as a matter of 
practicality, situations where we disagree, and I think good 
public administration does not leave you with a tie. You do 
need some kind of tiebreaker, and that's essentially what this 
provision provides.
    And finally, I think we all recognize, including OPM, that 
one size does not fit all. OPM's responsibility, as we all 
appreciate, is to represent the many different agencies in the 
Federal Government. Others from time to time will have a 
different set of needs and a different set of requirements than 
the Department of Defense. And what this structure does, is to 
provide an equitable way for Defense to proceed in a way that 
responds to the military needs of the country.
    National security waivers, as people on this committee are 
aware, are scattered throughout the U.S. Code as something that 
we provide as necessary to defend the Nation's interests.
    Mrs. Davis of Virginia. I'm going to have to move on to my 
colleagues, but I have a lot more questions for you if they 
don't happen to ask them.
    I am going to move on now to my ranking member, Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman.
    Dr. Chu, there has been a tremendous amount of conversation 
in the last several years about transforming or reforming the 
Civil Service System. My question is when DOD thinks of 
reforming the Civil Service System, are we equating that with 
improving the Civil Service System; and if so, for whom?
    Mr. Chu. Yes, sir. I think we are focused on improvements. 
We want to make it better because we recognize it needs to be 
better for the Department to succeed.
    I think there are two important ways in which this 
legislation would facilitate improvement; the first, to make it 
possible to hire promptly. We are not going to succeed in 
replacing the current generation of civil servants, to say 
nothing of the additional slots that might transfer from the 
military to civil status under current hiring procedures. It 
takes this Department an average of 3 months to hire someone, 
and as a practical matter--and I understand that from Mr. 
Blair, that we are better than many agencies in that regard. As 
a practical matter if you go to a college job fair, and you are 
sitting at the table, as our people do, and say, it'll be 3 
months before we can let you know, and your competitor at the 
next table says, we'll tell you tomorrow, you can guess which 
offer the talented young man or young woman is going to accept. 
So speed of hiring, alacrity of hiring, is a key feature of 
what we would like to improve.
    Second, we have been convinced by the experience at China 
Lake and at other demonstrations that pay banding as the pay 
construct, as the job responsibility construct for our Civil 
Service servants, is the preferred way to go, and we would need 
the authority in this statute in order to get to that result. 
It would allow us to be more competitive in the marketplace, 
allow us to adjust job responsibilities promptly as 
circumstances change.
    Mr. Davis of Illinois. Thank you very much.
    Mr. Blair, Director Chu has talked about expediency and the 
rate at which we move. During a recent staff briefing with DOD, 
they stated that it was forced to contract out for Iraqi 
translators because OPM was slow to respond to their request to 
expedite hiring foreign translators as civil servants. Given 
the nature of the question, it should have received top 
priority. Do you know how long it took OPM to turn around DOD's 
request?
    Mr. Blair. I don't know what your staff was told by other 
staff. I do know that the Director of the OPM received this 
request, and we turned it around in approximately 5 working 
days.
    Mr. Davis of Illinois. And so 5 working days----
    Mr. Blair. In 5 working days, and I think that for the 
record, it is important to note that the request was to hire--
was for the ability to hire noncitizens, which is really an 
extraordinary request in terms of--from a governmentwide 
perspective. And we take our roles from a governmentwide 
perspective very seriously. But once we got the request, we 
turned it around quickly and promptly, and that's what we would 
like to show for the record.
    Mr. Davis of Illinois. In your opinion, was that sufficient 
turnaround time?
    Mr. Blair. I think given the situation it really was 
sufficient turnaround time. I don't think we would want to be 
giving advice and guidance on the hiring of noncitizens when 
other citizens might be available or when we would want to--or 
especially with, given our heightened security circumstances, 
we want to make sure that you can exhaust those other available 
sources such as citizens or working in other flexibilities. So 
I think we turned it around quickly and promptly.
    Mr. Davis of Illinois. Dr. Chu, you talked about best 
practices and using the experiences and lessons that we have 
learned. Does OPM have a performance management system that 
provides safeguards against abuse of the system?
    Mr. Chu. I think you will see, sir, in the April 2 Federal 
Register notice the kind of safeguards we would employ. This 
would not be just up to the immediate supervisor in terms of 
rewards. In would be--first of all, there would be criteria 
that would have to be established. There would be a restriction 
in terms of the range, the rewards and the fraction of the 
population that could receive them. There would be a board to 
review the awards actually made.
    So we believe that safeguards to ensure that this is done 
fairly and well are in place in our proposal. We also believe 
that we've got a track record over these many years of doing 
this in a way that, as the OPM surveys demonstrate, leads to 
greater, often substantially greater, employee satisfaction 
than was the situation before they were under this kind of 
system.
    Mr. Davis. Under the new system, what would be the process 
of appealing personnel actions for employees?
    Mr. Chu. The details of that depend, of course, on the 
issue that's involved. We have tried to spell that out in our 
Federal Register notice. In terms of pay changes, they would, 
as I indicated, be subject to review by a more senior board. It 
would not be simply the decision of the immediate supervisor. 
That supervisor would make recommendations to that board 
constrained by the criteria I have just described. But 
ultimately the board would be the final arbiter of the 
performance award.
    Mr. Davis. Given the fact that we're talking about 700,000 
employees, have you determined how many pay bands there would 
be and what spectrums they would cover?
    Mr. Chu. Yes, sir. We would propose to create five broad 
career fields. Within each of those career fields there would 
be four pay ranges approximately paralleling what you would 
view as the case in any work force. Let's say there's an entry 
level, there's a journeyman, there's an expert level, there's a 
senior level. In essence, the specific numbers differ depending 
upon the career field, reflecting real market conditions, and 
that is, I think, one of the great strengths of pay banding. 
This allows us to be much more competitive in the marketplace, 
to offer the kind of salary we need to get the talent the 
government requires.
    So we have thought that all out. The pay ranges range, of 
course, across the GS-1 or GM-1 through GS-15 levels that we're 
talking about today. We, in addition, would be explicit in 
offering those who take supervisory positions additional pay 
for the supervisory responsibilities, which would be tied 
explicitly to that responsibility. In other words, it's not a 
lifetime endowment. It comes with the post. If you step out of 
the post, then you would surrender the supervisory pay.
    Mr. Davis of Illinois. I see my time is up, Madam 
Chairwoman. I've got additional questions.
    Mrs. Davis of Virginia. Thank you, Mr. Davis. We may try a 
second round when we finish here.
    Mr. Murphy.
    Mr. Murphy. Thank you, Madam Chairwoman.
    I want to first ask perhaps Secretary Chu, I was reading in 
a GAO report, and I'll quote a line here. It said, for the most 
part the civilian human capital plans in our review did not 
contain detailed information on the skills and competencies 
needed to successfully accomplish future missions.
    And there's other criticisms the GAO report has. Can you 
comment on that? I mean, it seems to be describing that it's 
not really a clear plan in place, and so, therefore, how can 
one set up clear determinations of what's needed for employees?
    Mr. Chu. Yes, sir, I'm delighted.
    The GAO report has the flavor, if I may so characterize it, 
of many such reports that state the issue as, is the glass half 
empty or half full? And, I think the first thing to note about 
the GAO report, which some of your colleagues have also cited, 
is that it congratulates the Department for actually having 
such plans in the first place. It then goes on, as you and your 
colleague have noted, to suggest how we could strengthen those 
plans.
    We do have in the Department of Defense an extraordinary 
effort to identify specific skills and needs for the Department 
now and in years going forward. If the desire is to incorporate 
that material, which is quite voluminous, into the plan itself, 
that is a step we can take. It exists, and if preference is to 
have it be formally part of the plan, that is an easy step to 
conclude.
    Mr. Murphy. OK. I have a couple of other questions I want 
to squeeze in my 5 minutes. One has to do with understanding, 
and you could probably go on for hours about this, but 
understanding how employees are currently evaluated so that 
there is fair and accurate information to help them do their 
jobs better or to move on to another career if that's better 
for them. And, how do you propose changes be made that could 
accurately reflect that so that it will work efficiently for 
them and then turn over to the pay bands?
    Mr. Chu. I think we all recognize that one of the 
weaknesses of the current system is that most of the rewards in 
the system are the result of longevity, not the result of 
performance. And the intent in the system going forward, should 
Congress agree, is to place the emphasis on performance, to 
reward high performance. That's something our own employees, 
not only in the Defense, but also in our government, complained 
bitterly about, that we do not reward high-performing 
employees, and as we go out and try to hire young Americans 
right out of school, it's one of the things that they criticize 
us for, that we are not seen as a high-performing organization.
    The intent in the future would be to establish criteria 
against which to measure the individual employee's performance 
that puts a heavy burden on the supervisors to be proactive in 
thinking through carefully how does the agency mission 
translate into what this particular employee needs to do, and 
how do I be specific to the employee in the terms of what would 
constitute a good performance outcome for John Doe or Jane 
Smith. It will be incumbent on the supervisor to counsel 
employees during the course of the performance period as to how 
he or she is doing so that the employee can make continuous 
corrections, so that the interchange at the end of the year is 
not a surprise to the employee. And that's really the spirit 
that we want to bring to the system, that this really is a 
matter of continuous evaluation.
    Mr. Murphy. Do you know any forms or manuals already 
outlining some of those things of how employees are currently 
evaluated and how specific changes would compound?
    Mr. Chu. We do, and I think the best ones to give you are 
for the demonstration projects which already are ongoing. We'd 
like to share the material with you.
    Mr. Murphy. I appreciate that another issue that's been 
spoken about is the concern that this does not become a 
patronage system.
    Now, I understand the Department's need perhaps to look for 
experts in various fields, and sometimes that is very time 
sensitive; you need to get into that immediately. But there's 
the concern that's been raised about patronage. Can you address 
if you share that concern, or if not, how you would work to 
prevent that?
    Mr. Chu. We believe deeply in the Civil Service principles 
of merit and that the most meritorious individual ought to get 
the post. It is important to be able to hire experts, so-called 
``experts'' and ``consultants,'' in the language of the 
legislation, also so-called ``highly qualified experts'' in a 
little different category. We are seeking greater latitude to 
do that than the current law permits.
    Part of what we're seeking really is to deal with an issue 
that the current statutes complicate, and that is how we make 
these individuals subject to the ethics and the conflict-of-
interest provisions of U.S. law without turning them into 
government employees.
    Under current law, the only way we have to do that is to 
make them government employees. For part-time expertise, that's 
often not the way you ought to go, but we still want them to be 
subject to ethics and conflict-of-interest provisions and, 
hence, the language that's in here on that particular subject.
    Mr. Murphy. Those are some of those folks you would hire 
for like 5 years.
    Mr. Chu. The real--the right to hire people for 5 years, 
including older Americans, as my staff unkindly puts it--the 
intent here really is to advantage us in getting experts and 
consultants with the right expertise who are subject to the 
ethics and conflict-of-interest provisions without making them 
government employees. The so-called ``highly qualified 
experts'' in the words of the statute would be people who would 
be government employees.
    Mr. Murphy. Thank you.
    Mrs. Davis of Virginia. Mr. Waxman, we're delighted to have 
you here today so feel free to ask some questions.
    Mr. Waxman. Thank you very much, Madam Chairwoman.
    Mr. Chu, you moved through very quickly and glibly the 
criticisms of the General Accounting Office, but they're 
important because if you look at the bill itself, the bill says 
the new system would be based upon the Department's civilian 
human resources strategic plan. And that plan was evaluated by 
GAO, and GAO found it would lack the elements found in a fully 
developed plan. I want to ask you about some of the specific 
criticisms.
    On page 15 of the GAO's March report, they found that the 
DOD plan did not show mission alignment, meaning that the plan 
did not clearly show how the civilian work force contributes to 
accomplishing an organization's overarching mission. In other 
words, they said DOD does not know how its employees will help 
the Department accomplish its goals. That's a pretty incredible 
criticism.
    On page 16 of its report, GAO found that DOD's plan did not 
reflect a results-oriented approach to assessing progress 
toward mission achievement. In other words, DOD was more 
focused on process rather than results, and this is somewhat 
ironic since one of the purposes of this bill is to give DOD 
the ability to pay its employees based on performance and 
results.
    On page 15 of its report, GAO found that the DOD plan did 
not contain sufficient data about work force availability and 
its work force needs. In other words, DOD does not know what it 
has and what it will need.
    Finally, on page 22 of its report, GAO found that the DOD 
plan did not address how the civilian work force would be 
integrated with military personnel and contractors, and given 
the importance of all three groups to the war effort in Iraq, 
as well as the administration's desire to outsource more jobs, 
I find it remarkable that DOD has not figured out how to 
coordinate civilian, military and contractor personnel.
    So what we have now is a request by GAO to endorse a 
strategic plan--a request by DOD to endorse a strategic plan 
that the experts at GAO found deficient; and I'm asking myself 
why we should rush to endorse a plan rejected by GAO. You were 
asked that question by my colleague, and you said, well, they 
made recommendations and we can accept those recommendations; 
but it does not seem like you've done that.
    For example, GAO suggested that DOD try to make its plan 
more results oriented, more focused on future work force needs, 
yet DOD only partially concurred in this recommendation.
    That seems like a sensible recommendation. Why didn't you 
accept it completely?
    Mr. Chu. I think, Mr. Waxman, if everything you asserted 
were true, we would not have just won the war in Iraq. The 
Department of Defense has a clear----
    Mr. Waxman. We won the war in Iraq without this 
legislation; is that not correct?
    Mr. Chu. We won the war in Iraq with a total force 
comprised of our military and civil components. We want to be 
sure our civil component in the years ahead, those who are 
employees of the Government of the United States, are ready and 
able to do the kinds of things that those future challenges 
require.
    Mr. Waxman. I asked you a specific question, and why aren't 
you more results oriented and more focused on the work force 
needs?
    Mr. Chu. I think if any department is results oriented, it 
is the Department of Defense.
    Now let me, if I may, take the specific GAO criticisms. 
Again, if I may start with the headline, the GAO report 
basically says the glass is half empty, while also very 
graciously praising us for completing such a plan, noting it's 
the first one we've done and that it's a major step forward.
    Mr. Waxman. Mr. Chu, excuse me please. You can see there's 
a yellow light. We only have a limited time. What you're saying 
in effect is, it's half empty rather than half full. GAO's 
criticisms mean that your plan is quite deficient. They have 
made recommendations. I'd like to know why you haven't accepted 
their recommendations.
    One was on more results oriented. The other was to 
integrate military and civilian work force and take into 
account the role of contractors. And, GAO recommended this, but 
DOD rejected it.
    Now, I guess what I'm trying to find out is why we should 
be rushed to adopt a bill that would allow you to fundamentally 
rewrite the Civil Service laws based on a plan that GAO says is 
deficient; and, after they made recommendations to correct it, 
you still haven't accepted their recommendations.
