a

GAO

United States General Accounting Office

Report to Congressional Requesters

December 2002 HUMAN CAPITAL

Effective Use of 

Flexibilities Can Assist 

Agencies in Managing 

Their Workforces

GAO-03-2
Why GAO Did This Study

An essential element to

acquiring, developing, and

retaining high-quality federal

employees is agencies’ effective

use of human capital flexibilities.

These flexibilities represent the

policies and practices that an

agency has the authority to

implement in managing its

workforce.

Congressional requesters asked

GAO to provide information on

agency and union officials’ views

about the most effective human

capital flexibilities, additional

flexibilities needed, and whether

additional flexibilities could be

implemented while also

protecting employees’ rights.

GAO was also asked to identify

key practices for effective use of

flexibilities.

GAO interviewed the human

resources directors of the federal

government’s 24 largest

departments and agencies, and

representatives of 4 national

organizations representing

federal employees and managers.

GAO further focused its efforts

on 7 federal agencies—

Department of the Air Force,

General Services Administration,

Internal Revenue Service,

International Trade

Administration, U.S. Mint, State

Department, and Veterans

Benefits Administration—

interviewing more than 200

managers, supervisors, human

resources officials, and union

representatives in headquarters

and field locations.

December 2002

HUMAN CAPITAL

Effective Use of Flexibilities Can Assist

Agencies in Managing Their Workforces

The full report, including GAO's objectives, scope, methodology, and analysis is available at www.gao.gov/cgi-bin/getrpt?GAO-03-2. For additional

information about the report, contact J. Christopher Mihm at (202) 512-6806 or by e-mail at mihmj@gao.gov.

Highlights of GAO-03-2, a report to the Senate Committee on Governmental Affairs and to its

Subcommittees on International Security, Proliferation, and Federal Services and on Oversight of

Government Management, Restructuring, and the District of Columbia

United States General Accounting Office

What GAO Found

Agency and union officials’ views on human capital flexibilities.

Most effective flexibilities. Existing flexibilities that are most

effective in managing the workforce are work-life programs, such as

alternative work schedules, child care assistance, and transit

subsidies; monetary recruitment and retention incentives, such as

recruitment bonuses and retention allowances; special hiring

authorities, such as student employment and outstanding scholar

programs; and incentive awards for notable job performance and

contributions, such as cash and time-off awards.

Additional flexibilities needed. Additional flexibilities that would be

helpful in managing the workforce include more flexible pay

approaches to compensate federal employees, greater flexibility to

streamline and improve the federal hiring process, increased

flexibility in addressing employees’ poor job performance, additional

workforce restructuring options, and expanded flexibility in

acquiring and retaining temporary employees.

Protection of employee rights. Managers, supervisors, and human

resources officials generally believed that additional human capital

flexibilities could be implemented in their agencies while also

protecting employees’ rights. Union representatives, however, gave

mixed views ranging from the opinion that additional flexibilities

could be implemented while still protecting employee rights to

concerns that managers would abuse their authority.

Key practices for effective use of human capital flexibilities. GAO

identified six key practices for the effective use of human capital

flexibilities. These practices are (1) planning strategically and making

targeted investments, (2) ensuring stakeholder input in developing

policies and procedures, (3) educating managers and employees on the

availability and use of flexibilities, (4) streamlining administrative

processes, (5) building transparency and accountability into the system,

and (6) changing the organizational culture.

The insufficient and ineffective use of flexibilities can significantly hinder

the ability of federal agencies to recruit, hire, retain, and manage their

human capital. Congress recently debated the extent of personnel

flexibilities that should be granted to the new Department of Homeland

Security. While this decision was important to how the department will

operate, how personnel flexibilities are implemented is equally

important.

G A O

Accountability Integrity Reliability

Highlights
Page i GAO-03-2 Human Capital Flexibilities

Contents

Letter 1

Results in Brief 3

Background 7

Agency Officials and Union Representatives Cited Most Effective 

Human Capital Flexibilities 11

Agency Officials and Union Representatives Cited Need for 

Additional Human Capital Flexibilities 25

Agency Officials Believed That Additional Flexibilities Could 

Coexist with Protection of Employee Rights, but Union 

Representatives Gave Mixed Views 27

Key Practices Can Assist Agencies in Effectively Using Flexibilities 

29

Conclusions 42

Agency Comments and Our Evaluation 42

Appendixes

Appendix I: Objectives, Scope, and Methodology 47

Appendix II: Comments from the Office Personnel Management 50

Appendix III: Comments from the Internal Revenue Service 52

Appendix IV: Comments from the U.S. Mint 54

Appendix V: Comments from the International Trade Administration 55

Appendix VI: GAO Contacts and Staff Acknowledgments 56

Tables Table 1: Human Capital Flexibilities That Agency Officials and 

Union Representatives Cited as Most Effective 13

Table 2: Air Force CPMIS Funding Strategy for 3Rs (Fiscal Years 

2004 through 2009) 32

Figures Figure 1: Key Practices for Effective Use of Human Capital 

Flexibilities 5

Figure 2: Background Information on the Seven Selected Agencies 

with Examples of Exemptions from Title 5 Personnel 

Requirements 10
Contents

Page ii GAO-03-2 Human Capital Flexibilities

Abbreviations

AFMC Air Force Materiel Command

CPDF Central Personnel Data File

CPMIS Civilian Personnel Management Improvement Strategy

GS General Schedule

GSA General Services Administration

IRM Information Resource Management

IRS Internal Revenue Service

ITA International Trade Administration

MSPB Merit Systems Protection Board

NAPA National Academy of Public Administration

OMB Office of Management and Budget

OPM Office of Personnel Management

PBO performance-based organization

PBS Public Buildings Service

QSI quality step increase

SQA superior qualifications appointment

VA Department of Veterans Affairs

VBA Veterans Benefits Administration

VEOA Veterans Employment Opportunities Act

VRA Veterans Readjustment Appointment
Page 1 GAO-03-2 Human Capital Flexibilities

United States General Accounting Office

Washington, D.C. 20548

A

December 6, 2002 Letr

The Honorable Joseph I. Lieberman

Chairman

The Honorable Fred Thompson

Ranking Minority Member

Committee on Governmental Affairs

United States Senate

The Honorable Daniel K. Akaka

Chairman

The Honorable Thad Cochran

Ranking Minority Member

Subcommittee on International Security,

Proliferation, and Federal Services

Committee on Governmental Affairs

United States Senate

The Honorable Richard J. Durbin

Chairman

The Honorable George V. Voinovich

Ranking Minority Member

Subcommittee on Oversight of Government

Management, Restructuring, and the 

District of Columbia

Committee on Governmental Affairs

United States Senate

For years, many observers have viewed the federal civil service as overregulated and inflexible. At the same time, federal agencies are 

experiencing pervasive human capital challenges in acquiring and 

developing staffs to meet current and emerging agency needs. These types 

of challenges are likely to go unresolved if agencies do not take steps to 

ensure that they have sufficient numbers of people in place with the right 

skills, tools, and incentives to get the job done right. To deal with these 

challenges, agencies need effective human capital flexibilities to assist 

them. The recent deliberations over human capital flexibilities for the new 

Department of Homeland Security underscore the importance of ensuring 

that agencies have the capabilities needed to effectively achieve their 

missions and manage their people.
Page 2 GAO-03-2 Human Capital Flexibilities

In broad terms, human capital flexibilities represent the policies and 

practices that an agency has the authority to implement in managing its 

workforce to accomplish its mission and achieve its goals. These 

flexibilities can include actions related to areas such as recruitment, 

retention, compensation, position classification, incentive awards and 

recognition, training and development, performance management and 

appraisals, realignment and reorganization, and work arrangements and 

work-life policies. The tailored use of such flexibilities for acquiring, 

developing, and retaining talent is an important cornerstone of our model 

of strategic human capital management, which we recently released to 

assist in transforming agencies so they become more results-oriented, 

integrated, and externally focused.1

In previous reports and testimonies,2 we have emphasized that in 

addressing their human capital challenges, federal agencies should first 

identify and use the flexibilities already available under existing laws and 

regulations and then seek additional flexibilities only when necessary and 

based on sound business cases. In this regard, as agreed with your offices, 

this report provides information on

• agency officials’ and union representatives’ views on (1) the most 

effective flexibilities for managing their workforces, (2) additional 

flexibilities that would be the most helpful in managing their 

workforces, and (3) whether employee rights could be protected if 

additional flexibilities were authorized and implemented within 

agencies and

• key practices that agencies should implement for effective use of human 

capital flexibilities, along with specific examples of such practices from 

selected agencies.

We were also asked to identify actions that the Office of Personnel 

Management (OPM) could take to facilitate the effective use of human 

capital flexibilities throughout the federal government. We will be 

discussing that issue in a separate report to be issued soon.

1

U.S. General Accounting Office, A Model of Strategic Human Capital Management, 

Exposure Draft, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002).

2

U.S. General Accounting Office, High-Risk Series: An Update, GAO-01-263 (Washington, 

D.C.: January 2001); and Human Capital: Meeting the Governmentwide High-Risk 

Challenge, GAO-01-357T (Washington, D.C.: Feb. 1, 2001).
Page 3 GAO-03-2 Human Capital Flexibilities

To address these issues, we reviewed relevant reports and interviewed 

cognizant officials from OPM, the Merit Systems Protection Board (MSPB), 

and the National Academy of Public Administration (NAPA). In addition, 

we interviewed the human resources directors of the federal government’s 

24 largest departments and agencies and representatives from four national 

organizations representing federal employees and managers. As agreed, 

we further focused our review on seven federal agencies: the Department 

of the Air Force, General Services Administration (GSA), Internal Revenue 

Service (IRS), International Trade Administration (ITA), U.S. Mint (Mint), 

Department of State (State), and Veterans Benefits Administration (VBA). 

At the headquarters and various field locations of the seven agencies, we 

collected documents on their use of human capital flexibilities and 

interviewed over 200 managers and supervisors, human resources officials, 

and union representatives. We selected the seven agencies for various 

reasons, including their variety of existing human capital challenges and 

their range in usage of available human capital flexibilities. Our agency 

selection process was not designed to identify examples that could be 

considered representative of all the human capital flexibilities used at the 

seven agencies reviewed or the federal government as a whole. We 

conducted our review in accordance with generally accepted government 

auditing standards. (See app. I for additional information on our objectives, 

scope, and methodology.)

Results in Brief According to the agency officials and union representatives we 

interviewed, work-life policies and programs, such as alternative and 

flexible work schedules, transit subsidies, child care assistance, and 

employee assistance programs, are among the most effective human 

capital flexibilities available in federal agencies for managing the 

workforce to achieve agency missions and accomplish agency goals. These 

flexibilities are effective because they serve as important recruitment and 

retention tools as employees weigh the balance between their work life and 

leisure time. In addition, agency and union officials frequently cited the 

effectiveness of monetary recruitment and retention incentives, including 

recruitment and relocation bonuses for hard-to-fill positions; special hiring 

authorities, such as student employment and outstanding scholar 

programs; and incentive awards to employees for superior job performance 

and specific accomplishments, including cash and time-off awards.

Although agencies’ first priority should be to improve their human capital 

management by using the authorities already available to them, we 

identified five categories of additional human capital flexibilities that 
Page 4 GAO-03-2 Human Capital Flexibilities

agency officials and union representatives cited as most helpful if 

authorized for their agencies. These additional authorities include 

(1) more flexible pay approaches, (2) greater flexibility to streamline and 

improve the federal hiring process, (3) increased flexibility in addressing 

employees’ poor job performance, (4) additional workforce restructuring 

options, and (5) expanded flexibility in acquiring and retaining temporary 

employees. These suggestions by agency officials and union 

representatives provide a starting point for executive branch decision 

makers and Congress to consider as they seek to reform federal human 

capital policies and practices. Key aspects of these additional authorities 

are included in various legislative initiatives under consideration by 

Congress. In other cases, however, additional analysis may be needed to 

ensure that any new authorities are granted and implemented consistent 

with a focus on program results, merit, and other important federal 

employment goals.

The agency managers and supervisors and human resources officials we 

interviewed generally agreed that additional human capital flexibilities 

could be authorized and implemented in their agencies while also ensuring 

protection of employees’ rights. Union representatives, however, 

expressed a variety of opinions on the ability of agencies to protect 

employee rights. Some believed that employee rights could be protected 

with additional managerial flexibility, while others were concerned that 

managers would abuse their authority and agency leaders would not take 

appropriate disciplinary action. According to agency and union officials, 

one of the most effective ways to ensure protection of employees’ rights 

when implementing these flexibilities is to make certain that supervisors 

and employees are fully aware of the available flexibilities, the procedures 

to use them, and the associated rights and responsibilities of both 

managers and employees when using them. In addition, they frequently 

mentioned the importance of securing the assistance and support of agency 

human resources officials in implementing and monitoring the use of 

flexibilities within the agency.

Based on our interviews with human resources directors from across the 

federal government and our previous human capital work, we identified six 

key practices that agencies should implement to use human capital 

flexibilities effectively. Figure 1 identifies the practices and provides some 

examples from the seven federal agencies we reviewed.
Page 5 GAO-03-2 Human Capital Flexibilities

Figure 1: Key Practices for Effective Use of Human Capital Flexibilities

Source: Interviews with human resources directors and prior GAO work.

Agency and union officials identified several significant reasons why 

agencies have not made greater use of the human capital flexibilities that 

are available to them. These reported barriers that have hampered 

agencies in maximizing their use of available flexibilities included agencies’ 

weak strategic human capital planning and inadequate funding for using 

these flexibilities given competing priorities; managers’ and supervisors’ 

lack of awareness and knowledge of the flexibilities; managers’ and 

supervisors’ belief that approval processes to use specific flexibilities are 

often burdensome and time-consuming; and managers’ and supervisors’ 

• Plan strategically and make targeted investments. Agencies need to ensure that the use of flexibilities is part of an overall human 

capital strategy clearly linked to the program goals of the organization. Agencies also need a sound plan for how they will use and fund 

the authorities. For example, the Air Force developed a series of initiatives that use flexibilities to recruit and retain civilian employees 

with high technical skills. The initiatives are accompanied by both funding and legislative strategies designed to promote succession 

planning while ensuring the resultant workforce is cost-effective.

• Ensure stakeholder input in developing policies and procedures. Agency leaders, managers, employees, and employee unions 

must work together and in a constructive and cooperative manner to effectively implement any flexibility in order to reach agreement on 

the need for change, the direction and scope that change will take, and how progress will be assessed. For example, employees at the 

Mint’s San Francisco coin-making plant (with assistance from the local union) were able to vote on various options for implementing an 

alternative work schedule for the facility. 

• Educate managers and employees on the availability and use of flexibilities. Agencies’ human capital offices need to ensure that 

they have effective campaigns not only to inform managers of their personnel authorities, but also to explain the situations where the 

use of those authorities is appropriate. Agencies also need to inform employees about relevant policies and procedures and about 

employees’ rights related to the use of these authorities. For example, GSA in Philadelphia educates its supervisors on human capital 

flexibilities with its Human Resource Solutions Series training, which includes topics such as performance management, position

classification, and staffing.

• Streamline and improve administrative processes. Agencies should streamline administrative processes for using flexibilities and 

review self-imposed constraints that may be excessively process-oriented. For example, GSA automated its on-the-spot cash award 

process to allow supervisors to initiate these awards by accessing the agency’s intranet Web site rather than the previous process of 

completing a lengthy justification and sending the form to the personnel office for review.

• Build transparency and accountability into the system. Agencies should delegate authority to use flexibilities to appropriate levels 

within the agency. Agencies must also develop clear and transparent guidelines for using flexibilities and then hold managers and 

supervisors accountable for their fair and effective use. For example, IRS developed guidelines for its managers to determine if a job 

applicant qualifies for a recruitment incentive, which helps to ensure fair and consistent application of such flexibilities. Agencies can 

also make public the extent to which the flexibilities are used and the results of the flexibilities. Finally, agencies’ use of flexibilities 

should, as appropriate, be subject to internal and external evaluations.

• Change the organizational culture. Agencies need to address managers’ and supervisors’ concerns that employees will view the use 

of some flexibilities as unfair. Also, with appropriate accountability mechanisms in place, agencies can begin to foster an organizational 

culture that encourages managers to develop creative approaches and take appropriate risks. For example, IRS in Oakland hired a 

consultant to conduct training for managers that promotes creative thinking, empowerment for decision making, and prudent risk taking. 

The training course is an ongoing process with managers returning each year to ensure their continued comfort with and use of the 

principles covered in the training.
Page 6 GAO-03-2 Human Capital Flexibilities

concerns that employees will view the use of various flexibilities as 

inherently unfair, particularly given the common belief that all employees 

must be treated essentially the same regardless of job performance and 

agency needs. 

The insufficient and ineffective use of flexibilities can significantly hinder 

the ability of federal agencies to recruit, hire, retain, and manage their 

human capital. To deal with their human capital challenges, it is important 

for agencies to assess and determine which human capital flexibilities are 

the most appropriate and effective for managing their workforces. 

Congress recently debated the extent of personnel flexibilities that should 

be granted to the new Department of Homeland Security. While this 

decision was important to how the new department will operate, how 

personnel flexibilities are implemented is equally important. Thus, to 

ensure more effective use of any human capital flexibility, it is critical that 

all agencies (1) plan strategically and make targeted investments, (2) 

ensure stakeholder input in developing policies and procedures, (3) 

educate managers and employees on the availability and use of flexibilities, 

(4) streamline and improve administrative processes, (5) build 

transparency and accountability into their systems, and (6) change their 

organizational cultures. By more effectively using flexibilities, agencies 

would be in a better position to manage their workforces, assure 

accountability, and transform their cultures to address current and 

emerging demands. 

OPM and six of the seven selected agencies provided comments on a draft 

of this report. The agencies either generally agreed with the information 

presented or did not express an overall opinion about the report. OPM was 

pleased that our report acknowledges the need for greater personnel 

flexibilities in cases where existing law constrains OPM in providing 

policies and programs to assist agencies in accomplishing their missions. 

However, OPM commented that authorizing additional legislative 

flexibilities to agencies on a case-by-case basis could create an unfair 

competitive advantage for certain agencies. OPM also stressed in its 

comments that agencies should use the outstanding scholar hiring program 

as a supplement to competitive examining and not use the program as a 

general approach to circumvent the standard competitive hiring process. 