    Mr. Chu. I don't think I said that, Mr. Chairman. I don't 
think the record shows that. Let me, if I may, walk through the 
three specific points you raised.
    First, should there be a greater mission orientation in the 
plan, should the mission be called out in the plan? We don't 
disagree. I think every single civilian understands what the 
mission is and how his or her duties align with that mission. 
The GAO asks for a very explicit plan. We're delighted to do 
that.
    Second, the GAO asks for more inventory data in the plan. 
We have massive amounts of inventory data. They are stored in 
computer files. There is an issue of what you want to put in 
the plan, which is a set of directions, a set of goals. Whether 
you put all that detail in the plan, I think, is a matter of 
formatting and how you want to present the information. We're 
delighted to share that information. GAO knows we have that 
information. I think people in this committee know we have that 
information. It's all there.
    Third, I think that we agree with GAO that we want to make 
the criteria for its evaluation as results oriented as one can. 
That becomes a matter of how you best do that in each 
individual case. That's one of the things that I think we've 
got some experience with. We're proud of what we do in that 
regard, and we welcome the encouragement to do more of it.
    Mr. Waxman. Just one last comment I'd make to you: If 
you're going to rewrite your plan, I think we'd be better off 
waiting to see what the rewrite is going to produce before we 
adopt Civil Service law changes that give you all this latitude 
to make the system comply with the plan that we haven't seen in 
its rewrite form.
    Mrs. Davis of Virginia. Thank you, Mr. Waxman.
    Ms. Norton.
    Ms. Norton. Thank you, Madam Chairwoman.
    Mr. Blair, do you believe that what is being proposed here 
for DOD should be implemented for the entire civilian work 
force of the Federal Government?
    Mr. Blair. I think there will be many lessons that we can 
learn for the rest of the Federal work force.
    Ms. Norton. Sorry?
    Mr. Blair. There will be many lessons that we can learn 
that will be applicable for the rest of the Federal work force.
    Ms. Norton. You would not say that we ought to put these 
recommendations in that we should apply these proposals, 
rather, to the rest of the civilian work force? Would you?
    Mr. Blair. I think we are moving from a ``one size fits 
all'' to specific, agency-tailored plans, and so I wouldn't 
want to apply what we're doing from one agency in total on 
another.
    Ms. Norton. I'm glad to hear that since we're invoking 
national security as the reason for this. I don't expect to see 
these proposals in parts of the government where that is not 
the reason given.
    Mr. Chu, in reading your testimony, I was intrigued by your 
rather extensive quotation from Lou Gerstner, the former CEO of 
IBM, who essentially you accept his philosophies, one, it 
should be applied here; I can understand in some respects why--
and you quote him saying, nothing, however, was more important 
to fostering a one-for-all team environment than a common 
incentive compensation opportunity for large numbers of IBMers. 
And I was intrigued further, therefore, by what might seem a 
small item that represents a larger attitude.
    Why, in light of this notion that people respond to 
compensation, would you propose to eliminate the requirement of 
chapter 55 that employees be paid overtime for working on 
Sunday? How in the world is that going to provide the kind of 
compensation incentive that would make people glad to rush 
forward to work for DOD?
    Mr. Chu. I'm glad to clarify this issue, Ms. Norton, 
because in fact the reason for the language that you see is 
because some people who work in the overtime periods you have 
described actually are worse off under the present system than 
they should be. So, the language we're seeking there is so we 
can be fair and just to all our employees.
    Ms. Norton. Explain how you're worse off in getting paid 
overtime for working on a Sunday.
    Mr. Chu. Because the way these rules work in terms of what 
the rates are going to be, it turns out for some employees 
you're actually worse off than you should be if we are working 
with a more modern system here, and that's what we're trying to 
seek with this legislative change.
    Ms. Norton. What you are saying is, this employee would 
make as much as he makes today and more by working on Sundays; 
he'd lose nothing from working on Sundays?
    Mr. Chu. We have cases now where you actually get reversals 
under the current rules that we are seeking to correct with 
this legislative language.
    Ms. Norton. You need to clarify exactly under what 
circumstances an employee loses his rights under the civilian 
law to be paid for working on Sunday. That's the kind of thing 
you can imagine, the kind of cynicism that will breed in 
employees who see that's one of the proposals.
    You say, Mr. Chu, in your testimony that there were higher 
levels of satisfaction in your experiments. Did those in your 
experiments lose their collective bargaining rights?
    Mr. Chu. No, and there's no proposal here for anyone to 
lose his or her collective bargaining rights.
    Ms. Norton. But there certainly is a proposal to waive 
collective bargaining rights under some circumstances, sir.
    Mr. Chu. The proposal is designed to facilitate bargaining 
at the national level. That is the proposal.
    Ms. Norton. I've no idea what that means. I sense that the 
proposal is rather clear that chapter 5 collective bargaining 
rights could, under some circumstances, be waived. Do you deny 
that?
    Mr. Chu. We are seeking the way the law's constructed, and 
at this point we need, in order to get the national bargaining 
we need, to waive certain elements of the current language in 
Title 5.
    Ms. Norton. These folks in your experiments did not have 
those collective bargaining rights. Did they lose anywhere any 
of their due process and Civil Service rights in your 
experiment?
    Mr. Chu. Not that I am aware of, ma'am.
    Ms. Norton. Since they did not lose what your proposal says 
might be lost, one has to wonder about the value of the 
experiment.
    Again, the important point about the experiment is that it 
be a true experiment from which we can learn. I note that in 
there were apparently 70,000 employees eligible; only 30,000 
decided to take part. Do you have any better statistics than 
that?
    Mr. Chu. Ma'am, I think you misunderstand the way these 
demonstration projects work.
    The employees don't get to select them, unfortunately, 
because many more would like to be part of them. It's an 
administrative decision how many employees are covered by a 
particular demonstration. Indeed, the point of the April 2 
Federal Register notice is to expand the demonstration program, 
and we anticipate further Federal Register notices that would 
use authority Congress has given us on this point to enlarge 
the demonstration program perhaps to as many as 130,000 to 
150,000 employees.
    Ms. Norton. Thank you, Madam Chairwoman. I see my time is 
up. Thank you.
    Mrs. Davis of Virginia. Thank you, Ms. Norton.
    Ms. Watson, did you have any questions?
    Ms. Watson. Thank you very much for an opportunity.
    In reading, briefly, the GAO summary, I am concerned about 
moving employees around and performance based. Can you explain 
to us what guarantees an employee has in the position in which 
he or she would be assigned? With this broad-based authority 
given, who has the bottom line, so to speak? Does the employee 
have protections or can the employee be moved or can the salary 
be adjusted if there is a performance base?
    That is vague and unclear, and my interest goes to 
protecting employees' rights. Can you respond, please?
    Mr. Chu. Glad to.
    The whole point is--I think we all appreciate that the pay-
for-performance system is that pay changes should depend on 
performance, and that is the spirit in which such a system 
would be administered.
    Ms. Watson. Could you yield for just a second? ``Depend on 
performance,'' is that going into the position or is that while 
the employee holds that position the salary, the pay could be 
adjusted? I'm not clear on how that would work.
    Mr. Chu. Let me try to clarify if I can.
    There would, of course, be--as there is in any 
organization, when an employee comes in, a salary set. Changes 
to that salary would be based on one of two circumstances. 
First, if the duties are enlarged, you could in a pay-for-
performance system, which is a little different from the way it 
works today, add to the employee salary in a more expeditious 
manner than is currently possible.
    Under the current system, you have to rewrite the job 
description, recompete the position, which actually leads to 
some employees declining to be considered for expanded 
responsibilities for fear they won't win in the next 
competition.
    Second, language on pay-for-performance pays out how 
benefits of this kind would work. Pay would change based on the 
annual performance review, and that review would determine what 
the pay change was.
    Under the kinds of safeguards we have described in our 
April 2 Federal Register notice, which includes establishing 
the criteria clearly advanced, it includes an individual to 
review the post-pay changes so it's not just the jurisdiction 
of the supervisor.
    Ms. Watson. So as a followup, what I hear you saying is 
that we can advance forward.
    Can we also reduce the employee's pay at the end of the pay 
period or the end of the evaluation, and if so, is there no 
protection--if you are employed at a certain salary annually 
and at the end of the review your salary is reduced, is there 
any protection that employee has to maintain the level on which 
he or she was employed?
    Mr. Chu. There is the opportunity in this system--if an 
employee has performed so badly that a salary reduction is 
appropriate, there is the opportunity for a limited salary 
reduction in the pay for performance approach that we would 
recommend. The employee, of course, has a right to appeal that 
decision. I think we all agree that is not something that 
should be usual, that there ought to have been truly something 
lacking in the employee's performance. In other words, I think 
we all agree that if an employee has performed badly, a salary 
reward is not appropriate.
    Ms. Watson. Well, I think that rather than moving so 
quickly, I join my colleagues here on my left that--I think 
that you should look very, very intently at the GAO 
recommendation before you bring back a final proposal, because 
I think that some of these vagaries need to be more 
specifically indicated in the provisions.
    Thank you.
    Mrs. Davis of Virginia. Mr. Cooper.
    Mr. Cooper. I thank the Chair. I wish I had been able to 
attend the first part of the hearing, but I just got late 
notice that we would be considering a subject of this dramatic 
importance because it's not every day we try to change the work 
rules for 600,000 people around here.
    May I ask the Chair, we're scheduling a markup for this, 
for this Thursday?
    Mrs. Davis of Virginia. Yes, Mr. Cooper. What I said 
earlier, and I'm sorry you were not here, is that I regret very 
much we had to do this hearing so hastily, but I also sit on 
the Armed Services Committee, which is when I found out that 
the portions that we're having a hearing on today is actually 
in the bill that is being marked up in the Armed Services 
Committee.
    We were able to get the authority to bring this before this 
committee, which is where I believe the jurisdiction lies for 
this part of the bill. It is not a stand-alone bill. It is the 
bill coming before the Hawks, and we're marking it up next 
week, which is why we quickly had to do this hearing. And I 
regret we had to do it, but I am, on the other hand, quite glad 
that we were able to do it.
    Mr. Cooper. Well, I'm all for preserving committee 
jurisdiction, but I worry that it will be at terrific cost to 
the livelihoods of some 600,000 individuals, because it's hard 
for me to understand how this committee could possibly do an 
adequate job given the short time available. Most Members 
aren't even in town today.
    Mrs. Davis of Virginia. If the gentleman would yield, 
whether we hold this hearing and whether we mark it up in 
Government Reform or not, it will be marked up in Armed 
Services next week. This is the only way that we will get the 
opportunity to have our voices heard.
    Mr. Waxman. Will the gentleman yield?
    Mr. Cooper. Yes.
    Mr. Waxman. I don't quite buy that threat. If our committee 
told the Armed Services Committee, this is within our 
jurisdiction and they'd better stay out of it, I think that 
would carry some weight. What I see is the Armed Services 
Committee being used as an excuse, and this committee is 
rolling along with it.
    I agree with you, this is major, major change. We ought to 
be carefully examining it before we make such a radical 
departure from 100 years of Civil Service law.
    Mr. Cooper. To reclaim my time, I appreciate the 
gentleman's point. As a member of the minority, it's perhaps 
easier to be thinking of voting ``no,'' but I would worry for 
the majority because y'all are apparently going to be obligated 
to vote ``yes'' and essentially rubber stamp these changes.
    Mrs. Davis of Virginia. If the gentleman would yield, I 
would not assume anything.
    Mr. Cooper. Well, I know it's perilous to assume, and I'll 
turn my attention to the witnesses. I'm one of these Democrats 
that's open to personnel policy changes as long as there's 
proven cause, as long as we have a reasonable likelihood that 
they will actually work.
    I understand the gentleman from California made the point 
earlier, quite eloquently, that the Pentagon seems to be 
working quite well these days. In fact, it seems to have worked 
quite well for the last 10 or 20 years, and to consider such 
radical changes at this point on such a thin or nonexistent 
record worries me greatly.
    I understand you want a copy of the homeland security 
changes that were made. Of course, it's way too early to judge 
the effectiveness of those changes. I understand also that we 
do not have a detailed list of changes that you want to make, 
so essentially this committee will be asked to vote on a pig in 
a poke, a list of raw, discretionary policies that the Pentagon 
would like to make that essentially force us to give you a 
blank check, which is a very unusual situation for Congress.
    Where is the detailed list of recommendation? It's my 
understanding you haven't even discussed these changes with 
some of the union groups that are most directly involved; is 
that correct?
    Mr. Chu. Let me, sir, if I may, briefly summarize my 
testimony since, as you indicated, you were not here at that 
time.
    First of all, this is an evidence-based set of changes. We 
have, as you are probably aware, about 20 years of experience 
with demonstration authority that Congress has given us. We 
have currently nine such demonstrations ongoing in the 
Department of Defense that cover 30,000 employees; that's the 
size of a small Cabinet department by itself.
    We've spent more than the last year reviewing what we call 
the ``best practices'' coming out of those demonstrations to 
try to see if we could propose a cohesive system to apply to 
the Department as a whole. We believe we have reached that 
conclusion. The detail that you're asking for is there in the 
April 2 Federal Register notice that is built on the authority 
Congress has already given us to extend these best practices to 
our entire defense laboratory community.
    So we believe there is considerable evidence. That evidence 
is done by others; you don't need to take our word for it. One 
of the things I would urge everyone to read is OPM's extensive 
report on the Department of Defense's use of these 
demonstration authorities. It has extensive survey material 
that covers the attitudes of our employees, which I think all 
of you properly are concerned with--what's going to be the 
reaction of the employees to this, is this something they would 
endorse; and I think what these surveys indicate is that after 
a transition period, which typically does take 1 to 3 years, 
there is a higher, often much higher, level of satisfaction on 
the part of the employee work force than was true before.
    That's the record on which we want to build, sir.
    Now, we cannot, however, under current law do that for the 
entire Department. We can reach 130,000 to 150,000 individuals 
in DOD under current law with these kinds of changes. We'd like 
the authority to reach the entire Department with these kind of 
changes. We'd be a more effective Department if we could do so.
    In reviewing the history of these best practice 
demonstrations, we conclude there are some other things it 
would be constructive to have. One of them, we think, is 
national bargaining rights. The other is a series of rights 
that would allow us to hire more, particularly for young 
individuals just coming out of school. We think we need to 
compete with the private marketplace.
    Mr. Cooper. I'll do my best to do my own work in the short 
time allowed. May I ask one more question?
    There's an interesting book, hardback, that's called Boyd 
in the Marketplace. It refers to a David Chu in that book. Are 
you the same David Chu listed in that book?
    Mr. Chu. Could you give me the title again? There's a 
wealthy David Chu in Hong Kong, but unfortunately I'm not he.