IRS commented that its recently acquired statutory flexibilities were 

instrumental to achieving the agency’s transformation to a modern, 

business-like organization. The Department of Defense (Defense) and GSA 

suggested that our report more fully discuss the drawbacks of 

telecommuting. The Mint commented that the report provides an 
Page 7 GAO-03-2 Human Capital Flexibilities

objective, balanced review and assessment of the issues surrounding the 

implementation of human capital flexibilities and noted that the report 

would serve as a useful tool for policymakers. ITA commented that the 

report thoroughly and comprehensively addresses the critical issue of the 

programs needed to manage the federal workforce and emphasized the 

need for the additional flexibilities mentioned in the report. The 

Department of Veterans Affairs (VA) agreed with the information presented 

in the report and provided no additional comments. State did not provide 

comments on this report. Where appropriate, we made changes to the 

report to address the comments we received.

Background Federal managers have complained for years about the rigid and elaborate 

procedures required for federal personnel administration, often expressing 

the need for more flexibility within a system that has traditionally been 

based on uniform rules. Reformers have long sought to decentralize the 

personnel system and simplify the rules, arguing that however well the 

system may have operated in the past, it is no longer suited to meet the 

needs of a changing and competitive world. In 1983, for example, NAPA 

published a report critical of the excessive constraints on federal 

managers, including constraints on their human resources decisions.3

 As 

part of the response to these criticisms, OPM decentralized and delegated 

many personnel decisions to the agencies and has encouraged agencies to 

use human capital flexibilities to help tailor their personnel approaches to 

accomplish their unique missions. Our strategic human capital model also 

advocates that agencies develop a tailored approach to their use of 

available flexibilities by taking advantage of those flexibilities that are 

appropriate for their particular organizations and their mission 

accomplishment.4

 Because of this tailoring, the federal personnel system is 

becoming more varied, despite its often-cited characterization as a “single 

employer.”

3

National Academy of Public Administration, Revitalizing Federal Management: Managers 

and Their Overburdened Systems (Washington, D.C.: 1983).

4

GAO-02-373SP.
Page 8 GAO-03-2 Human Capital Flexibilities

The trend toward increased flexibility has manifested itself a number of 

ways, including the efforts of some agencies to seek congressional 

approval to move away from the personnel provisions of Title 5 of the U.S. 

Code that have traditionally governed much of the federal government’s 

civil service system.5

 As noted by OPM in a 1998 report,6 federal agencies’ 

status relative to these Title 5 personnel requirements can be better 

understood by thinking of them on a continuum. On one end of the 

continuum are federal agencies that generally must follow Title 5 personnel 

requirements. These agencies do not have the authority, for example, to 

establish their own pay systems. On the other end of the continuum are 

federal agencies that have more flexibility in that they are exempt from 

many Title 5 personnel requirements. For example, Congress provided the 

Tennessee Valley Authority and the Federal Reserve Board with broad 

authority to establish their own personnel systems and procedures. The 

movement in the direction of greater flexibility, in fact, has gained 

momentum to the extent that about half of federal civilian employees are 

now exempt from at least some of the personnel-related requirements of 

Title 5.

In addition to receiving congressional authorizations for exemptions from 

the personnel-related requirements of Title 5, other mechanisms are 

available to introduce human capital innovations and flexibilities within 

federal agencies. OPM has the authority to review and make changes to its 

existing regulations and guidance to provide agencies with additional 

flexibilities. Additionally, a federal agency can obtain authority from OPM 

to waive some existing federal human resources laws or regulations 

through a personnel demonstration project. The goal of these 

demonstration projects is to encourage experimentation in human 

resources management by allowing federal agencies to propose, develop, 

test, and evaluate changes to their own personnel systems. In some cases, 

Congress has allowed some agencies to adopt alternatives that have been 

tested and deemed successful. For example, more flexible pay approaches 

that were tested within the Department of the Navy’s China Lake 

5

Title 5 laws (or requirements) refer to those personnel management laws, procedures, and 

associated functions generally applicable to federal employees. Most federal personnel 

laws governing topics such as classification, appointment, pay and benefits, and adverse 

action are contained in Title 5. Title 5 also contains laws unrelated to federal personnel 

issues, such as the Administrative Procedure Act and the Freedom of Information Act, that 

are also applicable to federal agencies.

6

U.S. Office of Personnel Management, HRM Policies and Practices in Title 5-Exempt 

Organizations (Washington, D.C.: August 1998).
Page 9 GAO-03-2 Human Capital Flexibilities

(California) demonstration project in the early 1980s were eventually 

adopted by other federal agencies, such as the Department of Commerce’s 

National Institute of Standards and Technology. 

Exemptions from Title 5 personnel requirements within our seven selected 

agencies help to illustrate the gradations of flexibility. IRS, for example, 

represents an agency with broad authority related to its human capital 

management. Efforts to reform IRS led to provisions under the IRS 

Restructuring and Reform Act of 1998, which gave the Secretary of the 

Treasury various pay and hiring flexibilities not otherwise available under 

Title 5, such as the authority to establish new systems for hiring and 

staffing, compensation, and performance management. State and ITA are 

examples of organizations in which some employees are not subject to 

Title 5, while the remainder of the organization is covered. In this case, 

Foreign Service employees at State and ITA are outside of Title 5. For the 

remaining four agencies we included in our review, the majority of their 

employees are covered under the personnel requirements of Title 5, with 

some limited exemptions. Air Force, for instance, has made use of 

flexibilities under the demonstration project authority and currently 

participates in two such demonstration projects, one involving laboratory 

personnel and another for the civilian acquisition workforce. In addition, 

several of our selected agencies, such as GSA and VBA, received additional 

flexibility through legislative authority to offer voluntary separation 

incentive payments, commonly known as buyouts, to help restructure their 

workforces. Figure 2 provides background information on the seven 

agencies along with a summary of some of their related exemptions from 

Title 5 personnel requirements.
Page 10 GAO-03-2 Human Capital Flexibilities

Figure 2: Background Information on the Seven Selected Agencies with Examples of Exemptions from Title 5 Personnel 

Requirements

Source: Agency Web sites and planning documents.

Department of the Air Force: The mission of the Air Force, a component of the Department of Defense, is to defend the United States 

and protect its interests through aerospace power. The Air Force employs over 150,000 civilians in a full range of occupations. Although 

the majority of civilians employed by the Air Force are subject to Title 5 requirements, Air Force Research Laboratory employees, for 

example, are involved in a demonstration project, which features a contribution-based compensation system.

General Services Administration: GSA is one of three central management agencies in the federal government. The agency's 

mission is to support federal employees wherever they work by, among other things, providing work space, furniture, equipment, 

supplies, tools, and travel services. GSA also oversees telecommuting centers and federal child care centers and preserves historic 

buildings. The agency employs approximately 14,000 people, the majority of whom are covered by Title 5. Congress authorized GSA to 

offer voluntary separation incentive payments to help shape its workforce. 

Internal Revenue Service: IRS is a component of the Department of the Treasury. The agency's mission is to provide America's 

taxpayers with top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with 

integrity and fairness to all. IRS employs approximately 100,000 full-time employees. Under the IRS Restructuring and Reform Act of 

1998, the Secretary of the Treasury has pay and hiring flexibilities that are not generally available to Title 5 agencies. Some of these 

flexibilities are intended to allow IRS managers more discretion in rewarding good performers and in making employees accountable for 

their performance.

International Trade Administration: ITA is the lead unit for trade in the Department of Commerce. The agency promotes U.S. exports 

of manufactured goods, nonagricultural commodities, and services. It also participates in formulating and implementing U.S. foreign 

trade and economic policies and monitors market access and compliance of U.S. international trade agreements. ITA employs 

approximately 2,000 full-time employees. About 300 of these employees are Foreign Service employees, who are not subject to Title 5.

U.S. Mint: The U.S. Mint is a bureau within the Department of the Treasury. The primary mission of the agency is to produce an 

adequate volume of circulating coinage for the nation to conduct its trade and commerce. The Mint's workforce consists of 

approximately 2,600 employees with a wide mix of white-collar and blue-collar occupations. Of these employees, the rates of basic pay 

for positions within the police forces of the U.S. Mint are fixed without regard to the pay provisions of Title 5, except for minimum and 

maximum rates. 

Department of State: State is the principal agency for advancing and protecting U.S. interests abroad by conducting U.S. foreign policy, 

and supporting and coordinating the activities of all other U.S. government agencies operating abroad. State has approximately 7,300 

civil service employees and 9,400 Foreign Service employees. 

Veterans Benefits Administration: The mission of VBA—an agency within the Department of Veterans Affairs—in partnership with the 

Veterans Health Administration and the National Cemetery Administration, is to provide benefits and services to veterans and their 

families in a responsive, timely, and compassionate manner in recognition of their service to the nation. VBA employs approximately 

13,000 employees, the majority of whom are under Title 5. Like GSA, the agency received special legislative authority to provide 

voluntary separation incentive payments to help shape its workforce. 
Page 11 GAO-03-2 Human Capital Flexibilities

Even under current Title 5 personnel provisions and their applicable 

regulations, efforts to reform and improve the personnel system have 

provided many human capital flexibilities for agencies to use. Within broad 

parameters, such as adherence to merit system principles7

 and employee 

protection from prohibited personnel practices,8

 these flexibilities offer the 

agencies effective ways to accomplish their missions while maintaining the 

key values of a centralized system. For example, agencies have many 

flexibilities available to help them restructure and realign their workforces. 

Moreover, agencies have numerous compensation flexibilities that 

authorize them to provide additional direct payments to support their 

recruitment, relocation, and retention efforts, although some of them may 

require the approval of OPM or the Office of Management and Budget 

(OMB). 

Agency Officials and 

Union Representatives 

Cited Most Effective 

Human Capital 

Flexibilities 

Today, federal agencies are facing many human capital challenges. With 

the increasing numbers of employees retiring and the numbers of 

employees who will be eligible to retire in the near future, along with 

competition from private companies, federal agencies are in a struggle to 

recruit and retain highly skilled employees. In response to these 

challenges, agencies need to use the various human capital flexibilities that 

are available to them in managing their workforces to achieve agency 

missions and accomplish goals. 

Our discussions with agency officials and union representatives revealed 

numerous human capital flexibilities that they deemed effective in 

managing their workforces. These flexibilities encompassed broad areas 

of personnel-related actions such as recruitment, retention, compensation, 

position classification, incentive awards and recognition, training and 

development, performance management and appraisals, realignment and 

reorganization, and work arrangements and work-life policies. On the 

basis of these discussions, we identified the flexibilities that were the most 

7

Section 2301(b) of Title 5 of the U.S. Code stipulates that federal personnel management 

should be implemented consistent with merit system principles, including recruiting or 

promoting employees based on merit, retaining or separating employees based on 

performance, and protecting employees from improper influence. 

8

Section 2302(b) of Title 5 of the U.S. Code sets out personnel actions that may not be taken 

by any employee who can take, direct others to take, recommend, or approve any personnel 

actions; examples of prohibited personnel actions include discrimination, coercion of 

political activity, reprisal against whistleblowers, and nepotism.
Page 12 GAO-03-2 Human Capital Flexibilities

frequently cited by agency and union officials as being the most effective 

for managing their agencies’ workforces. These flexibilities include

• work-life programs, such as alternative work schedules, child care 

assistance, and transit subsidies;

• monetary recruitment and retention incentives, including retention and 

relocation bonuses and retention allowances;

• special hiring authorities, such as student employment and outstanding 

scholar programs; and

• incentive awards, which range from performance-based cash awards to 

time-off awards to symbolic items of nominal value, such as plaques and 

T-shirts.

Table 1 provides a summary of these flexibilities and the cited benefits of 

implementing them.
Page 13 GAO-03-2 Human Capital Flexibilities

Table 1: Human Capital Flexibilities That Agency Officials and Union 

Representatives Cited as Most Effective

Flexibility Cited benefits of flexibility

Work-life policies and programs:

Alternative work schedules • Increase employee morale

• Allow employees to be more flexible in accomplishing 

job responsibilities

• Decrease need for employees to use accumulated 

leave

Employee assistance programs • Assist agencies in addressing personnel issues that 

might be affecting agency operations

• Help employees resolve problems that might be 

affecting personal health or job performance

Child care centers and 

assistance

• Help recruit skilled workers and retain valuable 

employees

• Can aid lower paid employees with assistance

• Increase productivity among users because centers 

often mean more reliable child care and fewer 

employee absences

Subsidized transportation • Reduces congestion in transportation systems

• Decreases smog in local commuting areas

• Aids some employees in obtaining reliable 

transportation by subsidizing costs

Telecommuting • Decreases employee stress and commuting costs

• Helps to reduce traffic congestion and smog

• Allows employees to be more productive by decreasing 

their commuting time

Monetary recruitment and retention incentives:

Superior/special qualification 

appointments

• Allow agencies more control over entry-level salaries

• Permit agencies to match the prior salaries of new 

hires coming from the private sector

• Allow agencies to more easily hire employees with 

highly specialized skills in areas such as information 

technology and engineering

Recruitment bonuses • Assist agencies in recruiting employees for hard-to-fill 

positions

• Help agencies to retain employees for reasonable 

periods (i.e., written service agreement)

Relocation bonuses • Assist agencies in relocating employees for hard-to-fill 

positions

• Help agencies to retain employees for reasonable 

periods (i.e., written service agreement)
Page 14 GAO-03-2 Human Capital Flexibilities

Source: Agency and union officials interviewed.

Retention allowances • Assist agencies in retaining employees who possess 

unusually high or unique qualifications or who fill 

essential needs for the agencies

• Allow agencies to terminate the incentive payments 

when no longer needed 

• Can be provided on a group basis to help agencies 

retain groups or categories of employees

Special hiring authorities:

Student educational 

employment programs (i.e., 

“co-op” programs)

• Allow agencies and student employees to test whether 

the students would be suitable matches for possible 

permanent employment

• Allow agencies to quickly and easily hire needed staff 

who may be eligible for permanent positions with the 

agencies

Outstanding scholar program • Allows agencies to quickly hire high-quality entry-level 

employees (i.e., college graduates with superior 

academic credentials) in certain occupations

Veteran-related hiring 

authorities

• Allow agencies to quickly hire needed talent

• Allow veterans to apply for positions not generally open 

to nonfederal employees

Incentive awards:

Performance- and 

accomplishment-based cash 

awards

• Allow supervisors to recognize employees’ outstanding 

performance or accomplishment either at the end of 

performance appraisal periods or at a specific points in 

time for special acts or contributions

• Can provide supervisors with autonomy to offer awards

Quality step increases • Allow agencies to provide permanent pay increases on 

the basis of outstanding performance as demonstrated 

in employees’ performance appraisals

• Do not require agencies to conduct an annual review 

and approval to continue payments, as do retention 

allowances

Time-off awards • Allow employees to receive awards other than money

• Allow employees to take time off from work when most 

convenient for agencies and employees

Group incentives (i.e., 

gainsharing and goalsharing)

• Allow both agencies and employees to benefit from 

increases in productivity and decreases in costs

• Allow both agencies and employees to benefit from the 

achievement of specified goals that enhance the 

success of the organization’s mission

Honorary and informal 

recognition awards

• Give supervisors maximum flexibility to be creative in 

how they recognize their employees

(Continued From Previous Page)

Flexibility Cited benefits of flexibility
Page 15 GAO-03-2 Human Capital Flexibilities

Agency and Union Officials 

Cited Work-Life Programs 

among the Most Effective 

Flexibilities 

Agency officials and union representatives cited work-life programs among 

the most effective flexibilities for recruiting, motivating, and retaining staff. 

These programs are offered to help employees balance their work and 

family lives and include alternative work schedules, employee assistance 

programs, child care centers and assistance, transit subsidies, and 

telecommuting options. OPM has strongly supported the use of these 

family-friendly programs, indicating that they can help to attract and retain 

quality employees, boost morale, and reduce unscheduled leave. Our 

recent report looking at human capital challenges at the Securities and 

Exchange Commission revealed how agencies can sometimes overlook the 

effectiveness of these work-life programs in recruiting, retaining, and 

motivating staff.9

 The following is additional information about the 

effectiveness of these work-life flexibilities.

Alternative work schedules. Federal agencies generally have the authority 

to determine the hours of work for their employees to ensure that agencies 

meet organizational goals. Agencies may establish hours of work and 

scheduling flexibilities to replace the traditional schedules of 8 hours per 

day and 40 hours per week, such as full-time and part-time, overtime hours, 

and flexible work schedules. Scheduling flexibilities, such as alternative 

work schedules, were among the effective flexibilities most cited by agency 

managers and supervisors, human resources officials, and union 

representatives. Although some supervisors told us that such schedules 

can be a challenge to manage, these supervisors stated that this scheduling 

flexibility increases employee morale, strongly motivates employees, and 

allows employees to be more flexible in accomplishing job responsibilities. 

For example, IRS officials told us that the agency has made use of 

alternative work schedules since the early 1980s and that this flexibility is 

attractive to both current and potential employees. Supervisors at the San 

Francisco Mint said that the use of alternative work schedules reduces the 

amount of accumulated leave taken because employees can accomplish 

personal errands and tasks on their days off. According to human 

resources officials in GSA’s San Francisco region, about 1,300 of the 

region’s 1,500 employees make use of alternative work schedules. 

Employee assistance programs. Through these programs, agencies can 

provide a range of free, confidential counseling and referral services to 

9

U.S. General Accounting Office, Securities and Exchange Commission: Human Capital 

Challenges Require Management Attention, GAO-01-947 (Washington, D.C.: Sept. 17, 2001).
Page 16 GAO-03-2 Human Capital Flexibilities

assist employees who may be experiencing personal problems affecting 

their job performance or personal health. Agency and union officials said 

that these programs can be valuable in helping employees deal with issues 

such as work and family pressures. IRS supervisors in Philadelphia told us, 

for example, that IRS’s employee assistance program offers employees and 

their family members a way to address both work-related and nonworkrelated issues and that the employees they had referred to the program had 

found the services to be quite beneficial. Officials at Langley Air Force 

Base told us that both civilian and military personnel use the agency’s 

employee assistance programs, which were designed to meet the needs of 

various employee groups. 