    Mr. Cooper. This is Boyd, Air Force colonel, someone who's 
very interesting, strategist, somewhat of a maverick within the 
Pentagon, and he apparently testified on the same panel with 
you many times, and it refers in the book to a David Chu. I 
just wanted to confirm that was in fact you.
    Mr. Chu. I'm not sure which book you're referring to, sir. 
Therefore, it may be me, but I don't want to be too assertive 
on that point.
    Mr. Cooper. I'll check.
    I thank the Chair.
    Mrs. Davis of Virginia. Thank you, Mr. Cooper.
    And I'm going to beg the other witnesses' indulgence, but 
given the fact that we don't have the time to give you our 
questions in writing and get the answers back for the record, 
since we're marking this bill up on Thursday, I still have a 
lot of questions, and I believe my colleagues do as well; so if 
the other witnesses would bear with me, I would like to have 
the opportunity to ask some more questions of the first panel.
    Dr. Chu, I hate to go back to you on this, but I don't 
think you answered me the first time when I talked about 
national security being broad enough to be meaningful, and I 
asked you to explain to me what constitutes ``essential to the 
national security'' and also what does ``certify'' mean. Can 
you give me any definite definition on those two?
    Mr. Chu. ``Certify,'' of course, means the Secretary has to 
reach a formal conclusion, so it has to be a finding on his 
part that there is national security issue here. It cannot just 
be one of the staff imagining a problem.
    National security goes to issues in which the ability of 
our military forces to carry out their missions would be harmed 
in one way or another if we were to reach a result different 
from that which such mission might require. And so ultimately 
this is tied to the military responsibilities of the Department 
of Defense.
    Mrs. Davis of Virginia. No disrespect, but I think that 
could also be very broad, but I'll take that for the moment.
    And I think one of my colleagues may have alluded to this, 
but I respect the law and I think you do, too.
    Mr. Chu. Yes, ma'am.
    Mrs. Davis of Virginia. But you're asking Congress to give 
the administration the ability to waive the law in several 
important ways. You've asked us for authority to change the 
statutory rules that apply to almost 700,000 people--for 
instance, the law on overtime pay, the law on training, the law 
on nepotism, the law on allowances, and so on and so on. This 
grant of authority would be permanent.
    And in addition to those that Congress gave DHS for only a 
limited period of time, I want those almost 700,000 people to 
have the protection of the law like everybody else and to abide 
by the law's obligation; and, due to that, that includes you 
and the Department of Defense. We need to know what is wrong 
specifically, not generally, with these laws that would justify 
the authority that you're wanting us to grant DOD, and in my 
opinion, the burden is on the administration to give us these 
specific answers.
    Do you have them now or can you get them to me like 
yesterday?
    Mr. Chu. Let me try, if I may, ma'am, a first-round answer 
to provide additional material that would be helpful this week 
in time for your deliberations.
    Mrs. Davis of Virginia. Our markup is Thursday, so 
tomorrow.
    Mr. Chu. We will get it for you. Most of the waivers in our 
proposal are focused on those sections of the law that 
basically make it impossible to have a pay-for-performance 
system. That's the heart of much of what is being waived, and 
in order to get there, given the structure of the Civil Service 
law, you have to waive those provisions.
    That--I recognize this is a complex way of doing this 
business. It is, however, part of our effort to keep this whole 
package within Title 5, as opposed to starting with a clean 
sheet of paper and writing everything down again in the way 
that a different system might be administered.
    So the waivers are there so that we can get to a pay-for-
performance system; in order to get there, you need waivers 
from these parts of the Federal statute.
    Mrs. Davis of Virginia. If you could get a little more 
specific than that, I would certainly appreciate it. The whole 
proposal is full of phrases like ``sole,'' ``exclusive,'' 
``unreviewable discretion,'' ``ought to be given to the 
Secretary of Defense and anyone he or she may wish to delegate 
that authority to.'' Is there some kind of hidden meaning there 
that I'm not aware of, and/or does it mean that the Defense 
Department will be able to have the liberty to act unilaterally 
and without oversight and review by Congress and the courts of 
this country?
    And, maybe I'm reading too much into that, but I've read 
the articles in the newspaper how this Secretary wants less 
oversight. Is that where we're going with this?
    Mr. Chu. No, ma'am, that's not our intention. We always 
operate with oversight of the Congress. I think you know that.
    These are intended to facilitate the administrative process 
of actually putting in place--the system involved in some of 
this is to deal with various Federal regulations and how those 
proceed, so that we can move expeditiously if Congress should 
decide to give us this authority.
    Mrs. Davis of Virginia. I hope you can answer me, Director 
Blair, on this one honestly and forthrightly.
    What is OPM's position on the desirability of your office 
having no role, no role at all, on a number of matters 
involving a huge segment of the Federal work force?
    Mr. Blair. Well, I would disagree.
    Mrs. Davis of Virginia. I would hope you don't give me, to, 
``coin a phrase'' here, a rubber-stamp answer because you have 
to support the administration.
    Mr. Blair. Well, I would argue that we do have a 
substantive role. If you look at the legislation itself, it 
says that the Secretary may in regulations prescribe jointly 
with the Director. That is a substantive role to have. It's our 
understanding that based on assurances from the Department of 
Defense, there's no intention to cut out OPM from exercising 
any strategic oversight role. And I think it's also important 
to note that granting managerial flexibility is not 
inconsistent with the applications of the merit system 
principles, transpreference protections against prohibited 
personnel practices or whistle-blower protections.
    In granting flexibility, you need to balance out the needs 
for extensive--for appropriate oversight and for a continuing 
role for the President's chief human capital officer, and 
that's the office of OPM.
    Mrs. Davis of Virginia. But in case of national security, 
you would be overruled and taken out of the equation; and, as 
yet, I do not have a real, specific, clear explanation of 
national security. And I'm not sure you can give me one, Dr. 
Chu. That's not a slam to your explanation. I'm not sure you 
can give one that's not so broad that when you're talking about 
the Department of Defense that you could pretty much say 
anything's a matter of national security.
    Mr. Chu. If I may, Madam Chairwoman, let me try to answer 
the question in the spirit in which you asked it.
    We view ourselves as partners with OPM in constructing this 
new system. We have benefited enormously in terms of trying to 
think through what might be the best way to proceed. The 
several significant white papers that OPM has created over 
these last 2 years, they are terrific, they point the way 
ahead; and one of the things they hammer away at again and 
again is the need to tie more of compensation to performance.
    That is a key part of this proposal. So we are building 
OPM's foundation. We want OPM to be our partner. We intend for 
OPM to be our partner. We recognize there will be situations 
where we're going to disagree and the provision that you are 
asking about would allow the Secretary of Defense to break the 
tie in that circumstance. I don't anticipate that's going to 
happen frequently, and I suspect it's going to be over rather 
narrow, specific issues.
    Mrs. Davis of Virginia. Thank you, Dr. Chu. But again, I'm 
agreeing with my colleagues on the right here. We're doing this 
so quickly and so fast that I cannot say that I am real 
comfortable.
    Mr. Davis.
    Mr. Davis of Illinois. Thank you, Madam Chairwoman. Let me, 
if I could, ask the question you just raised a little 
differently.
    Mr. Blair, in today's Washington Post a spokesman for 
Director James stated, that ``Director James absolutely 
supports the administration's DOD legislation.'' Then it goes 
on to say that a professor of public administration from the 
University of Southern California is quoted as saying that 
``OPM would be weakened to the point where it would have no 
central personnel coordination with much ability to facilitate 
cutting edge progress in the field.''
    Are you testifying that the position or the role of OPM 
will not be weakened with this legislative enactment?
    Mr. Blair. No, I think it would be entirely inaccurate if 
we try to characterize his proposal as anything but what it is. 
It is a significant proposal. We're talking about creating an 
independent system for the Department of Defense. It's a system 
covering 635,000 employees.
    Is it going to impact governmentwide? Of course it is. And 
I think that we need to be honest in our approach on that.
    Does DOD make the case they need managerial flexibility? 
Absolutely, absolutely they do, and they have 20 years of 
experience--in their demonstration projects, in pay banding, in 
pay for performance--making the case that they need managerial 
flexibility.
    OPM's role is evolving, and we will--this will make our 
role harder, more difficult in terms of exercise of oversight. 
It might, but making our role more challenging is not a reason 
to deny the flexibility to the Department of Defense.
    I think that Congress needs to carefully look at the 
proposal, evaluate it and make sure--I mean Dr. Chu's testimony 
quotes from the Volcker Commission, and that report recommended 
agencies having tailored systems, and we endorse that. But that 
presupposes continued OPM-OMB oversight and that's something we 
think is important, and we think that can be consistent with 
this legislation.
    Mr. Davis of Illinois. So we're going to put DOD in a class 
by itself; I mean, we're going to set it aside, it looks like 
to me, and put it in a class of its own.
    Let me ask you, Mr. Chu, in your testimony, you quoted from 
the Volcker Commission; and the Volcker Commission report also 
states that what is clear is that a new level of labor 
management discourse is necessary if we are to achieve any 
serious reforms in Civil Service. The commission believes that 
it is entirely possible to modernize the public service without 
jeopardizing the traditional and essential rights of public 
servants; engaged and mutually respectful labor relations 
should be a high priority.
    You stated that you did not engage labor in the development 
of this legislation because the dialog with the unions would be 
more focused once the legislation was complete.
    And given the circumstances, being marked up by Congress, 
do you consider the process you described in your testimony as 
``engaging labor management in mutually respectful dialog?''
    Mr. Chu. Sir, I think we need to go back to the foundations 
of this proposal.
    The demonstration projects, which are the basis of our 
recommendations, have had extensive employee--and I would 
emphasize ``employee''; this is not just a matter of labor 
union input, but extensive employee input. We've also taken 
very seriously what our employees have told us through their 
survey responses, both the surveys that OPM has done of the 
demonstration projects, the surveys that OPM did of the entire 
Federal Government just published, independent surveys by 
institutions like Brookings', and others' language. We listened 
to what our employees had to say. We ourselves personally spent 
time with our employees to understand what is of greatest 
import to them.
    So this is a complex process of trying to listen to all the 
different voices out there, to try to hear what they're telling 
us. And what they're telling us and what the young people of 
the United States are telling us in terms of considering a 
government job is, they want this to be a high performing 
organization.
    Mr. Davis of Illinois. I think what you're telling us is 
that you have not chosen to listen to labor at all because you 
decided not to include them in the proposal until after it's 
done.
    I think, listening before the fact is far more effective 
than after the fact, because trying to change it once it's been 
done and accepted becomes very difficult. And I appreciate your 
position, but I think it would have been more effective if it 
had been done up front, rather than after the fact.
    And I thank you, Madam Chairwoman.
    Mr. Chu. If I may, Madam Chairwoman, we have listened--if I 
may emphasize, we have listened to our employees and labor, 
which is different from labor unions. It is employee input, 
employee reactions that are the foundation of trying to decide 
what's the best way to proceed.
    Mrs. Davis of Virginia. I'm going now to our ranking member 
of the full committee, Mr. Waxman.
    Mr. Waxman. Thank you very much, Madam Chairwoman.
    As I understand, the whole purpose of this bill is that you 
think there ought to be a way to waive a lot of the rule of 
Civil Service in order to have a performance-based Civil 
Service system working at the Defense Department. Is that what 
this is all about?
    Mr. Chu. Sir, I think where we start from is that we need a 
more flexible, more agile personnel system than we have under 
the current rules under which we operate most of the 
Department. In order to get there and to keep the structure of 
the system within Title 5, you have the somewhat complex 
language which has been the subject of this morning's debate.
    But what I would emphasize is, the purpose, the end point 
here is the kind of flexibility of the hiring speed, kind of 
rewards performance that are embodied in our April 2 Federal 
Register notice. That's the end point that the statutory 
changes are designed to facilitate.
    Mr. Waxman. Do you see any reason why what you're asking 
for should not be given to every other department of the 
Federal Government? They all want the agility, the flexibility, 
to develop a system that will not in any way impede them from 
getting to the best performance possible. And to do that, they 
may think they also should be able to waive the provisions of 
the law that have been in force for many decades that have 
hamstrung them.
    Maybe Mr. Blair should answer that question. Why shouldn't 
every Department have the power that DOD's going to get?
    Mr. Blair. I think that DOD is seeking some certain 
flexibilities that could be applicable governmentwide. Again--I 
think Ms. Norton asked that same question earlier--that would 
be, we'd have the same system for DOD and applied 
governmentwide; and my answer was, I think we need to more 
narrowly tailor it.
    As far as hiring flexibilities go, I think--I was going to 
say with regard to----
    Mr. Waxman. Rather than getting into details of this, 
because we know some of the details, and rather than go through 
them, you have an overall scheme here that allows the 
Department of Defense to waive not only the personnel 
provisions that were granted to Homeland Security, but in 
addition to that, 12 major chapters of Title 5 that have been 
developed over the past century to prevent Civil Service from 
becoming a patronage system, such as a performance appraisal 
system, a pay raise position classification system, collective 
bargaining rights, due process and appeals rights.
    And then DOD, beyond that, wants to waive six other 
chapters that are not waivable in Homeland Security, hiring, 
examination, reduction in force, training, pay administration, 
allowances. Then they want to also have the ability to bring 
people back, so they don't lose their pension, but they can 
work for the government at the same time. You can hire 
relatives, all sorts of things like that. Why shouldn't we have 
that for homeland security? If you have a tie between the 
Secretary of Homeland Security and OPM, which is an unusual 
notion to tie, why should not the Secretary of Homeland 
Security trump the OPM?
    Mr. Blair. As you know, with Homeland Security, that was an 
extensively debated bill that went through the legislative 
process; and the final bill represented the administration's 
interests as well as the congressional--Congress' interests. I 
would expect that this legislation is going to go through the 
same process.
    Mr. Waxman. Well, I'm asking you your position as we go 
through the process. Why not extend to Homeland Security all 
the provisions that you're willing to give up to the Department 
of Defense?
    Mr. Blair. At this point, we don't think Homeland Security 
is in need of those other--those additional flexibilities at 
this time, especially since we haven't designed the system for 
Homeland Security.
    Mr. Waxman. GAO is arguing that the Department of Defense 
has not designed its performance standards yet, and therefore 
we ought to wait until it comes up with a game plan for how 
it's going to achieve those performance standards before we 
give them blank authority to go out and start waiving all these 
rules.
    Now, Mr. Walker testified, I believe, that a vast majority 
of Federal agencies do not have the infrastructure in place in 
order to effectively and fairly move to a more performance-
based compensation system. And this is what bothers me. We're 
moving not nearly as rapidly as we did with Homeland Security 
where, you say, we had a thorough consideration; here we're 
given at least 2 days.
    Now, I was also concerned, Mr. Chu, about this question of 
scrutiny. We're trying to give as much scrutiny as we can, but 
the bill we're considering expressly states that any personnel 
regulations promulgated by DOD would be internal rules of the 
departmental procedure. That language appears to be intended to 
exempt the regulations from public notice and comment 
requirements of the Administrative Procedure Act and, in a 
sense, taking away any public scrutiny. If you really look at 
public scrutiny while you are exempting your regulations from 
notice and comment.
    Mr. Chu. Most of these provisions, sir, are parallel 
provisions in the Homeland Security Act that you cited earlier.
    Mr. Waxman. So you just modeling what you're doing on what 
they did?
    Mr. Chu. The basics--as I testified, sir, the basic 
structure of this bill follows the structure of the Homeland 
Security bill. There are some provisions that go a bit further 
than the Homeland Security bill, as my colleague, Mr. Blair has 
emphasized, in order the try to tailor it to the specific 
circumstances of the Department of Defense.
    Mr. Waxman. Well, I don't--I'd like to know why the 
Department of Defense needs to say that hiring relatives or 
political favorites is an appropriate practice.
    Mr. Chu. I don't believe, sir, that's what we've said, as 
I've tried to emphasize.
    Mr. Waxman. Well, if you have the ability to waive chapter 
31 that prohibits the hiring of relatives and political 
favorites, that means you have the ability to do it. Why should 
be able to waive that rule, for example?
    Mr. Chu. As I have tried to explain, sir, we have tried, 
just as Homeland Security did, rather than write a new title of 
the Federal Code, to keep it within Title 5. In order to keep 
it in Title 5, given the extraordinary accretion of provisions 
over the decades in that code.
    Mr. Waxman. Homeland Security did not waive this provision; 
this is now Department of Defense. Why does Department of 
Defense need that, and, while I'm asking, why does Defense need 
waivers from the rules and chapter 75 relating to the due 
process rights for employees subject to suspensions, to motions 
for dismissal? Are you saying it's OK to arbitrarily discipline 
employees without giving them due process rights?
    The Homeland Security agency does not have that power to do 
what you were to have the power to do. What's unique about you?
    Mr. Chu. The need here, sir, is, if we're going to have a 
system that indeed rewards performance, you do have to change 
some of the things--these are parts of title 5, which make it 
impossible to get to the conclusion I think most observers 
believe we should reach. We could have started with a clean 
sheet of paper, it might be easier to see how the protections 
are carried forward; but we did try very hard to keep this 
within Title 5, that was the intent here, and to follow as 
closely as possible the Homeland Security template.
    Mr. Waxman. My time is up. I thank you, Madam Chairwoman.
    Mrs. Davis of Virginia. Thank you, Mr. Waxman.
    Mr. Murphy.
    Mr. Murphy. A quick question first. Do you anticipate any 
cost savings from this reorganization 1 year, 10 years out?
    Mr. Chu. This is not a cost-driven proposition. It is an 
effects-driven proposition. It's an effort to make sure that we 
have the kind of civil servants we're going to need in this 
Department in the years ahead. I would hesitate to estimate 
whether this will cost slightly more or slightly less; it's not 
intended to cost a lot more, but neither is it the intent to 
save money.
    Mr. Murphy. Thank you.
    And, Madam Chairwoman, just a request: I notice on pages 7, 
8, 9 10 of this bill there's extensive comments on information 
being sent back to Congress after conferring with labor 
representatives and getting that back to us.
    I would hope that you and subcommittee Chairman Davis would 
also make sure that's done very promptly with some details, 
allowing us to comment on these things instead of getting a 
report and not being able to comment.
    And with that, I yield back the balance of my time back to 
you.
    Mrs. Davis of Virginia. I just want to go back, and 
Director Blair, when you responded to one of my colleagues 
here, I wrote it down so I could quote you.
    You said, ``We need to carefully look and evaluate this 
proposal,'' and I think that's where the rub is on this whole 
thing. You know, you said that we've really fleshed out the 
Department of Homeland Security. Well, the Department of 
Homeland Security went through four or five or six different 
committees, and they had four or five or six or maybe even more 
hearings.
    This is it, guys, for this particular part of your bill. 
This is the only hearing. This bill will be marked up on 
Thursday in Government Reform; and the markup in Armed 
Services, there's no hearing, and that's where I think the real 
rub is coming from with some of us here.
    I know my problem with it is that there's just so many 
questions that I'm not anxious to run forward and vote for 
something when I just do not know what it's going to do to 
approximately 700,000 people.
    And pay for performance, Mr. Blair, you and I had a little 
discussion about the horse and the cart and the carrot. And, I 
know that you've had demonstration projects, Dr. Chu, but 
still, as we discussed, you do not want to put that carrot in 
front of that horse if that cart ain't hooked up right, and 
that's the scary part of this.
    Mr. Blair, the proposal allows the Department of Defense to 
hire any retiree, pay him or her their full salary in addition 
to the annuity paid by OPM. This basically gives DOD a free 
hand to offer retirees their full salary combined with full 
annuity with none of the strict limitations that are part of 
the current governmentwide statute.
    Don't you think this is going to present some situations 
where retirement-eligible employees anywhere in the government 
would be able to acquire, effectively, a pay raise equal to the 
amount of their annuity, 50 to 80 percent of their salary, and 
would also provide DOD with a remarkable recruiting advantage 
for highly experienced talent in other agencies?
    Not saying that DOD does not need the talent, and they do; 
trust me, I probably support defense more than any issue on 
Capitol Hill--and, Dr. Chu, you know that--but I don't want to 
be unfair, and that's where my concern is on this particular 
issue.
    It does not sound like a good, sound public policy to me to 
give that to DOD and not other folks. And how does OPM feel 
about that?
    Mr. Blair. Let us remember what the trend has been on this 
that we currently have the authority on a case-by-case basis to 
waive the offset to the salary for reemployment of annuitants. 
I think it was 3 years ago Congress allowed retired military to 
collect their full pension and work for the government; before 
that, it was subject to an offset. So this seems to be part of 
the continuum of recognizing that we need to bring people back 
into service who have worked for the government.
    Mrs. Davis of Virginia. Why not make it governmentwide?
    Mr. Blair. That's an interesting question, and I think at 
this point, we'd like to look to see how this proposal would 
work. Remember that OPM's a steward and has a fiduciary rule 
with regard to the Civil Service Retirement and Disability 
Trust Fund, and we carry out those responsibilities with quite 
a bit of gravity and we look at these proposals with a sharp 
eye to make sure that it's not going to add--what we wouldn't 
want to do is add to the unfunded liabilities or create 
unintended consequences for what could be a very good and sound 
proposal.
    I think that we want to see what kind of experience we have 
in this before we extend it governmentwide, but I would defer 
to my colleague for the specifics with regard to why his needs 
would be in the DOD work force in bringing back annuitants.
    Mrs. Davis of Virginia. Is this going to affect the 
retirement fund?
    Mr. Blair. It should not at this point other than you might 
have more people retiring early in order to get the salary.
    Mrs. Davis of Virginia. I would.
    Dr. Chu, do you have any comment?
    Mr. Chu. I thank you, Madam Chairwoman. I'd hoped to speak 
to this.
    First, as I think you do know, these would be term 
appointments, basically; it's not open-ended.
    Second, just as my colleague Mr. Blair indicated, this is a 
power we've already been given regarding retired military 
personnel who can be rehired without damage to annuity; and I 
think the record will show we have been careful in using that 
power. We have not abused that power. We actually keep in my 
office special indicators about that power to be sure we're 
being careful about that, and we would continue to manage any 
additional authority Congress gave us in just the same manner.
    Third, and here's really the reason we want to do this: As 
everyone has underscored in other hearings, we are, throughout 
the Federal Government, facing a human capital crisis in the 
sense that up to half of the Civil Service, really over the 
next 10 to 15 years, is going to retire. We have not hired that 
replacement generation, and we are very concerned in the 
Department of Defense about all the experience that's in the 
minds of those people who are now going to leave the work force 
and who might be willing, on a limited term basis, perhaps not 
full time, but part time, to come back and help us with that 
transition, to serve as the mentors for the young people we 
intend to hire to replace them, to serve as the experienced 
hands who really know how the system operates.
    I'm reminded in this regard of what happened in the New 
York City subway system when John Lindsey let everybody retire 
who was a seasoned mechanic, and what happened is, 3 years 
later, subway performance plummeted because not everything was 
written down in the technical manual; it was in the heads of 
those experienced workers.
    And what we want is the ability to reach those workers on a 
limited basis so we can benefit from their knowledge, benefit 
from their wisdom and ensure the future security of the United 
States.
    Mrs. Davis of Virginia. I do not disagree with you on that, 
but I do want to be fair; that's my big concern here.
    My time is up and I'm going to go to Ms. Norton.
    Ms. Norton. Thank you, Madam Chairwoman.
    Mr. Chu, I note that one of the proposals in the bill would 
allow a waiver of the rules, Civil Service rules, that require 
that reductions in force have to be based on tenure or on event 
of service or efficiency performance ratings. None of those 
would be required if this rule were waived. It sounds, I think, 
to the average person like the very definition of 
arbitrariness.
    Some of us really wonder how in the world race, a 
tremendous problem of the Federal Government for the entire 
history of our country, not to mention gender, ethnicity and 
other discrimination, is going to be also blocked if in fact we 
waive virtually every basis for reduction in force you use 
today. If not these, what in the world will we use to decide 
who to eliminate from the Federal Government?
    Mr. Chu. Thank you. I'm delighted to respond to this 
because I think there's a serious misunderstanding here.
    The reason for the waiver is, we can in fact make 
performance the primary basis of sorting through our work force 
if that sometimes does happen.
    Ms. Norton. But you have a performance management system in 
place according to the GAO. How would you measure performance, 
sir?
    Mr. Chu. I do not think that's quite what the GAO said.
    Let me first, if I may, deal with the waiver issue. The 
intent here is in fact to deal with what so many critics of the 
Civil Service have noted, which is that reductions in force 
today are driven almost entirely by tenure. They are almost 
invariably not with respect to performance.
    I think everyone agrees that is backward, the emphasis 
needs to be on performance first. That's the purpose of the 
waiver, so we can get to that.
    Ms. Norton. Of course, Mr. Chu, the reason for that, and 
all of us would agree that the way to lay off people in the 
world you're talking about would be by performance, so why do 
people go to tenure?
    But you, of course, would have waiver of performance 
ratings, as well. But, why do people go to tenure? They go to 
tenure because in the 100 years of Civil Service nobody's been 
able to come up with anything other than arbitrary ways to 
otherwise lay off people.
    I would be the first one--I have run a troubled agency; I 
have seen what tenure can do. But for the life of us, Mr. Chu, 
maybe you're smart enough, but nobody's been able to come up 
with a system that is objective and that would not result in 
arbitrariness.
    I want to know what in your system would keep us from 
arbitrarily laying off people who had in fact shown good 
efficiency or had good performance ratings in place of others 
who perhaps had not, particularly in light of the fact you do 
not have any performance management systems in place now, 
according to the GAO.
    Mr. Chu. I don't think that's what the GAO quite said. Let 
me go to your central concern, which is, can the Department of 
Defense be fair and performance oriented in any reduction in 
force. And let me point to the great historical experience in 
front of all of us which I personally lived through, and that 
is, we shrank the Armed Forces, the uniformed force of the 
United States, by several hundred thousand people in the early 
years of the 1990's. And we did it with a non-tenure system. We 
did it with a system that was performance oriented.
    I think this is a department that does know how to 
construct the safeguards we need in this regard, that does know 
how to manage a reduction in force, that is performance 
oriented and has done so on a scale that far exceeds anything 
that's at stake in this particular piece of legislation.
    Ms. Norton. I just want the record to show what you say; 
that's not quite what GAO said.
    At the same time, these projects relate, and related DOD 
efforts involving less than 10 percent of DOD's civilian work 
force in expanding these concepts to the entire Department will 
require significant effort and likely need to be implemented in 
phases over several years.
    Let me ask you, and try to make a distinction between labor 
and labor unions--frankly, I would never have asked this 
question without your answer.
    You said we have not talked to unions, but we have talked 
to labor. You've got to find out who labor is. Are you saying 
that the workers you talked to, the workers in these projects, 
were not in unions.
    Mr. Chu. No, I'm not saying that, ma'am; and I do not think 
I quite said we haven't talked to labor unions. We have had 
discussions with labor unions on a variety of these issues.
    Ms. Norton. And you have consulted with labor unions in the 
way that the law now anticipates?
    Mr. Chu. I believe the question that was asked is did we 
invite the labor unions to participate in the design phase; and 
the answer is no, we did not invite the labor unions to do 
that. We did extensively, through a variety of means, listen to 
what our employees had to say about the system.
    Ms. Norton. Including representatives of labor unions.
    Mr. Chu. To the extent they are our employees, of course.
    Ms. Norton. So you did talk to labor unions who have been--
--
    Mr. Chu. No, we did not. I'm not trying to be semantic 
about this.
    Ms. Norton. It sounds that way, sir. I just wanted to know 
if you talked with the people who've been elected by the 
employees to represent them in labor management consultations.
    Mr. Chu. As I testified, we drew this up based on a wide 
range of materials. We did not, however, undertake a formal 
consultation with our unions over the design of the system. 
That's an issue----
    Ms. Norton. So the answer is no. And we ought to, you know, 
you ought to say that. You haven't talked, you haven't 
consulted with your labor unions, and there's no way to slither 
out of that except to say you haven't done it. And the fact is 
that you are making these kinds of wholesale changes in your 
work force, and you expect them to be accepted and carried out 
by a willing work force. You must not have read closely the 
very private--the very private employer treatises you refer to 
in your testimony, because one of the reasons that American 
business succeeds, even when it did not have trade unions, is 
its understanding of the need to get work out of the only 
people who can do it, which is the people who work for you.
    I just want to say one thing before I close out, Madam 
Chairwoman, and that is about the notion about no notice and 
comment. The notion that we would attempt to do--that--the 
hubris, the outrage of attempting to affect this kind of large 
change without notice and comment is so reckless, so 
irresponsible, as to be completely unbelievable. When I came to 
the Equal Employment Opportunity Commission, it had interpreted 
the law to mean that it didn't have to under the APA do notice 
and comment. But I knew that I could protect myself best by, in 
fact, putting everything I was going to put into regulations 
out there to comment. Comments tell you--you can ignore 90 or 
100 percent of them, but they tell you things you don't already 
know. The people who were most appreciative of my putting EOC 
under the APA was the business community, because they got to 
tell me things about how business has to operate in--under a 
law which requires equal employment opportunity, and whether or 
not what I was suggesting was practical or whether it was 
simply going to blow up in my face.