Child development centers and child care assistance. Many federal 

agencies provide on-site or near-site child development centers to help 

employees with child care needs. Civilian federal agencies recently 

obtained authority through federal statute to use appropriated funds from 

salaries and expenses to assist their lower income employees with the cost 

of child care.10 Agencies can also assist their employees with information 

about other organizations that can help employees locate quality child care 

services. At some of the field locations we visited, agencies provided onsite or near-site child care for their employees. Agency and union officials 

said that this assistance greatly aids employees in focusing on their job 

responsibilities by providing more reliable child care, and that reliable 

child care often results in fewer employee absences. A national union 

representative pointed out that child care subsidies have allowed agencies 

to retain employees and save money because they do not have to train new 

staff members. According to OPM, there are approximately 1,000 work-site 

child care centers sponsored by civilian and military agencies in the federal 

government.

Transportation subsidies. In April 2000, an executive order was signed that 

required all federal agencies to implement a transportation fringe benefit 

program for their employees.11 This transit subsidy program was designed 

to encourage federal employees to use mass transportation for commuting 

to and from work to reduce traffic congestion and air pollution. Federal 

agencies in the national capital region were required to implement a 

“transit pass” program by providing eligible employees with subsidies in 

10Public Law 107-67, Nov. 12, 2001.

11Executive Order 13150, signed Apr. 21, 2000.
Page 17 GAO-03-2 Human Capital Flexibilities

the form of subway farecards. Agencies generally have the flexibility to 

make this program available to their employees nationwide and can 

provide employees with transit passes of up to $100 per month for each 

employee who uses public or vanpool transportation. Many supervisors 

and union representatives we interviewed said that this transit subsidy is 

highly valued by employees. Officials in the San Francisco Bay Area made 

particular note of the benefits of using public transportation given the 

traffic congestion in the area. 

Telecommuting Cited as 

Beneficial in Certain Cases, but 

Some Doubted Its Effectiveness 

and Stressed the Need for 

Careful Management

While many agency managers and supervisors, human resources officials, 

and union representatives supported the effectiveness of work-life 

programs, our discussions of telecommuting with these officials brought 

about strongly mixed opinions. Telecommuting, also referred to as 

telework or flexiplace, involves work arrangements that allow an employee 

to work away from the traditional work site, either at home or at another 

approved location. Often cited potential benefits for agencies to establish 

telecommuting programs include improved recruiting and retention of 

employees, increased productivity, and a reduced need for office space. 

Cited reasons for employees to participate in such programs include the 

opportunity to reduce commuting time; lowered personal costs in areas 

such as transportation, parking, food, and wardrobe; and improvement in 

the quality of work-life and morale because they are able to balance work 

and family demands. An MSPB survey conducted in 2000 found that 47 

percent of federal employees considered telecommuting important to them 

personally and that 20 percent had it available to them.12 

12U.S. Merit Systems Protection Board, Issues of Merit (Washington, D.C.: December 2000), 

p. 4.
Page 18 GAO-03-2 Human Capital Flexibilities

Several managers and supervisors we interviewed, however, said that 

telecommuting has not been shown to increase employee productivity, and 

that it is often complicated to manage an employee who is working “out of 

sight.” According to these agency officials, in many cases it is more 

difficult to judge the quality of the employee’s work in a telecommuting 

environment, while in other cases the quality of the work can decline if the 

employee is not mature in using this flexibility. In addition, with 

telecommuting, the office often loses some sense of teamwork and 

continuity, and sometimes significant logistical obstacles must be 

overcome. Further, telecommuting is not practical for all occupations or 

situations. Yet, other agency managers and numerous union 

representatives said that telecommuting can be an effective flexibility if 

used appropriately. Union representatives at GSA in Philadelphia, for 

example, said that agency managers should focus on employee 

productivity and results rather than the need to simply observe the 

employee working. These views mirror those found in our 1997 report 

reviewing the use of telecommuting (i.e., flexiplace) in the federal 

government.13 During that review, agency officials and union 

representatives we interviewed cited management resistance as the largest 

barrier to implementing flexiplace programs. Agency officials had 

informed us that they had had some success in overcoming management 

resistance by training supervisors or by exposing them to telecommuting 

arrangements. At the request of the Chairman, Subcommittee on 

Technology and Procurement Policy, House Committee on Government 

Reform, we are undertaking an assessment of federal telecommuting 

policies and programs.

Agency and Union Officials 

Identified Monetary 

Recruitment and Retention 

Incentives as Highly 

Effective Flexibilities

Agency and union officials also cited monetary recruitment and retention 

incentives as highly effective in managing their agencies’ workforces. 

Agencies generally offer these types of monetary incentives to employees 

based on employee qualifications, special needs of the agencies, or 

difficulties in filling positions. These flexibilities include the following.

13U.S. General Accounting Office, Federal Workforce: Agencies’ Policies and Views on 

Flexiplace in the Federal Government, GAO/GGD-97-116 (Washington, D.C.: July 3, 1997).
Page 19 GAO-03-2 Human Capital Flexibilities

Superior/special qualifications appointments. Using this flexibility, 

agencies can set base pay for newly appointed individuals above step 1 of 

the various grade levels based on the superior qualifications or highly 

specialized skills of the candidates or special needs of the agency. Agency 

officials said that this flexibility was especially effective because it allows 

agencies more control over entry-level salaries and permits agencies to 

match the prior salaries of new hires coming from the private sector. For 

example, IRS supervisors in Oakland told us that this hiring flexibility had 

helped their office in matching salaries of employees hired from the dotcom industry. GSA human resources officials in San Francisco said that 

this appointment authority had greatly assisted their office in hiring about 

30 employees over the last 3 years. Officials from the Mint’s headquarters 

information technology office said this pay incentive had helped in hiring 

highly skilled information security personnel at the GS-13 and GS-14 

levels.14 

Recruitment bonuses. A recruitment bonus is a lump-sum payment of up to 

25 percent of basic pay that an agency may pay to an employee newly 

appointed to a position that would otherwise be difficult to fill. In return, 

the employee must sign an agreement to fulfill at least 6 months of service 

with the agency. A senior human resources manager at one department, for 

example, told us that her department had instituted over 1,000 recruitment 

bonuses (averaging about $5,000 each) to attract new hires. She said that 

the department typically hired new employees only at the GS-7 level and 

thus relied on these recruitment bonuses to augment starting pay, 

particularly for hard-to-fill scientific and technical positions. 

Relocation bonuses. A relocation bonus is a lump-sum payment of up to 25 

percent of basic pay that an agency may pay to a current employee who 

must relocate to a position in a different commuting area that would 

otherwise be difficult to fill. In return, the employee must sign a service 

agreement with the agency. Another senior human resources manager, for 

example, told us that his agency uses relocation bonuses to assist certain 

employees who are required to move every 3 years to limit potential 

conflicts of interest in their sensitive positions. He said that without the 

14The General Schedule (GS) is the basic classification and compensation system for whitecollar occupations in the federal government as established by Title 5. Grades represent 

levels of difficulty, responsibility, and qualifications that are sufficiently similar to warrant 

their inclusion within one range of basic pay. Each grade includes 10 fixed rates of pay, 

called steps, through which employees advance.
Page 20 GAO-03-2 Human Capital Flexibilities

relocation bonus, these employees would often lose money when they 

move, resulting in significant morale problems. 

Retention allowances. A retention allowance is a continuing (i.e., 

biweekly) payment of up to 25 percent of basic pay that an agency may pay 

to help retain an employee. The agency must determine that (1) the 

unusually high or unique qualifications of the employee or a special need of 

the agency for the employee’s services makes it essential to retain the 

employee and (2) the employee would be likely to leave the federal 

government in the absence of a retention allowance. In addition, an agency 

may offer retention allowances to a group or category of employees.15 

Agencies must annually review and certify the allowances, which allows 

the agencies to terminate the incentive payments when no longer deemed 

necessary. One senior human resources manager told us, for example, that 

her department often uses retention allowances to help retain certain 

specialized employees who are frequently approached by recruiters from 

private industry and state governments. 

Agencies Can Use Retention 

Allowances to Build Employee 

Competencies

Although agencies generally use retention allowances to retain highly 

qualified employees, State also uses this flexibility to build employee 

competencies. In 1998, when planning for its information technology 

requirements, State determined that it needed to address the difficulty of 

attracting and keeping the highly qualified technical workforce necessary 

to carry out its mission of providing support and coordinating the activities 

of all U.S. government agencies abroad. As such, it implemented a 

technology skills development program to attract and retain employees 

with certain technological skills by granting them retention allowances for 

obtaining job-related degrees and certifications. Under the program, State 

also paid for training courses leading up to certification but not the 

examinations to obtain the credentials.16

According to State, it has granted over $4 million in total retention 

allowances under this skills development program. The number of 

15Agencies generally have the authority to pay retention allowances up to 10 percent of basic 

pay to a group or category of employees. For group retention allowances in excess of 10 

percent (but not more than 25 percent), agencies need to obtain OPM approval.

16A provision of the National Defense Authorization Act for 2002 provided agencies with 

discretionary authority to use appropriated funds or funds otherwise available to pay for 

employees’ expenses to obtain professional credentials, including the examinations to 

obtain such credentials (5 U.S.C. 5757).
Page 21 GAO-03-2 Human Capital Flexibilities

information technology employees with degrees or certifications increased 

from 133 in 1999 to 583 in 2001. As part of its evaluation of the skills 

development program, State surveyed the participants and supervisors 

involved in the program. Approximately 61 percent of the employees who 

participated in the program (335 out of 547) responded to the 2001 survey. 

The 2001 survey showed that 80 percent of the responding participants 

agreed that receiving the retention allowance played a substantial role in 

their decision to work at the department, and 90 percent agreed that 

receiving the allowance played a substantial role in their decision to remain 

at the department.