    And, if I may say, about the worst thing in these proposals 
is this language which says we don't have to talk to anybody 
but ourselves; we don't have to talk to the Congress, we don't 
have to talk to the public, and we need only to gather in a 
room by ourselves. That is the way they do things in 
authoritarian societies. They don't do things that way in open 
democratic societies. And, that one section ought to be reason 
enough to turn back this proposal.
    Thank you, Madam Chairwoman.
    Mrs. Davis of Virginia. Can we have order, please? Mr. Van 
Hollen.
    Mr. Van Hollen. Thank you, Madam Chairwoman. I do think 
what you gentlemen, what the administration's asking us to do 
here is extraordinary.
    Mr. Chu, you mentioned the underlying purpose of this was 
to create more flexibility and agility. And those are great--
they're great buzzwords. I mean, who can be against flexibility 
and agility, except when you turn to think about what exactly 
that means in practice? I mean, we have ethics rules that 
govern the Congress. It would make it a more flexible place if 
we got rid of them. Rules are in place to provide greater 
fairness. Rules are in place to protect, as Mr. Waxman said, 
against nepotism and political favoritism. So, no doubt about 
it,WE can give you greater flexibility and greater agility by 
throwing out all the rules and letting you do whatever you 
want. That doesn't mean you have a system that's more fair and 
a system that protects the American public. In fact, what this 
would allow, would it not, is any new Secretary of Defense 
could come in, you've given the power to the Secretary of 
Defense to rewrite the rules. Wouldn't that be allowed under 
this legislation?
    Mr. Chu. This legislation does not really envisage the 
frequent rewriting of the rules.
    Mr. Van Hollen. Mr. Chu, let me just interrupt. I'm not 
asking what it envisions. I'm asking if that would be allowable 
under this legislation. If we pass it, doesn't it give the next 
Secretary of Defense the authority to essentially come in and 
create whatever new system they want to create?
    Mr. Chu. This does give the Secretary of Defense 
flexibility, much as the country has given him flexibility on a 
wide variety of other issues. It is not without its safeguards. 
I think there are plenty of procedural safeguards there, both 
in the administrative practice of the Federal Government and in 
the statutory language that is proposed. So I think there's 
plenty of opportunity--there's plenty of oversight opportunity 
for the Congress, which really is ultimately the chance to 
dialog with the American public about what's the best way to 
proceed.
    Mr. Van Hollen. Well part of what--part of the rules that 
exist today are the result of that dialog between the American 
public over a period of time. That's how they got there and 
that's why you're seeking to change them. And those were put in 
place over a long period of time. You're asking them to 
overturn them in a short period of time.
    Let me just say I think one of the best measures probably 
is the performance of the Department of Defense as an 
institution, and both of you gentlemen have said that you 
consider it one force; that the military force together with 
the civilian force, one supporting the other, and they've done 
an excellent job. And I, as I think--as I understand the 
chairman of the committee said earlier, I think what we saw in 
the prosecution of this war in the Gulf is probably the best 
test of performance.
    So, I do find the timing here a little strange, having gone 
through what by any measure, whether people supported the war, 
were against the war, or wanted to do it later, everyone agrees 
that the American military forces and the support that they 
received from the civilians at the Department of Defense was 
exemplary. So, I find it strange that at this particular point 
you'd be coming in and saying we need to change it.
    Let me just ask--I would like to ask Mr. Blair a question 
because I thought we also had a great hearing between the House 
and the Senate committees, just a short period of time where we 
reviewed this whole question of pay-for-performance and review. 
And at that time, one of the key things that was raised by GAO 
and was raised by others was that in the Federal Government we 
do not have in place in many agencies a system now that we 
could use to, say, provide a measure against which we want to 
improve in terms of these performance systems. And, I asked Mr. 
Blair during that hearing and his testimony from that time, on 
page 7, we asked him to point out a couple of Federal agencies 
that had done well in terms of developing successful 
performance expectations of managers and strategic plans and 
mission objectives. The Department of Defense wasn't on that 
list. I mean, the two agencies he said made some progress in 
these areas were the Department of Energy and the Department of 
Labor. So I guess I'd ask you, Mr. Blair, why, if we talked 
about--we've talked about pilot projects, we talked about 
beginning small and seeing how it worked--and the two agencies 
you identified were not, you know, did not include the 
Department of Defense--why, if we want to really get going on 
this and get our sea legs, why would we start with one of the 
biggest Federal agencies in the United States Government?
    Mr. Blair. Well, let's remember, that wasn't an exhaustive 
list.
    Mr. Van Hollen. I asked you, Mr. Blair, at that time, based 
on your testimony, for examples and you did not provide any 
others.
    Mr. Blair. I provided those two examples and we can provide 
more. But that was not an exhaustive list. And keep in mind 
that DOD does have 20 years of experience in pay banding which 
inherently has performance factors in it, along with other pay-
for-performance fact--experimentation that have been going on 
in the Department. You come to a point where you realize it's 
no longer worth demonstrating; it's worth implementing, and if 
it's good for one component within the Department it may be 
good to spread it not only department-wide but governmentwide 
as well.
    Mr. Van Hollen. Mr. Chu, I'd like--I mean, I think you 
raised a point that I think all Members would agree on with 
respect to the importance of maintaining the expertise and the 
knowledge that we've accumulated over the years. And my 
question to you is, I'm sure that we can think of a way to 
safeguard that information to provide a mechanism where the 
Defense Department can retain the accumulated knowledge of its 
employees without the kind of wholesale immediate changes that 
we're talking about today. I mean, I'm sure that given your 
experience, if you were tasked with addressing that issue 
specifically, you would be able to identify ways of doing that 
without the wholesale changes you're talking about. And I 
wonder if you have any idea specifically on those issues how we 
could address those.
    Mr. Chu. I think, sir, indeed the provision on what my 
staff keeps calling ``older Americans,' is a narrowly targeted 
provision to deal with this question of human capital and the 
great human capital shift that is about to occur, and so it is 
a term appointment. There is a limit to how long an individual 
could hold this appointment. It mirrors the decision by the 
Congress several years ago, as Mr. Blair testified, to allow 
military annuitants to work for the Federal Government without 
damage to their annuity.
    I think what we envisage, frankly, is that these will often 
be part-time situations. They are opportunities for us to keep 
as mentors, as guides for the new generations, great figures of 
the present generation.
    Mr. Van Hollen. Thank you, Madam Chairwoman.
    Mr. Ose. Thank you, Mr. Van Hollen. And you gentlemen have 
been very patient, as have our other witnesses. I want to thank 
you, but I do want----
    Mr. Cooper. Would the Chair allow me?
    Mrs. Davis of Virginia. Oh, I'm sorry. I thought you left. 
Mr. Cooper, I didn't see you come back.
    Mr. Cooper. It's just like a bad dream.
    Mrs. Davis of Virginia. No, you're fine. I just didn't 
notice you when you came back. I apologize.
    Mr. Cooper. I'm pretty moderate and I think I'm slow to 
anger, but this is a truly amazing hearing. I tried to review 
the testimony, the OPM testimony. It was actually fairly easy 
to review. And, I almost wondered, since it was so thin, why 
OPM bothered to submit it. I read the Washington Post this 
morning, and one critic called OPM a toothless chihuahua. I 
think we've heard the toothless chihuahua try to bark in that 
testimony.
    I wonder if you're so willing to cede what one-third of 
your jurisdiction--why you don't resign in protest or why you 
don't, you know, have something more significant to say at a 
historic moment like this. And, by the way, where is the 
Director? You know, what is OPM there for? Maybe we should just 
go whole hog and repeal OPM. You know, it is amazing to me to 
see so little response from OPM.
    Mr. Blair. I think you've asked several questions that we 
could discuss for several hours. Let me start--it almost 
promotes a visceral reaction on my part when you say that where 
are we--I'll tell you where we are. This proposal should 
surprise no one. We've been talking about Civil Service reform 
for 20 years. We've been talking, we've seen over the past 
decade, agency by agency, first the banking agencies, then FAA, 
IRS, Homeland Security, all seeking flexibility from our 
current rigid rules. And every time they come up, people act 
surprised and say, we don't--you know, what's happening here?
    I'll tell you what's happening here is that when we operate 
under 100-year-old rules, agencies no longer can adequately--
not adequately; agencies chafe and find ways of going around 
and circumventing--not circumventing, but find ways of 
operating within the system that was not designed for the 21st 
century. So at OPM----
    Mr. Cooper. If I can reclaim my time. I'm afraid the Chair 
has me on a very short leash. I might be of the canine variety, 
too. But we had very little notice of this. I think it was 
submitted to the committee April 10. I traveled with the Chair 
of the full committee for 3 days during the recess. He at no 
point mentioned this was going on. I am a studious person. I do 
try to do my homework. This is an appalling procedure.
    As for Mr. Chu, as I say, I do try to do my homework and 
the Boyd book--and I realize that's just one reference; that 
book pretty systematically questions the credibility of a David 
Chu of the Pentagon who is--and this is a quick cite here, head 
of programs and policy at DOD. Would that be this Mr. Chu? You 
testified, I believe, either concurrently with a Mr. Spinney 
and a Mr. Boyd repeatedly, and you always denounced their 
testimony as historical and irrelevant, at least according to 
this one book. Now the book suggests that, sir, you were 
serious and systematically in error.
    Mr. Chu. I think you are referring then to Colonel John 
Boyd, and you're referring in fact to my tenure as Director and 
later Assistant Secretary of Defense for Program Analysis 
Evaluation. I think that tenure gives the lie to the 
accusations Mr. Boyd makes, but Mr. Boyd obviously is a 
partisan to that battle. And yes, I did question the assertions 
that he and his colleagues were making.
    Mr. Cooper. The conclusion of this book just--and I don't 
have the page number so excuse me: Boyd and Spinney were at the 
heart of the Pentagon reform effort that got squelched in large 
part by Chu.
    So at least to some folks on this committee who are trying 
to do their homework, your credibility is in doubt at least on 
some Pentagon reform issues. Perhaps you're a genuine reformer 
on this issue. I hope so. I look forward to the full committee 
having the time to seriously look at this proposal. But if you 
have, in fact, been working on it for a long period of time, 
for us to be presented with it April 10 and be expected to vote 
on it, finally, forever, by what, May 1, this is a seriously 
flawed process if you believe in due process. And that's what 
some of us are wondering on this side, whether you believe in 
fair process for your own employees. And that's a serious 
allegation, but this is a serious time when a proposal of this 
magnitude is brought up and expected to be rammed down our 
throats in short order.
    That is not fair play. That is not what this country is 
supposed to be about, especially in view of the magnificent 
performance of the Pentagon and its troops working in a 
coordinated fashion in this most recent conflict and in most 
all recent conflicts. It's a seriously challenging time and I--
it's little wonder there are so few members of the majority 
attending this hearing. They're embarrassed to be here and see 
this kangaroo court process go on. And I'm not a severe 
partisan. I've often voted with Republicans on issues. I'm not 
particularly close to organized labor. But this is appalling. 
And you are party to it again.
    So, as I do my homework, hopefully, I will see other 
references to David Chu, but this is not right. And, I hope 
that we will see greater fairness and hopefully a more lenient 
schedule on the part of this committee, because again you're 
buying jurisdiction for this committee at the cost of this 
committee becoming a rubber stamp for an unfair process.
    I thank the Chair.
    Mr. Chu. Could I respond, Madam Chairwoman?
    Mrs. Davis of Virginia. Yes, you may.
    Mr. Chu. I think I would like to reassure you, sir, about 
the schedule. The schedule is not just one of weeks or months. 
As my colleague Mr. Blair has testified, it is a schedule of 
years. We are not the first to reach these conclusions, either 
within the Federal Government or outside it. The Volcker 
Commission, chaired by one of the most distinguished public 
servants this country has ever seen, has reached similar 
conclusions. We are in the spirit of those proposals.
    Mr. Cooper. Has he endorsed your reform effort? You're 
using Chairman Volcker's name. Has he endorsed your 
legislation?
    Mr. Chu. We have not asked him for endorsement but we 
have----
    Mr. Cooper. Don't use his name unless you know you have his 
support.
    Mr. Chu. I believe, sir, a fair reading of his report would 
indicate that this proposal is in the spirit of his report. And 
that is----
    Mr. Cooper. Well, that's for him to judge, not you.
    Mr. Chu. It's for all of us.
    Mr. Cooper. If you want to be fair.
    Mr. Chu. It's for all of us to judge. And what I want to 
emphasize is, as Mr. Blair has testified, this is the 
culmination of a long series of events in which the entire 
Federal Government wants to move forward. Our challenge is not 
just whether we won the last war. Our challenge is whether 
we'll win the next war, and that's why we need these powers.
    Mr. Cooper. If this is the culmination of a long series of 
efforts, why are we given so little notice? I've attended every 
briefing I think the Pentagon's had. I've appreciated the 
meetings with Secretary Rumsfeld. He's done many things 
wonderfully well. But this was not mentioned in any form in 
which we could study it or chew on it or learn about it and we 
have duties as representatives of the American people to try to 
do the right thing, and to have orderly procedures here so that 
we're not members of a kangaroo court expected to rubber-stamp 
whatever the latest administration whim is.
    If you thought this proposal could stand the light of 
scrutiny, you would give the American people a full and fair 
opportunity to examine it and to do the right thing. But, you 
are systematically denying the American people that 
opportunity. Let's have hearings. Let's have the sort of 
scrutiny that other proposals have gone through, such as the 
homeland security proposal. But, this is not going to be 
eligible to receive that sort of scrutiny. You want to do this 
as quickly and as silently and as stealthily as possible. And, 
that leaves us with the only alternative, hoping and praying 
you're doing the right thing.
    Mr. Chu. Sir, if I may respond.
    Mrs. Davis of Virginia. OK. And the gentleman's time has 
expired but we'll let Dr. Chu respond.
    Mr. Chu. I'll try to do so briefly, Madam Chairwoman. Thank 
you for the chance. The Secretary has been quite public in 
speaking to this issue for many months, about the need for 
reform. We are not trying to do this secretly or silently as 
you suggest. We are open about this. I have met with all manner 
of representatives of the public in terms of explaining why we 
need change and what kind of change we need. We welcome the 
scrutiny that you want to give this proposal. We think it is an 
excellent proposal and we need your assistance.
    Thank you, sir.
    Mrs. Davis of Virginia. I think Director Blair would like 
to say something.
    Mr. Blair. Thank you, Madam Chair. Regarding the article in 
today's Post, if for argument's sake you wanted to accept the 
premise that--and I emphasize for argument's sake, you want to 
accept the premise that the purpose behind this is to get out 
from OPM rules, I think that argues against a toothless 
chihuahua approach that you just mentioned; that if in fact the 
purpose behind this is to get out of OPM, get out from under 
any kind of OPM oversight, it's because we exercise such 
oversight diligently. Now, I don't buy that proposal. I don't 
buy the proposal or the purpose behind that is to necessarily 
get out from OPM. I think the purpose is to--that the Defense 
Department truly believes that they need to have the autonomy 
to operate more efficiently.
    That said, however, there is a role for OPM and the role 
for OPM is one that will be decided by this committee. And so I 
would argue that any type of legislative changes they go 
through do go through a process and you have the opportunity, 
and you have your input on that.
    Mrs. Davis of Virginia. Thank you, Director Blair.
    Dr. Chu, you prompted me to say something here and I'm just 
going to have to say it. No. 1, I think you can see that we all 
on this, I believe, that are here today are very concerned 
about the speed in which this has had to go through. And quite 
frankly, it's my understanding when I found out about it, that 
was going through Armed Services under Title 10 to bypass the 
jurisdiction of this committee. Now, I don't know if that was 
true or not. But you just said that you welcome the scrutiny of 
this change through this committee. That said, would you be 
willing to pull it out of the DOD authorization bill and let it 
be a stand-alone bill and let us scrutinize it?
    Mr. Chu. Ma'am that's not my decision to make.
    Mrs. Davis of Virginia. Could you ask the Secretary?
    Mr. Chu. Delighted to ma'am. I don't--I think we all know 
Mr. Rumsfeld. The same 3 weeks that Mr. Cooper cited, the 3 
weeks it took our troops to get from the Kuwait border to 
Baghdad, he is not someone who is patient with a long, 
indecisive process. He is eager for the opportunity to reshape 
this Department in the way I think we all agree the country 
needs.
    And that's the purpose of this legislation. It is, as you 
indicated, a much larger package, covers a whole variety of 
issues, including management and military personnel, which is a 
classic Title 10 issue. So, my expectation is the Secretary 
will press us all to consider moving forward. It's ultimately 
your question here in the Congress whether you're prepared to 
move forward. But we welcome----
    Mrs. Davis of Virginia. Well, with all due respect, putting 
it on the DOD authorization bill does not give it the scrutiny 
that it needs because, as you know, those of us in Armed 
Services are looking at helping the military and the defense of 
our country. And it will probably fly through. But I'll see 
what I can do to try and fix it before it gets there, if that's 
possible.
    I do appreciate both of you coming, and your patience, and 
thank you very much.
    Mr. Chu. Thank you ma'am for the opportunity.
    Mr. Blair. Thank you very much.
    Mrs. Davis of Virginia. Mr. Comptroller General, I very 
much apologize to you for having to wait so long. Again, Mr. 
Comptroller General thank you so much. You know the drill.
    [Witness sworn.]
    Mrs. Davis of Virginia. Let the record reflect that the 
witness has answered in the affirmative and I'm just going to 
let you begin.

STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL OF THE UNITED 
             STATES, U.S. GENERAL ACCOUNTING OFFICE

    Mr. Walker. Thank you, Madam Chair, Mr. Davis, Ranking 
Member Davis, other members of the subcommittee that are here, 
I appreciate the opportunity to appear before you today to 
provide some observations regarding the Department of Defense's 
proposed National Security Personnel System which is included 
as part of the Defense Transformation for the 21st Century Act 
of 2003.
    Madam Chairwoman, I'd ask that my entire statement be 
included into the record and I'll summarize key portions 
please.
    Mrs. Davis of Virginia. So ordered.
    Mr. Walker. Thank you. The proposed Defense Transformation 
Act of the 21st Century represents a substantive legislative 
proposal that has both significant precedent-setting 
implications for the Federal Government and OPM, along with 
far-reaching implications for the way that DOD is managed. 
DOD's legislative initiative would, among other things, provide 
for major changes in civilian and military human management 
practices, make important adjustments to the DOD acquisition 
process, affect DOD's organizational structure, and change 
DOD's reporting requirements to Congress.
    As per your request and Ranking Member Davis's request I 
will focus on the civilian personnel aspects. Many of the basic 
principles underlying DOD's civilian human capital proposals 
have merit and deserve serious consideration. The Federal 
personnel system is clearly broken in critical respects, 
designed for a time and work force of an earlier era, and not 
able to meet the needs and challenges of our current rapidly 
changing and knowledge-based environment.
    DOD's proposal recognizes that, as GAO has stated and the 
experiences of other leading public sector organizations here 
and abroad have found, strategic human capital management must 
be the centerpiece of any serious government transformation 
effort. At the same time, we have a number of serious concerns 
regarding DOD's proposal that Congress should consider. Human 
capital reforms at DOD obviously have important implications 
for national security.
    At the same time, given the massive size of DOD and the 
nature and scope of changes that are being considered, DOD's 
proposal also has important precedent-setting implications for 
the Federal human capital management area, in general, and OPM, 
in particular. As a result, DOD's proposal should be considered 
in these contexts. After all, DOD employs almost 700,000 
civilian employees, making it the second largest civilian 
employer after the Postal Service.
    As a result, the critical questions that in our view need 
to be asked include: Should DOD and/or other agencies be 
granted broad-based exemptions from existing law, and, if so, 
on what basis? And whether they have the institutional 
infrastructure in place to make effective use of the new 
authorities? This institutional infrastructure includes, at a 
minimum, a human capital planning process that integrates the 
agency's human capital policy strategies and programs with its 
program goals and mission and desired outcomes, the capability 
to effectively develop and implement a new human capital 
system, and, importantly, a set of adequate safeguards, 
including reasonable transparency and appropriate 
accountability mechanisms to ensure the fair, effective, and 
credible implementation and application of any new system.
    Many of DOD's proposals are based on the Department of 
Homeland Security bill. However, unlike the legislation 
creating DHS, the Defense Transformation for the 21st Century 
Act would allow the Secretary of Defense to waive the 
requirement for joint issuance of regulations if in his or her 
judgment, it is, quote, essential to the national security, 
which is not defined in the act. While the act specifies a 
number of key provisions of Title 5 that would not be altered 
or waived, including those concerning veterans' hiring 
preference, merit protections, and safeguards against 
discrimination and prohibitive personnel practices, the act 
nonetheless would in substance provide the Secretary of Defense 
with significant independent authority to develop a separate 
and largely autonomous human capital system for DOD. DOD states 
that it needs a human capital management system that provides 
new and increased flexibility in the way it manages and 
assesses and compensates its employees.
    As you know, there is growing agreement on the need to 
better link individual pay to performance. Establishing such 
linkages is essential if we expect to maximize the performance 
and assure the accountability of government for the benefit of 
the American people. As a result, from a conceptual standpoint, 
we strongly support the need to expand broadbanding approach 
and pay-for-performance based systems in the Federal 
Government. However, moving too quickly or prematurely at DOD 
or elsewhere can significantly raise the risk of doing it 
wrong. This could also serve to severely set back the 
legitimate need to move to a more performance and results-based 
system for the Federal Government as a whole.
    Thus, while it is imperative that we take steps to better 
link employee pay to performance across the Federal Government, 
how it is done, when it is done, and the basis under which it 
is done can make all the difference in whether or not such 
efforts are successful.
    In our view, the key need is to modernize performance 
management systems in executive agencies so that they are 
capable of adequately supporting more performance-based pay and 
other personnel decisions. Unfortunately, based on GAO's past 
work, most Federal personnel appraisal systems, including most 
of DOD's systems, are not designed to support a meaningful 
performance-based system at the present time. The bottom line 
is that in order to receive any additional performance-based 
pay flexibility for broad-based employee groups, in our view, 
agencies should have to demonstrate that they have modern, 
effective, credible and, as appropriate, validated performance 
management systems in place with adequate safeguards, including 
reasonable transparency and appropriate accountability 
mechanisms to ensure fairness and prevent politicization and 
abuse.
    More specifically, Congress should consider establishing 
statutory safeguards that an agency must have to put in place 
before it could implement broadbanding on more performance pay 
authority.
    At the request of Congressman Danny Davis, we developed a 
list of initial safeguards for consideration by the Congress 
that we believe would provide reasonable flexibility while 
incorporating appropriate safeguards to prevent abuse. We would 
ask that you seriously consider them.
    In my view, Madam Chair, the effort to develop such 
safeguards could and should be part of broad-based expanded 
pay-for-performance authority under which a whole agency, DOD 
and otherwise, and or employee groups, could adopt broadbanding 
and move to a more pay-for-performance oriented system if 
certain conditions are met in advance.
    Specifically, the agency would have to demonstrate and OPM 
would have to certify that a modern, effective, credible, and, 
as appropriate, validated performance management system with 
appropriate 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 implement the new system; in other 
words, a broad base of authority that could cover DOD and other 
government agencies with these safeguards, where agencies would 
have to demonstrate in advance to the satisfaction of OPM that 
they have the systems and controls in place; and when they do, 
they can move forward. Not just DOD, anybody. But you would 
have these standard safeguards that Congress would determine as 
being adequate to protect the interests of employees and to 
prevent abuse.
    In this regard, we believe that the OPM should consider 
adopting class exemption approaches and should be required to 
act on individual certifications within prescribed timeframes, 
say 30 to 60 days. This approach would allow for a broader-
based yet more conceptually consistent approach in this 
critical area. It would also facilitate a phased implementation 
approach throughout government and it would promote high-
performing organizations throughout government in ways that 
would provide reasonable flexibility to management but 
incorporate adequate safeguards to prevent abuse of employees. 
Both are of critical importance. One without the other is not 
acceptable.
    Congress should also consider establishing a governmentwide 
fund whereby agencies, based on a sound business case, could 
apply for funds to modernize their performance management 
systems and ensure that those systems have adequate safeguards 
to prevent abuse. This approach would serve as a positive step 
to promote high-performing organizations throughout the Federal 
Government while avoiding further fragmentation within the 
executive branch in the critical human capital area.
    Madam Chair, that represents a summary of my statement. I 
would be more than happy to answer any questions that you or 
the other members of the subcommittee may have. Thank you.
    [The prepared statement of Mr. Walker follows:]

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    Mrs. Davis of Virginia. Thank you, Mr. Walker, and again we 
really appreciate your patience.
    I'm going to start with my ranking member, Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman.
    Mr. Walker, I want to thank you for your testimony and also 
thank you for your cooperation. Last week you did in fact send 
plea, a letter outlining a list of possible safeguards to help 
ensure that agencies that are granted waivers from Title 5 have 
performance management systems in place that are indeed fair 
and equitable.
    You mentioned in your testimony that DOD has not had a good 
track record reaching out to stakeholders such as employee 
groups. In your opinion, what is the potential for abuse if 
safeguards are not put in place to ensure fair and transparent 
personnel systems?
    Mr. Walker. I believe very strongly that the Federal 
Government needs to move to a more modern human capital system 
which incorporates pay-for-performance principles to a much 
greater extent than today. I also believe that how it's done, 
whether it's done, and on what basis it's done, matters. The 
process is critically important.
    I believe that DOD has involved employees in the past in 
connection with demonstration projects. They have actively 
involved them. And you have to in order to design and implement 
it. But they represent less than 5 percent of their work force 
at the present point in time. And this would give authority for 
100 percent of their work force. And I believe it is important 
to involve labor as well as employees who aren't represented by 
a union in the process up front.
    Mr. Davis of Illinois. Do you think that these safeguards 
would have a tendency to be more of a help to agencies than a 
hindrance?
    Mr. Walker. My personal view is that they're important that 
they be in place in order to maximize the chance for success 
and to minimize the possibility of abuse.
    Mr. Davis of Illinois. That would suggest to me that it's 
going to be helpful. I mean, we want systems that are going to 
provide not only protection but also provide efficiency and 
effectiveness, and you need morale, you need all of those 
things that become factors in productivity and the 
implementation of work plans. And so I would take that to mean 
that this is actually going to be helpful to the agencies 
rather than harmful.
    In his testimony, Mr. Chu stated that DOD did not engage 
labor in the development of its legislative human capital 
proposals because the dialog with the unions would be more 
focused when the legislation was completed. Do you feel that's 
an acceptable method for ensuring employee input as we try and 
create the most responsive and effective system that we could 
have?
    Mr. Walker. I think, obviously, management at DOD had to 
decide how they wanted to proceed in this regard. I wouldn't 
have done it that way.
    Mr. Davis of Illinois. Madam Chairwoman, I don't have any 
other questions.
    Mrs. Davis of Virginia. Thank you. Mr. Waxman.
    Mr. Waxman. Thank you very much. Mr. Walker, I am pleased 
to see you. In the past, you've consistently talked about the 
need for greater accountability measures, checks and balances, 
if you will, to be instituted at Federal agencies before 
greater flexibilities are given to them. For instance, you told 
Senator Voinovich at a joint House/Senate hearing last month, I 
believe, ``a vast majority of the Federal agencies do not have 
the infrastructure in place in order to effectively and fairly 
move to a more performance-based compensation structure.'' In 
your opinion, does DOD have the necessary systems in place to 
manage the hiring and pay flexibilities that it is seeking?
    Mr. Walker. No, I think they have the framework that they 
want to implement, but it's not in place.
    Mr. Waxman. In fact, when GAO reviewed DOD's strategic plan 
for civilians last month, GAO found a lot of problems with the 
plan; isn't that correct?
    Mr. Walker. It was, as was said before, we had concerns 
that we expressed. You could say it's half empty or half full, 
but half is half.
    Mr. Waxman. Well, has DOD made sufficient corrections to 
its plan to suggest that it could design a personnel system 
that will both treat employees fairly and allow the Department 
to perform its mission effectively and efficiently?
    Mr. Walker. I believe it is possible for DOD to design and 
implement systems based upon the demonstration projects that 
can be successful. However, there's a fundamental philosophical 
difference here. In my view, I believe in the Missouri 
principle: Show me.
    We're talking about something that is very significant 
here, and I personally believe it would be better if Congress 
provided broad-based authority with specific statutory 
safeguards that either DOD or anybody in the executive branch 
could come forth--if they could demonstrate to OPM that they 
satisfy these safeguards, I think that would be the preferred 
approach.
    Mr. Waxman. Well, if you take the Missouri approach and you 
look at DOD's past record, it's not very comforting in my view, 
because GAO has criticized DOD for its poor bookkeeping, 
nothing in terms of management problems, nothing the 
Department--noting that the Department lacks fundamental 
control and management oversight in its handling of money. In 
2001 you gave the Department a D-plus grade on economy and 
efficiency. DOD had over $1 trillion worth of transactions that 
were unaccounted for last year, and we've all heard about the 
misuse of government travel cards at DOD and news articles have 
even compared the Pentagon to another Enron when it comes to 
financial management. Given all these recent management 
problems in DOD, why should Congress trust DOD to be able to 
devise, implement, and plan a completely new personnel system?
    Mr. Walker. Mr. Waxman, I believe that DOD has the right 
conceptual framework, that intellectually they want to do the 
right thing, and that Dr. Chu and Secretary Rumsfeld and others 
are dedicated to transforming the Department, and that human 
capital transformation is a key part and pay-for-performance is 
an important sub-element.