Special Hiring Authorities 

Were Also Noted to be 

Particularly Effective 

Flexibilities

Agency and union representatives frequently noted that special hiring 

authorities available to federal agencies can also be particularly effective in 

assisting agencies to appoint needed employees. These hiring authorities 

allow agencies to hire employees without going through the standard 

federal hiring process, often resulting, according to managers, in shorter 

hiring times, less onerous paperwork, and more flexibility in selecting the 

job candidates who managers believe are most qualified. These special 

hiring flexibilities include the following.

Student educational employment program. The student employment 

program allows agencies to appoint graduate, undergraduate, vocational, 

technical, associate degree, and professional degree seeking students who 

are enrolled or have been accepted for enrollment in at least a part-time 

schedule at an accredited institution. Some of these student employees are 

eligible to receive tuition assistance and, upon completion of their 

academic work, may be eligible for conversion to permanent jobs with the 

agency. A senior human resources manager at one department said that 

the student employment program allows agencies to develop professional 

relationships with students while they are still in school, which makes it 

easier to hire them when they are looking for permanent employment. GSA 

officials said they had hired 110 students under this program in the last 3 

years and noted that the agency has done well at retaining these employees 

after they completed their academic work. Air Force officials told us that 

given the agency’s downsizing environment of the past decade, the Air 

Force had only recently reestablished its student employment program but 

that the program has been successful in bringing in new employees who, 

thus far, tend to stay with the agency.
Page 22 GAO-03-2 Human Capital Flexibilities

Outstanding scholar program. The outstanding scholar program 

supplements the standard competitive hiring process by allowing agencies 

to hire outstanding college graduates17 for certain entry-level occupations 

at grades GS-5 and GS-7. Agency officials we interviewed said that because 

agencies using the program are not required to rate and rank candidates for 

these positions, the hiring process can be shortened. For example, 

supervisors at GSA in Philadelphia told us that outstanding scholar hiring 

authority is beneficial because it allows the agency to hire more quickly. 

Although these and other agency officials strongly supported the use of this 

program, concerns have been raised by some about the degree of 

discretion this program provides in allowing agencies to circumvent the 

standard competitive hiring process. For example, in a January 2000 

report, MSPB noted that the hiring authority under the outstanding scholar 

program was originally intended to be used as a short-term supplemental 

hiring tool.18 The program was established in 1981 in response to a civil 

lawsuit challenging the federal government’s use of a written test for entrylevel professional and administrative jobs because of that test’s adverse 

impact on African-Americans and Hispanics.19 Although the program is 

aimed at addressing underrepresentation of African Americans and 

Hispanics, the program has never been restricted to those designated 

minority groups. In its report, MSPB recommended that this hiring 

authority be abolished and that merit-based hiring be restored to this group 

of federal jobs. In its comments on a draft of our report, OPM cautioned 

that although some agency officials we interviewed may have viewed this 

program as providing broad authority to use noncompetitive hiring 

procedures, agencies are to use this program only as a supplement to 

competitive examining. OPM stressed that agencies must have an 

established pattern of competitive selection into the covered occupations 

before agencies can use the program.

Veteran-related hiring authorities. During our review, several agency and 

union officials also noted the benefits of two veteran-focused hiring 

authorities. Veterans Readjustment Appointment (VRA) authority allows 

17To be eligible, graduates must have maintained 3.5 grade point averages on a 4.0 scale or 

have graduated in the upper 10 percent of their graduating classes or major university 

subdivisions, such as the School of Business Administration.

18U.S. Merit Systems Protection Board, Restoring Merit to Federal Hiring: Why Two 

Special Hiring Programs Should Be Ended (Washington, D.C.: January 2000).

19Angel G. Luevano et al., v. Alan Campbell, Director, Office of Personnel Management, et 

al., 93 F.R.D. 68 (1981).
Page 23 GAO-03-2 Human Capital Flexibilities

agencies to noncompetitively appoint eligible veterans to otherwise 

competitive positions at any grade level through GS-11 or equivalent. After 

the veteran completes 2 years of satisfactory service, the employing agency 

must then noncompetitively convert this VRA appointee to permanent 

status in the competitive federal service. Veterans Employment 

Opportunities Act (VEOA) authority allows agencies to obtain a wider pool 

of job applicants by permitting agencies to accept job applications from 

eligible veterans for certain positions that would typically be open only to 

individuals with competitive status. Veterans who submit job applications 

under this VEOA authority could then be selected for the positions under 

standard competitive procedures. Supervisors of wage-grade employees at 

GSA’s Philadelphia region said, for example, that using VRA authority had 

been effective in assisting the region in quickly hiring highly qualified 

veterans. GSA human resources officials in San Francisco told us that 

VEOA had been effective in facilitating the hire of 24 veterans over the last 

year.

Incentive Awards Were Also 

Cited as Effective 

Flexibilities

Agency and union officials also frequently mentioned the effectiveness of 

granting incentive awards to employees. The intent of the incentive awards 

program is to provide appropriate motivation and recognition for 

excellence in job performance and contributions to an agency’s goals. 

Incentive awards, which can be either monetary or nonmonetary, include 

the following. 

• Performance awards are lump-sum cash awards that reward employees 

for fully successful or better job performance as defined by formal 

performance appraisals. Awards can be up to 10 percent of an 

employee’s basic pay, or up to 20 percent for exceptional job 

performance.

• Special act or service awards are lump-sum cash awards for specific 

accomplishments that contribute to the efficiency, economy, or other 

improvement of government operations. Agencies may grant up to 

$10,000 without external approval, up to $25,000 with OPM approval, 

and in excess of $25,000 with Presidential approval.20

20The Department of Defense and IRS do not require OPM approval for awards up to 

$25,000, but awards over $25,000 must be approved by the President.
Page 24 GAO-03-2 Human Capital Flexibilities

• Quality step increases (QSI) are permanent pay increases for 

outstanding performance as shown on formal job performance 

appraisals. QSIs are granted by providing employees with faster than 

normal progression through the stepped rates of GS.

• Time-off awards are awards that grant employees time off from duty 

without charging their annual leave or requiring that they forgo pay. 

These awards allow employees to take time off from work when it is 

most convenient for both the agencies and the employees.

• Group incentives include cash awards granted to employees based on 

(1) increases in productivity or decreases in costs (i.e., gainsharing) or 

(2) achievement of specified goals that enhance the success of the 

organization’s mission (i.e., goalsharing). These incentives are designed 

to foster teamwork and promote innovation and continuous 

improvement.

• Honorary and informal recognition awards are awards such as trophies, 

plaques, certificates, and other tangible incentives. These awards give 

supervisors maximum flexibility to be creative in how they recognize 

employees.

Agency and union officials provided us with numerous examples of their 

use of incentive awards as effective flexibilities. For example:

• Officials at GSA said that GSA had used its awards program effectively 

to recognize and motivate employees and that the agency had delegated 

approval for authorizing awards to appropriate levels within the agency. 

GSA’s fast-track awards program, for example, allows managers and 

supervisors to log onto GSA’s intranet system and complete the 

administrative work for the award within minutes. 

• At VBA in Philadelphia, supervisors noted that offering movie tickets 

and restaurant coupons to employees was a good way to show 

appreciation for employees’ performance and contributions. 

• U.S. Mint officials said that they reward and recognize employees 

through on-the-spot awards, time-off awards, and gainsharing. At the 

Mint in San Francisco, managers mentioned that they have used 

employee recognition day to boost morale by providing awards that are 

of nominal monetary value but that are symbolically significant, such as 

T-shirts. 
Page 25 GAO-03-2 Human Capital Flexibilities

• State’s Information Resource Management (IRM) Bureau officials said 

that their quarterly awards process allows supervisors to recognize and 

reward employees in a more timely fashion, rather than waiting until the 

annual job performance appraisal process. 

• IRS managers in Philadelphia mentioned that the agency provides data 

conversion employees with incentive pay tied to quality and production, 

noting that this award has helped to motivate these employees to 

accomplish their job tasks more quickly and accurately.

Agency Officials and 

Union Representatives 

Cited Need for 

Additional Human 

Capital Flexibilities 

We identified five categories of additional flexibilities that agency officials 

and union representatives cited most often as being potentially helpful in 

managing their workforces if additional flexibilities were authorized for 

agencies. Specifically, these categories include

• more flexible pay approaches,

• greater flexibility to streamline and improve the federal hiring process,

• increased flexibility in addressing employees’ poor job performance,

• additional workforce restructuring options, and 

• expanded flexibility in acquiring and retaining temporary employees.

These suggestions by agency officials and union representatives provide a 

starting point for executive branch decision makers and Congress to 

consider as they seek to reform federal human capital policies and 

practices. Although we have not analyzed the validity of the suggestions, 

the categories are consistent with the authorities that we have established 

at GAO and have been urging for other federal agencies. The GAO 

Personnel Act of 1980 and our 2000 legislation included some of the 

proposed additional flexibilities. The most prominent change in human 

capital management that we implemented as a result of the GAO Personnel 

Act of 1980 was a broadbanded21 pay-for-performance system that bases 

employee compensation primarily on the knowledge, skills, and 

performance of individual employees. It provides managers flexibility to 

21Broadbanding is a personnel classification and pay system that involves combining 

separate grade levels into broad pay bands.
Page 26 GAO-03-2 Human Capital Flexibilities

assign and use employees in a manner that is more suitable to multitasking 

and the full use of staff. Importantly, careful design and effective 

implementation is crucial to obtaining the benefits of broadbanding in an 

equitable and cost-effective manner. Also, as a result of the 1980 Act, the 

Comptroller General has the authority to hire, on a noncompetitive basis, 

up to 15 experts and consultants at any level, including senior executives, 

with renewable terms up to 3 years each. GAO has used this authority in 

selected cases and found it to be valuable in filling critical time-sensitive 

positions within the agency.