    However, I go back to what I said. I believe it would be 
vastly preferable to be able to take a governmentwide approach 
that allows DOD and other executive branch agencies to move 
forth with broadbanding and pay-for-performance if they meet a 
set of statutory safeguards in advance before they implement. I 
believe that would be the prudent way to go.
    Mr. Waxman. What do you think about the idea, as a previous 
witness--you may not have been here to hear him, but he argued 
that if there's a conflict between DOD and OPM, to break the 
tie, DOD wins. Do you think that personnel decisions ought to 
be decided by the agencies if there is a disagreement with OPM 
if the head of the agency feels it's national security, or 
should they go to the President or someone in the White House 
to resolve it?
    Mr. Walker. Well, in most mechanisms that I've seen, 
including GAO records access, I might add, these types of 
certifications are done by the President of the United States 
or the Director of OMB rather than a party who has a vested 
interest in the outcome. That's not intended to reflect one way 
or the other on specific individuals. I have tremendous respect 
for Secretary Rumsfeld and Dave Chu and others.
    Mr. Waxman. No, it's certainly not a personal issue. But 
how would you distinguish DOD getting extraordinary flexibility 
and powers to waive the Civil Service laws and then not give it 
to Homeland Security to the same extent, or Department of 
Transportation, or any other agency at the Federal Government 
where they can argue their functions are important, in fact 
their functions are important for the national economy and 
national security? Shouldn't Civil Service laws apply the same 
across the board?
    Mr. Walker. My view, Mr. Waxman, is that it would be vastly 
preferable to have a set of statutory safeguards that could 
apply to every department and agency, DOD and others, where 
when people can come forth with a business case to say we want 
to do this, we meet these safeguards, we've got the system in 
place, therefore, OPM, give us the authority to implement, 
that's I believe the appropriate approach.
    Mr. Waxman. Thank you very much. Thank you, Madam Chair.
    Mrs. Davis of Virginia. Thank you. Mr. Van Hollen.
    Mr. Van Hollen. Thank you. Thank you, Madam Chairwoman.
    Thank you, Mr. Walker, for being here. I just want to thank 
you for your testimony, and I appreciate your guidance as to 
your recommendations how to proceed here, because we did, as 
has been said already, have this hearing just a short time ago 
where we discussed a lot of these issues, and I think the 
recommendations you're making today I sensed were part of the 
consensus that was emerging out of that discussion, which is 
that these agencies, including DOD, currently have all the 
authority they need today, at least to demonstrate, to bring 
their personnel evaluation systems up to the point where they 
can say to the Congress or ask--we can ask GAO to review and 
say have you gotten to the point where you can appropriately 
move on to the next step? I mean, there's nothing barring DOD 
today from taking those steps internally to reach that point, 
is there?
    Mr. Walker. No. I think it is possible to achieve broad-
based consensus with this centrist framework that you referred 
to.
    Mr. Van Hollen. Right. I mean, so I--again, and your 
testimony reflects this so I'm not going to prolong the point, 
but I do think that your suggestion that we move very 
cautiously in this area, I think is well taken, and I just 
don't understand the reason to move forward on the kind of 
timetable that we're being asked to move forward, especially 
whether the greatest performance results from the last couple 
of months suggest that things don't need--it's not urgent that 
we make any kind of overhaul that we're talking about. Thank 
you for your testimony.
    Mrs. Davis of Virginia. Thank you, Mr. Walker. I do have a 
question or two, and maybe I should have asked this one to DOD 
as well. But I kept them long enough. What would be the harm in 
granting DOD the same guidelines, safeguards, flexibilities, 
what have you, that we gave to the Department of Homeland 
Security? And couldn't DOD function just as well, or more 
efficiently and effectively, with those guidelines as well as 
the--as opposed to the far-reaching ones that they've asked for 
in their proposal.
    Mr. Walker. Well, they're asking for many of the things 
that the Department of Homeland Security got, plus some 
additional authorities, and, in some cases, without the 
safeguards that apply to DHS. Obviously, that's one of the 
options you could decide to adopt. My personal view is that it 
would be preferable to take a governmentwide approach and have 
a consistent set of safeguards that could apply throughout 
government. Otherwise we're in danger of further balkanizing 
the government. I think there are certain principles that 
should apply universally.
    At the same point in time DOD, DHS, GAO, and others ought 
to be able to design their systems for their missions for their 
work forces, so it's not a one-size-fits-all approach. But 
certain principles have no boundaries. Certain principles are 
timeless, and I think Congress has a role to play in 
determining what those are.
    Mrs. Davis of Virginia. You and I have had that discussion, 
and you know I totally agree with you, and I wish we could do 
that. But trying to fix something that's here now, and like 
somebody said down there, the train's left the station, so 
we're going to try and fix it before it gets too far out of 
bounds.
    Going back to what I think Mr. Davis--or it might have been 
Mr. Waxman, I'm not sure--asked you about involving the labor 
unions. If you had to--and I'm going to put on you the spot 
here.
    Mr. Walker. It's been done before, Madam Chair.
    Mrs. Davis of Virginia. If you had to rate what DOD did 
with the labor unions on a scale of 1 to 10, how effectively do 
you believe DOD has involved employer representation in their 
efforts to expand their pay-for-performance management system?
    Mr. Walker. For this proposal?
    Mrs. Davis of Virginia. Yes.
    Mr. Walker. Less than 50/50. Not very good. It would be 
less than 5. I don't know enough to be able to give it an 
actual grade. But it would clearly be less than 5 on a scale of 
10.
    Mrs. Davis of Virginia. And you and I have had that 
discussion, too, that a lot of times it's the perception, and 
if you do the discussions up front maybe you don't have as much 
opposition when you get to the table.
    I really appreciate you coming, and I think, you know, 
you've already answered my questions in the past and I totally 
agree with you. I wish we could do something on a standard 
governmentwide basis. I don't have it down as well as you do. 
You say it so well. You've said it so much. And maybe 1 day 
we'll listen. But thank you, Mr. Walker, for coming.
    I'm going to ask if my colleagues have any more questions 
to ask of you. And I do appreciate you taking the time.
    Mr. Walker. Thank you. Take care.
    Mrs. Davis of Virginia. If the third panel would come 
forward, and if you'd just remain standing while I administer 
the oath. It is the subcommittee's standard practice to ask 
witnesses to testify under oath, and if you'll raise your right 
hands.
    [Witnesses sworn.]
    Mrs. Davis of Virginia. Let the record reflect that the 
witnesses have answered in the affirmative. And you may be 
seated. The witnesses will now be recognized for opening 
statements. We will ask you to summarize your testimony in 5 
minutes and any fuller statement you may wish to make will be 
included in the record.
    I'd like to welcome Bobby Harnage, president of the 
American Federation of Government Employees; also Jerry Shaw, 
general counsel, Senior Executives Association. Thank you both 
for being here today, and thank you both for your patience for 
having to sit and wait so long. But I think you understand this 
is an important issue, and given this is the only hearing we're 
going to have, we wanted to hash it out as much as possible.
    Mr. Harnage, I'm going to recognize you first for 5 
minutes.

 STATEMENTS OF BOBBY L. HARNAGE, NATIONAL PRESIDENT, AMERICAN 
FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO; AND G. JERRY SHAW, 
         GENERAL COUNSEL, SENIOR EXECUTIVES ASSOCIATION

    Mr. Harnage. Thank you, Madam Chairwoman, and majority 
Member Davis, members of the subcommittee, for the opportunity 
to testify today. I understand that my written testimony will 
be entered into the record, and so I have a few comments that I 
would like to make concerning DOD's proposal for total and 
unilateral and unchecked authority to impose an entirely new 
personnel system upon the Department's 640,000 employees every 
time a Defense Secretary decides to do so.
    AFGE represents over 200,000 civilian DOD employees. We 
have worked around the clock with total dedication, 
maintaining, repairing, and loading equipment and preparing our 
troops; loading them and their weapons on the tanks, aircraft, 
warships. And they have barely come up for air and find that 
the Pentagon has now declared war on them.
    Madam Chairwoman, I'm most impressed by the knowledge not 
only expressed here by the Chair, but also by the members of 
the committee concerning the subject and what has been a very 
short period of time to become familiar with it. You've asked 
very good questions, very pointed questions, questions that I 
could not have written better had I tried. So I want to make 
one plea with you in addition to the testimony that I'll give 
this morning.
    First, I too recognize the arrogance of this legislation. 
It's unprecedented. This is a bully moving through Congress, 
and it should not be allowed to operate that way. I appreciate 
your request of Dr. Chu that he consider withdrawing the 
legislation from the civil--from the Armed Services and allow 
it to properly come before this committee which has 
jurisdiction. And I would encourage you and your colleagues to 
ask the rest of the Representatives in the House to take the 
same position, that this legislation should not be allowed to 
be moved in the manner in which it's being moved and the 
precedent that it is setting. It may be their turn next.
    So I appreciate your recognition of protecting the 
institution of this great body. They should not be allowed to 
get away with this. It's a trend-setter. They'll certainly be 
encouraged to do it even more often in the future if allowed 
here.
    But this proposal does not ask you to vote on new personnel 
systems for the Department. It asks you to hand over your 
authority for approving new employee personnel systems to each 
successive Secretary of Defense. This proposal does not ask you 
to vote on a new pay-for-performance system for the Department. 
It asks you to hand over your authority for approving the pay 
system for 654,000 Federal employees to each successive 
Secretary of Defense. This proposal does not ask you to vote on 
taking away Federal employees' rights to due process so they 
can appeal decisions they feel have been based on 
discrimination or cases of political coercion. It asks to you 
hand over your authority to keep or take away such rights to 
each successive Secretary of Defense. And the list goes on.
    You will hear lots of disinformation and this operation 
erodes the Civil Service campaign. The worst will be that the 
legislation gives DOD the freedom to link pay to performance so 
that (a), DOD won't have to contract out everything that isn't 
nailed down, and (b), DOD will finally be able to achieve its 
mission by making sure that high performance is at last 
rewarded. Neither of these rationales is true. The not-so-
veiled threat that if they don't get the power they demand 
they'll simply privatize everything is an important admission 
that contracting out has never had anything to do with saving 
money or improving efficiency. It's about moving money and jobs 
to political favorites and cronies, and giving each successive 
Secretary of Defense total unchecked authority to hire and fire 
whomever he wants; promote and demote whomever he wants; 
schedule and pay overtime, or schedule and fail to pay overtime 
to whomever he wants; allow collective bargaining or disallow 
collective bargaining to whomever he wants; is also about power 
to move money and jobs to the political cronies.
    AFGE testified before this subcommittee 4 weeks ago about 
the perils of pay-for-performance. Expert opinions is unanimous 
that individualized pay-for-performance schemes, if they make 
any effort whatsoever to be fair and based on measurable 
factors, eat up an enormous amount of managerial resources and 
make everyone unhappy. They do not improve productivity and 
they do not accomplish organizational goals.
    Madam Chairwoman, I think the question has been asked: Why 
haven't these people worked with us over the last year since 
March 2002 to develop this and come before you with a complete 
package rather than a blank check? And I, too, am confused. I 
thought I represented the employees of DOD. I didn't know the 
employer did. I've been elected; I wasn't appointed by a 
political appointment.
    To say that they've talked with labor is misleading, and 
also say they talked to the employees. I am labor. The 
employees are the people that I represent. And, the arrogance 
of this Pentagon to not only try to say that they speak for the 
employees, the employees have already voted. That's not so. But 
for them to also say that they will decide where collective 
bargaining will be and at what level and to what extent, rather 
than the employees having the opportunity to vote on it--I have 
recognition at agency levels, I have it with DFAS, I have it 
with DECA, DLA, with all of those within the Department of 
Defense. But the employees voted for that. But this employer 
wants to say it will make that decision for employees.
    Why the Right to Work for Less Committee and the Chamber of 
Commerce aren't upset about those two proposals I fail to 
understand. But this is total arrogance and it should be 
stopped. It should not be allowed.
    And thank you very much for the opportunity for this 
testimony and I'll be glad to answer any questions you have.
    Mrs. Davis of Virginia. Thank you Mr. Harnage.
    [The prepared statement of Mr. Harnage follows:]

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    Mrs. Davis of Virginia. Mr. Shaw, you're recognized for 5 
minutes and if you'd like to put your complete statement in the 
record you can. If you'd like to summarize, that's up to you.
    Mr. Shaw. Yes. I would like my complete statement in the 
record, please, Ms. Chairman Davis.
    Thank you for the opportunity to testify. SEA represents 
the interests of career members of the Senior Executive Service 
at DOD and all Federal agencies' senior-level senior technical 
employees and those in equivalent agencies' equivalent 
positions.
    First, these--this proposal by DOD goes far beyond anything 
that has been demonstrated and proven in the demonstration 
projects that we have. I'm going to confine my comments to 
those matters we believe threaten the integrity of the Senior 
Executive Service and its cadre of career executives who ensure 
the impartial and nonpolitical, nonpartisan enforcement and 
administration of our Nation's laws.
    I was watching a ``60 Minutes'' segment on CBS Sunday 
night. It involved allegations there had been improper 
political interference in the awarding of DOD contracts for the 
rebuilding effort in Iraq. Specifically it accused Vice 
President Cheney of interfering in the pre-hostilities award of 
classified contracts to Halliburton Corp. It also made 
allegations about former general officers in the military who 
are now working for Halliburton and other companies that 
received contracts for providing services to the troops in 
Iraq. Finally, it cast aspersions on the current administration 
and its political leadership for allegedly interfering in these 
and other rebuilding efforts in Afghanistan.
    While allegations and innuendo are the life blood of ``60 
Minutes'' and other television news shows, the interesting part 
was the response of DOD. Instead of the Secretary or another 
high-level political appointee responding, the Chief Counsel of 
the Army Corps of Engineers, Robert Anderson, responded to the 
allegations. He is a career member of the Senior Executive 
Service, and provided an eloquent defense of the procurement 
process. His most important and telling statement was that the 
contract procurement activities were performed by career 
employees who would not allow DOD or other Federal contracts to 
be awarded on the basis of partisan politics. He stated that if 
``60 Minutes'' or any others making allegations were to spend 1 
week with these career employees, they would understand how 
carefully and objectively these contracts were evaluated and 
awarded.
    The importance of this is that DOD realized that the 
integrity of its programs depended on the career executives and 
career employees who carry out its day-to-day activities. It 
also knew that a career SES employee presenting the facts would 
carry more credibility with the public. ``60 Minutes'' was at a 
loss when confronted with this response, and I believe that 
most of the Nation's citizens dismissed the allegations out of 
hand because of the assurance of the career SES employee, Mr. 
Anderson.
    We relate this incident because we firmly believe that some 
of the authorities sought by DOD in this legislation would 
serve to undermine the citizens' confidence in the integrity of 
government operations. This confidence is based in large part 
on the integrity of the Civil Service System and its career 
senior executive leadership. This legislation would do away 
with many of the rights and protections of these employees need 
to maintain their nonpartisan integrity. SEA is aware that this 
is not intended but there is always a concern about unintended 
consequences.
    We believe that the breadth and depth of the unfettered 
authority sought by this legislation justifies our and your 
concerns. Some of SEA's concerns are highlighted here today, 
others are in our written testimony.
    First the legislation does away with the requirement for 
Career Reserved SES positions which are--which must be filled 
by career employees. They would allow such employees, such 
positions, to be abolished or not to exist, to be filled by 
anyone, qualified or unqualified, partisan politician or not. 
This authority is not necessary. OPM has done the job of 
overseeing and ensuring the positions requiring impartiality 
and nonpartisan enforcement of the Nation's laws are carried 
out by career employees who have gained their positions based 
on merit. We believe this should continue.
    The bill would do away with the requirement that career SES 
appointments be made up of persons who meet the qualifications 
for the job. These qualifications are approved by OPM through 
the Qualifications Review Board process, which should continue, 
and which takes a maximum of 2 weeks to perform.
    It would allow for SES Career Reserved positions to be 
filled by temporary employees with no review of their 
qualifications and no limit on their numbers. We object to this 
authority.
    It also removes the restriction that political appointees 
may fill no more than 10 percent of SES positions overall or 25 
percent in any agency. This would destroy the career SES and 
rob the government and the people of this country of the 
impartial administration of our Nation's laws and regulations. 
It would allow the elimination of all appeal rights for career 
executives and employees to the Merit System Protection Board 
if their pay was drastically cut or they were removed from 
their positions for alleged misconduct. They would have no due 
process rights in the taking of their pay, their positions, and 
their reputation.
    It allows the flexibility to limit the SES appointment 
rules. It allows for SES employees' pay to be set annually, 
anywhere between 125,000 lower--at the lower end, or 198,000 at 
the upper end, with no opportunity for oversight, no necessity 
for certification of a fair evaluation process, or any right on 
behalf of the employee to challenge the determination anywhere, 
even if his or her pay is cut.
    It allows the creation of appointments of highly qualified 
experts, quote unquote, who would be paid up to 50 percent 
higher than the higher SES salary or, based on current pay, 
$192,500. There would be no limit on the number of these 
appointments and they could serve for 6 years in any position 
with no independent check of their qualifications. If a 
particular DOD administrator wishes, they could unilaterally 
fire everyone of their current SES employees and fill these 
positions with, quote, highly qualified experts from whatever 
field without review of their actions or appointees.
    Currently DOD has authority for a limited number of such 
positions at DARPA, the armed services research lab, etc. They 
are limited to scientific and engineering positions which pay 
25 percent higher than the SES.
    These are but some of our concerns. We urge the 
subcommittee to expeditiously amend this proposal to restore 
the necessary safeguards for career SES employees before its 
enactment. We do not object to additional flexibility for DOD. 
We support pay-for-performance and we support many of the 
proposed changes which would allow additional management 
flexibility. But we believe that loose flexibility should be 
limited to that provided the Department of Homeland Security 
and that DOD be required to go through the same process as 
Homeland Security before issuing regulations and beginning or 
implementing new systems in the Department of Defense.
    Thank you.
    [The prepared statement of Mr. Shaw follows:]

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    Mrs. Davis of Virginia. Thank you, Mr. Shaw, and thank you, 
Mr. Harnage. I'm going to start again with my ranking member, 
Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman.
    Mr. Harnage, Mr. Shaw, I believe that you gentlemen 
basically have answered my questions, but let me ask you what 
role did your respective organizations play in development of 
this proposal and have you had any opportunity to comment on 
the legislation to the Department?
    Mr. Shaw. No to both questions. None.
    Mr. Harnage. No. We got word they wanted to talk to us, and 
they talked with us in general terms just a few days before it 
was published in the Register. They just gave us advance 
warning that it was coming out.
    Mr. Davis of Illinois. Dr. Chu stated that employee groups 
had essentially commented, or had the opportunity to comment on 
this proposal, because you had the opportunity to comment on 
the nine demonstration projects that had been conducted 
earlier. How do you assess that comment?
    Mr. Shaw. Well, first I have to correct my previous answer. 
We did receive a call, and there was a meeting last Friday 
which was the first notice that we had of any of these 
proposals. And we did meet with two individuals from the 
Department of Defense, but that was kind of late in the process 
seeing as it had already been introduced and was well on its 
way.
    Second, most of the--if not all of the demonstration 
projects, did not affect their Senior Executive Service. So 
that it was not necessary or appropriate for us to be brought 
into that process, and we were not part of that process.
    Mr. Davis of Illinois. Mr. Harnage.
    Mr. Harnage. Yes, to answer your question, seems to rebut 
Mr. Chu's expression that the employees are in favor of this. 
I'm still trying to figure out whether that's ``employee'' or 
``labor.'' There's only one of the demonstration projects that 
were union. All of the others are nonunion. All of the 
opportunities to participate in a demonstration project in 
current law are subject to the approval of the recognized 
union, and they have yet to be able to convince our employees 
to ask me to try and get that legislation for them. The 
employees are not demanding this. It's the political appointees 
and top management.
    Mr. Davis of Illinois. Are either one of you aware of any 
instances, have you heard from any experts where the current 
Civil Service laws have hindered the way in which DOD had the 
opportunity to execute its most recent military operations?
    Mr. Harnage. Well, to answer that question, your colleague 
Steny Hoyer from Maryland asked that question during the 
Department of Homeland Security debate, to give one example of 
where either be it a union member or collective bargaining 
agreement has been a problem with national security, and this 
has been over a year and he's still waiting for an answer to 
that question. You would think that having just come out of 
this war in Iraq, that if there was ever going to be an example 
that would be fresh in your memory it would certainly be now, 
but they do not have any.
    Mr. Shaw. We have heard of none that prevented any 
activities, appropriate activities in Iraq. And--but I must say 
that the--that current senior executives are aware of 
management inflexibilities that are dogging their ability to 
manage the work force in DOD and other agencies, and we have 
testified about those before, and we have made our suggestions 
to Congress to resolve those.
    Mr. Davis of Illinois. Thank you very much, Madam 
Chairwoman. I have no other questions, but I would just say 
that I'm sure that you've got more influence with DOD than I 
do, but I would join with you----
    Mrs. Davis of Virginia. Not much.
    Mr. Davis of Illinois [continuing]. In calling upon the 
Secretary to withdraw this portion of the legislation and give 
us more time to really deal with it. So, I would thank you very 
much.
    Mrs. Davis of Virginia. I'm certainly going to ask, Mr. 
Davis, but I wouldn't hold my breath on it. But I really would 
hope that we can get that portion out of the DOD authorization 
bill, just to be able to flesh it out more with more hearings, 
at least at another hearing where we'd have a little more time 
to prepare. To follow----
    Mr. Harnage. Out of the Davises, we have a 2 to 1 vote.
    Mrs. Davis of Virginia. A few more than two people on the 
committee, unfortunately. And he's not with me in Armed 
Services, unfortunately.
    I'm sort of lower on the totem pole in Armed Services.
    To followup on what Mr. Davis was talking about, when it 
comes to using Federal workers and executing the conflicts, Dr. 
Chu stated that--I don't think he stated it here, I think it 
was when he talked to us in the back--where DOD said they had 
9,000 civilian workers on the ground in Iraq and only 1,500 of 
those 9,000 were Federal employees. And he said that the reason 
for that was that they don't have the flexibility that's 
necessary to use civilian workers.
    You know I support defense very strongly, and I think our 
Nation's security is of utmost importance. Given that, what do 
you think that we need to do in order to protect the status of 
the DOD civilian worker from competition from contractors; what 
adaptations do we need to make? What is the problem? Is that 
what you're saying; we do not know what the problem is?
    Mr. Harnage. Well, first of all, in all due respect to Dr. 
Chu, I think that was a misrepresentation of the facts. The 
civilian work force and the situation with Kosovo, Afghanistan, 
and the Gulf war, civilian employees were deployed because 
contractors could not be or would not be placed in harm's way. 
This time there may have been more contractors than there were 
civilians, but it had nothing to do with the civilian work 
force flexibilities.
    The only complaints that I have heard concerning this 
deployment--and I think there were more than 1,500--were two 
complaints that came to me because they were not allowed to be 
deployed, not because they were deployed. Many of the people 
that were deployed were union members. Many of the people that 
were activated were Federal employees that are now reservists, 
were also union employees, and nobody's had to check their 
union card in order for them to shove a rifle in their hand. So 
I think that's a total misrepresentation of the fact.
    In this crowd, in this hearing room today, are several of 
the leaders, and Department of Defense are here because they're 
dedicated, and there's nobody more supportive of the Department 
of Defense than AFGE and its leadership out of DOD.
    Mr. Shaw. There are no restrictions in laws or regulations 
from the deployment of career Federal managers or executives 
anywhere in the world, in any part of the world at any period 
of time.
    Mrs. Davis of Virginia. We're going to try to get some 
specifics from Dr. Chu on that because I want that question 
answered.
    Mr. Harnage, I really appreciate the time and effort you 
have put into your prepared remarks and I appreciate the work 
you do representing your people. You've posed many questions 
that certainly should be answered and you've got a lot of 
folks, 200,000 people over at DOD. That's a lot, and I know 
it's a job for you.
    You mentioned earlier in your prepared testimony on page 5 
that the AFGE's repeated overtures to the administration have 
been spurned.
    Mr. Harnage. Say that again?
    Mrs. Davis of Virginia. You were not able to talk to the 
people in the administration. Can you elaborate on that for us? 
You know, have they given--have you given them something in 
writing, have they ignored you? Have you tried to make 
appointments? Have they ignored you? Can you expand on it? 
What's the deal?
    Mr. Harnage. Well, there's one specific thing I can give 
you in writing, where one of the first things I did was write 
to this administration which--when it had only been in office a 
couple of weeks, saying we want to sit down and talk to you 
about pay reform. If there's a problem with pay, then let us 
fix it and do it together. We were not ignored. We did get a 
response, but it basically said they were too busy.
    The same way with this legislation. AFGE was working with 
the previous administration, with the Pentagon, on personnel 
reforms and we was working I thought very well together. We had 
a Department-level partnership going. That came to a screeching 
halt when they canceled the executive order on partnership. I 
used to go to the Pentagon two or three times a month, meeting 
with various departments and people and sometimes even with the 
Deputy Secretary of Defense. I have been to the Pentagon twice 
since this Secretary has been there, and it's twice at his 
calling of all the organized labor, not to talk about the 
Pentagon but to talk about the response to terrorism and the 
changes that had to be made, more or less preparing us for the 
eventual war that was going to happen.
    Mrs. Davis of Virginia. Have you tried to get in to see 
him?
    Mr. Harnage. Pardon?
    Mrs. Davis of Virginia. Have you made the initiative and 
tried to get----
    Mr. Harnage. We have. And even with Dr. Chu we've asked let 
us sit down and talk through these things. I'm not interested 
in being allowed to disagree or agree, I want to have 
meaningful input, and I think the people I represent who are on 
the job can have some meaningful input if given the 
opportunity. But the timing and the progress of this 
legislation is more important than the substance is my 
impression of the Pentagon.
    Mrs. Davis of Virginia. OK. I'm not going to comment on 
that. It's clear from your testimony that the proposal we're 
addressing today gives you concern because of the potential for 
each Secretary of Defense to change the rules or to move the 
goal post anytime that they want to.
    Would it be fair to say that because of a new and improved 
system that still takes many years to implement, even if it may 
be possible for the Secretary to act unilaterally, successive 
Secretaries would have other projects to put in place, than to 
reform a new personnel system, and do you have any comments you 
would like to share on that? I think we're all concerned about 
the sweeping power that we'd be giving the current Secretary.
    Mr. Harnage. It's sweeping power and it's final. It's not 
only taking me out of the picture, it takes you out of the 
picture. You have got to recognize that where now we have 
collective bargaining by law, and it's defined what it can 
entail by law, you're changing that to where the employer now 
decides whether or not collective bargaining will take place 
and, if so, to what degree it will take place, and it's not 
subject to any outside party's interpretation.
    Currently, there's an incentive to reach an agreement 
because there's a third-party involved. In fact, there's more 
than one party. You go from negotiations to impasse to 
mediation; from mediation to the impasse panel who has an 
opportunity to make the final decision, which is a panel 
appointed by the President of the United States.
    Under this change in the law, not only will they decide the 
subject matter to be collectively bargained but the degree 
collective bargaining takes place, and then if there's an 
impasse, there's a final say in it, nobody else has a final 
word. There's no check and balance, an opportunity to agree or 
disagree.
    Mrs. Davis of Virginia. Thank you, Mr. Harnage. My time is 
up. We're going to go to Mr. Waxman.
    Mr. Waxman. Thank you very much, Madam Chairwoman.
    Mr. Harnage, I think you're absolutely right. The idea of 
making this kind of a change in our Civil Service System with 
24 hours' notice at best for Members of Congress, for us to 
give up all authority we're going to have in the future about 
how the Civil Service System is going to be run at the 
Department of Defense is to me astounding. And not only are 
they trying to cut us out of the picture, they want to cut the 
workers out of the picture, too, and keep you from being able 
to have the input that you need, your people need, to make sure 
that the whole system works for everybody.
    It seems like they're forgetting the big picture and the 
goal that we all should want is a good-performance outcome, a 
good result for the work of the Department of Defense; that the 
combination of the armed services, the Civil Service personnel, 
and those that have to contract out for certain services, all 
of it needs to be brought together effectively to work 
successfully. And I'm astounded at the idea that they want to 
trample on individual employees' rights and the rights of 
employees to bargain collectively and then think they're going 
to have a work force that's going to be committed and feel that 
they have been given a fair chance to make all of this succeed, 
that we all want it.
    I appreciate the position you have taken here and the 
leadership you've given to government employees not only on 
this issue but on so many others, and I just want to express my 
point of view to you. We're going to do what we can to make 
sure that the end result is not going to be one where we 
delegate to anybody in any administration to throw out 100 
years of Civil Service protections at the whim of any 
individual. I remind this administration that administrations 
come and go, but the laws are there to protect us under all 
circumstances. I thank you very much.
    Mrs. Davis of Virginia. Thank you, Mr. Waxman. And again 
I'd like to say thank you to our witnesses for being so patient 
to hang around and let us hear from you, and thank you again 
for all you do. And with that, this subcommittee is adjourned.
    [Whereupon, at 1:20 p.m., the subcommittee was adjourned.]

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