Our October 2000 legislation gave us additional tools to realign our 

workforce in light of mission needs and overall budgetary constraints; to 

correct skills imbalances; and to reduce high-grade, managerial, or 

supervisory positions without reducing the overall number of employees. 

To address any or all of these three situations, we were given authority to 

offer voluntary early retirement and voluntary separation incentive 

payments to our employees until December 31, 2003. This legislation also 

allowed us to create a technical and scientific career track at a 

compensation level comparable to senior career executives and to give 

greater consideration to performance and employee skills and knowledge 

in any reduction-in-force actions. 

Aspects of these authorities were also included in the recently enacted 

Homeland Security Act of 2002,22 which created the new Department of 

Homeland Security. In addition to providing the President with additional 

authority to create new policies for managing the workforce within the new 

department, the legislation includes provisions that authorize agencies 

across the federal government to use additional personnel flexibilities. For 

example, agencies will now be permitted to offer buyouts to their 

employees without the requirement to reduce their overall number of 

employees. This change will provide agencies the opportunity to more 

easily restructure their workforces to correct skills imbalances related to 

those employees whose jobs have become obsolete or whose skills are no 

longer needed. The legislation also permits agencies to use a more flexible 

approach in the rating and ranking of job candidates during the hiring and 

staffing process. Using this alternative approach can expand the number of 

qualified candidates that a selecting official could choose from when filling 

a position. In addition, under the legislation agencies will need to 

22 Pub. L. No. 107-296, Nov. 25, 2002.
Page 27 GAO-03-2 Human Capital Flexibilities

incorporate workforce planning into their strategic plans and appoint 

“chief human capital officers” to oversee workforce management.

Additional analysis may be needed to ensure that any new personnel 

authorities that are granted and implemented are consistent with a focus 

on results, merit, and other important federal employment goals. As we 

have noted in previous reports and testimonies,23 comprehensive legislative 

reform of the civil service will likely be necessary to address the federal 

government’s human capital challenges; however, the consensus necessary 

to make this a reality has yet to be achieved. Such reform could provide a 

broader range of federal agencies with a more standard set of human 

capital tools and flexibilities to manage their workforces. Ultimately, in 

undertaking any civil service reform, policymakers will likely want to 

consider the potential needs of individual agencies along with the 

governmentwide need to manage competition between agencies for skilled 

employees. 

Agency Officials 

Believed That 

Additional Flexibilities 

Could Coexist with 

Protection of 

Employee Rights, but 

Union Representatives 

Gave Mixed Views

Because human capital flexibilities entail greater decentralization and 

delegation of human capital authorities and fewer rules, the protection of 

employees’ rights under these conditions can be challenging. The 

managers and supervisors and human resources officials we interviewed 

generally believed that additional human capital flexibilities could be 

authorized and implemented in their agencies while also ensuring 

protection of employees’ rights. Union representatives we interviewed, on 

the other hand, had mixed views on the ability of agencies to protect 

employee rights with the increased discretion that additional flexibilities 

would give to agency managers. Some union representatives responded 

positively when asked if agencies could give managers additional 

flexibilities while protecting employees’ rights. Several union officials, 

however, said that managers could more easily abuse their authority when 

implementing these additional flexibilities and that agency leaders often do 

not take appropriate actions in dealing with abusive managers. 

According to the agency and union officials we interviewed, one of the 

most effective ways to ensure protection of employees’ rights when 

implementing these flexibilities is making certain that supervisors and 

employees are fully aware of the available flexibilities, the procedures to 

23See, for example, GAO-01-263 and GAO-01-357T.
Page 28 GAO-03-2 Human Capital Flexibilities

use them, and the associated rights and responsibilities of both managers 

and employees when using them. Clear guidelines for consistently 

applying the flexibilities and straightforward explanations from managers 

about how and why they made decisions are essential, according to some 

of the individuals we interviewed. The consensus of agency officials, with 

some union representatives agreeing, was that putting personnel authority 

in the hands of agency managers through human capital flexibilities will 

not affect employee protection as long as managers are held directly 

accountable for their personnel decisions.

In our previous work, we recognized the importance of involving employee 

unions when agencies propose major changes in the work environment 

that may be of particular concern to the unions.24 We found that obtaining 

union cooperation and support through effective labor-management 

relations can help achieve consensus on the planned changes, avoid 

misunderstandings, and more expeditiously resolve problems that occur. 

When agencies and employee unions maintained an ongoing working 

relationship in an environment of trust and openness, agencies and unions 

were able to work cooperatively even in the face of significant change. For 

example, both IRS and the National Treasury Employees Union officials 

credited the excellent working relationship they developed over the last 

decade for helping the reorganization of IRS. One IRS official, for example, 

stated that it is important to involve the union as a part of the discussions 

about flexibilities because the union is sometimes more effective than 

agency managers in communicating with employees.

Agency managers and supervisors also cited the importance of securing a 

close working relationship with the agency’s human resources officials in 

the protection of employee rights. Officials commented that human 

resources officials are often good sources of information about flexibilities 

and effective monitors of potential problems involving their use. 

According to several supervisors we interviewed, this assistance and 

monitoring by human resources officials, along with managers’ and union 

representatives’ efforts to keep each other honest, help to ensure that 

employee protection can coexist with the use of human capital flexibilities.

24U.S. General Accounting Office, Human Capital: Practices That Empowered and 

Involved Employees, GAO-01-1070 (Washington, D.C.: Sept. 24, 2001).
Page 29 GAO-03-2 Human Capital Flexibilities

Key Practices Can 

Assist Agencies in 

Effectively Using 

Flexibilities

Based on our interviews with human resources directors across the federal 

government and our related human capital work, we identified six key 

practices that agencies can implement for effectively using human capital 

flexibilities. These practices are (1) planning strategically and making 

targeted investments, (2) ensuring stakeholder input in developing policies 

and procedures, (3) educating managers and employees on the availability 

and use of flexibilities, (4) streamlining and improving administrative 

processes, (5) building transparency and accountability into the system, 

and (6) changing the organizational culture.25 We confirmed the 

importance of these practices in our discussions with managers and 

supervisors, human resources officials, and local union representatives at 

the seven agencies we selected for more detailed review. We also identified 

relevant examples of the use of these key practices from the seven 

agencies. The following is a more detailed discussion of these practices 

along with examples we identified.

Planning Strategically and 

Making Targeted 

Investments

With strong commitment on the part of their leadership, federal agencies 

need to ensure that the use of human capital flexibilities is part of an 

overall human capital strategy clearly linked to the program goals of the 

organization. Agencies need to plan for how they will use and fund these 

authorities, what results they expect to achieve, and what methods they 

will use to evaluate actual results. Our review found that a significant 

reason why managers and supervisors had not made greater and more 

effective use of existing human capital flexibilities was agencies’ weak 

strategic human capital planning and inadequate funding for using these 

flexibilities given competing priorities. Such a strategic focus would allow 

for answering critical questions such as whether current staff and 

resources are sufficient; whether they are being allocated in a manner best 

suited to promote mission accomplishment; and, ultimately, whether 

agencies and Congress may wish to consider a variety of targeted 

investments or new human capital flexibilities in the future. The following 

are elements and examples of planning strategically and making targeted 

investments from the seven agencies we reviewed.

25U.S. General Accounting Office, Managing for Results: Building on the Momentum for 

Strategic Human Capital Reform, GAO-02-528T (Washington, D.C.: Mar. 18, 2002).
Page 30 GAO-03-2 Human Capital Flexibilities

• Obtain agency leadership commitment. Top leadership commitment 

is crucial to instilling a common vision across the organization and 

creating an environment that is receptive to innovation. In earlier 

reports and testimonies, we observed that top leadership plays a critical 

role in creating and sustaining high-performance organizations.26 We 

also highlight the importance of top leadership commitment in our 

recently issued model of strategic human capital management, in which 

we note that political leaders and senior career executives demonstrate 

this commitment by personally developing and directing reform, driving 

continual improvement, and characterizing the agency’s mission in 

reform initiatives.27 At IRS, for example, Commissioner Rossotti’s 

efforts demonstrated a clear case of leadership’s commitment to change. 

As mandated by Congress in the IRS Restructuring and Reform Act, the 

Commissioner articulated a new mission for the agency, together with 

support for strategic goals that balance customer service and 

compliance with tax laws. The Commissioner led a modernization 

effort that touched virtually every aspect of IRS, including 

implementation of IRS’s newly authorized personnel system and the 

additional human capital flexibilities that accompanied it.

• Determine agency workforce needs using fact-based analysis. 

Federal agencies often have not gathered and analyzed the data required 

to effectively assess how well their human capital approaches have 

supported results. High-performing organizations identify their current 

and future human capital needs, including the appropriate number of 

employees; the key competencies for mission accomplishment; and the 

appropriate deployment of staff across the organization. For example, 

in 1998 the Air Force Materiel Command (AFMC), the largest employer 

of civilians in the Air Force, began a two-phased workforce study 

designed to tailor its human capital to meet future business needs. 

AFMC’s planning efforts, as documented in its April 2000 study called 

Sustaining the Sword, involved an assessment of the current and 

projected 2005 workforce by workforce mix, skills, skill levels, and 

26See the following GAO products: GAO-01-1070; Managing for Results: Federal Managers’ 

Views Show Need for Ensuring Top Leadership Skills, GAO-01-127 (Washington, D.C.: Oct. 

20, 2000); Management Reform: Using the Results Act and Quality Management to 

Improve Federal Performance, GAO/T-GGD-99-151 (Washington, D.C.: July 29, 1999); and 

Management Reform: Elements of Successful Improvement Initiatives, GAO/T-GGD-00-26

(Washington, D.C.: Oct. 15, 1999).

27GAO-02-373SP.
Page 31 GAO-03-2 Human Capital Flexibilities

demographics and then a more detailed position-level analysis of 

workforce data from AFMC locations. AFMC reported that these data 

and the results of its workforce shaping activities led to a more 

informed understanding of workforce gaps, for which corrective 

strategies could be then developed.

• Develop strategies that employ appropriate flexibilities to meet 

workforce needs. After identifying current and future workforce 

needs, agencies ought to develop effective strategies that fill the gaps. 

In developing these strategies, agencies should assess which human 

capital flexibilities might work best given current and future needs. For 

example, in 2000 the Mint created a “human resources flexibilities team” 

to assess the agency’s current and future use of existing human capital 

flexibilities. This initial assessment, as outlined in a December 2000 

report, revealed that the Mint had pursued a number of key flexibilities 

but had not done so uniformly across its organizational, occupational, 

and grade-level structures. In its report, the Mint assessed over 80 

disparate human capital flexibilities and developed specific plans to use 

each of the flexibilities that had not been used or that required 

immediate attention for full use.

• Make appropriate funding available. After developing strategies, 

agencies need to assess the associated costs of using any human capital 

flexibilities as part of these strategies. Such assessments will allow 

agencies to better plan for the use of these flexibilities and to ensure 

that appropriate funding is available when needed. Air Force, for 

example, developed a comprehensive, multiyear funding plan to 

implement its Civilian Personnel Management Improvement Strategy 

(CPMIS), which comprises 28 separate human capital initiatives 

grouped into the areas of accession planning, workforce development, 

retention/separation management, and support activities. Under 

accession planning, for instance, one initiative calls for the Air Force to 

expand its use of the “3Rs”—recruitment bonuses, relocation bonuses, 

and retention allowances—to sustain necessary skills in the civilian 

workforce. Beginning in fiscal year 2004, the Air Force projects offering 

approximately 1,300 recruitment bonuses annually at an average cost of 

$11, 250, approximately 650 relocation bonuses at an average cost of 

$10,000, and approximately 650 retention allowances at an average cost 

of $9,000. (See table 2.)
Page 32 GAO-03-2 Human Capital Flexibilities

Table 2: Air Force CPMIS Funding Strategy for 3Rs (Fiscal Years 2004 through 2009)

Source: Air Force.

Ensuring Stakeholder Input 

in Developing Policies and 

Procedures

Agency leaders, managers, employees, and employee unions need to work 

together to identify and effectively implement human capital flexibilities. 

Engaging all of the stakeholders in developing policies and procedures for 

the use of flexibilities helps in reaching agreement on the need for change, 

the direction and scope that change will take, and how progress will be 

assessed. Stakeholder input should also be used to ensure that the policies 

surrounding the use of flexibilities are clear and the procedures to 

implement them are uncomplicated. The following are elements and 

examples from our seven selected agencies on how they ensured 

stakeholder input in developing human capital flexibility policies and 

procedures. 

• Engage the human capital office. Because flexibilities influence the 

entire human capital system, human capital professionals are needed to 

supply the energy and expertise in helping to develop policies and 

procedures on the use of flexibilities. As noted in our model of 

strategic human capital management, this assistance requires the 

expansion of the role of human capital professionals from largely 

paperwork processors to functioning as advisors to and partners with 

senior leadership and managers. By transforming from focusing largely 

on transactions to more on total customer service, the role of the human 

capital office in facilitating the use of flexibilities will become 

increasingly important. GSA’s Philadelphia regional office, for example, 

established a Human Resources Council, which is composed of the 

human resources director and representatives of various GSA offices, to 

discuss human capital policies and practices in the region, such as 

alternative work arrangements and incentive awards. In another 

example, State’s IRM Bureau directly involved human capital 

professionals in its working group that crafted its skills development 

program to provide retention allowances (ranging from 5 to 15 percent) 

Proposed funding by fiscal year (dollars in millions)

Human capital flexibility 2004 2005 2006 2007 2008 2009

Recruitment bonuses (1,300) $14.6 $15.5 $16.4 $17.3 $18.3 $19.3

Relocation bonuses (650) 6.5 6.7 6.8 7.0 7.2 7.4

Retention allowances (650) 5.9 6.0 6.2 $6.4 6.6 6.8
Page 33 GAO-03-2 Human Capital Flexibilities

to certain information technology workers who obtain job-related 

degrees and certifications.

• Engage agency managers and supervisors. Soliciting the input of 

managers and supervisors on how best to implement human capital 

flexibilities is a key component for their successful use. Because 

managers and supervisors are virtually certain to be negatively affected 

by unclear policies and procedures, their perspectives on how to make 

strategic use of flexibilities, while avoiding potential problems caused 

by poor implementation, are essential. To address the potential 

problems of limited input, for example, 160 frontline managers from 

GSA’s central and regional offices convened in four sessions in March 

2001 to exchange information about effective workforce-related 

practices using many of the flexibilities already available to the agency. 

This effort resulted in a catalog of “best practices” that their offices had 

implemented in the areas of recruiting and orienting employees, 

engaging existing employees, and developing leaders. 

• Involve employees and unions. As with any significant change in the 

workplace, involving employees and unions in decisions to use human 

capital flexibilities increases employees’ understanding and acceptance 

of the objectives for implementing change, helps to avoid 

misunderstandings, and can assist in more expeditiously resolving 

problems that might occur.28 While frontline employees can help ensure 

a more operationally oriented perspective on the use of flexibilities, 

obtaining union cooperation and support through effective labormanagement relations can help achieve consensus on the changes 

accompanying their use. For example, the Mint and VBA made changes 

to employee work schedules based on input from employees in open 

forums. At a “town hall” meeting at the Mint’s San Francisco coinmaking plant, employees (with assistance from the local union) were 

able to vote on various options for implementing an alternative work 

schedule for the facility. At a “listening post” session at VBA’s regional 

office in Philadelphia, employees offered input to change the operating 

hours of the facility’s phone operations.

• Use input to establish clear, documented, and transparent 

policies and procedures. After obtaining sufficient input from key 

players, agencies need to develop and implement human capital 

28GAO-01-1070.
Page 34 GAO-03-2 Human Capital Flexibilities

flexibilities using clear, documented, and transparent policies and 

procedures. This practice is essential to ensuring that they are used 

fairly and, at the same time, are not encumbered with so many 

administrative burdens that they lose their value as flexibilities. 

Agencies can take various steps to ensure that policies and procedures 

are clear and uncomplicated. For example, the Mint’s Office of Chief 

Financial Officer hired a writer-editor to assist the agency in writing 

personnel-related policies and procedures in “plain English.” As an 

example of developing uncomplicated policies and procedures, GSA 

officials provided us with a merit promotion plan that had been reduced 

from 75 to 5 pages.

Educating Managers and 

Employees on Availability 

and Use of Flexibilities

Agencies need to ensure that they have an effective campaign not only to 

inform agency managers and employees of their personnel authorities, but 

also to explain the situations where the use of those authorities is 

appropriate. Our work at the seven agencies showed that the lack of 

awareness and knowledge of human capital flexibilities was one of the 

most significant reasons why federal managers and supervisors have not 

made better use of these flexibilities. In some cases, senior managers 

might not know that such flexibilities were already available to their 

agencies. In other cases, agency leaders or parent departments might place 

restrictions on the use of a flexibility—either strategically or haphazardly—

and then not communicate the source and reasons for such restrictions to 

line managers and supervisors within the agency. Educating managers and 

employees goes a long way in ensuring effective use of these flexibilities 

across the federal government. The following are elements and examples 

of how agencies educated managers and employees on the availability and 

use of human capital flexibilities.

• Train human capital staff. Traditionally, what has been called the 

personnel or human resources function has often been viewed as 

strictly a support function involved in administering personnel 

processes and ensuring compliance with rules and regulations. As 

human capital professionals take a more consultative approach to their 

jobs, they will need not only the knowledge of and expertise in the full 

range of human capital flexibilities available but also skills on 

communicating this information to their clients in the agencies they 

serve. For example, GSA held a conference in September 2000 for its 

human resources staff members to increase their knowledge of 

emerging human capital issues and to better their skills in responding to 

the needs of clients throughout the agency. According to a senior 
Page 35 GAO-03-2 Human Capital Flexibilities

human resources manager at GSA, the conference included a 

presentation and discussion of the human capital flexibilities available 

for use within the agency.

• Educate agency managers and supervisors on existence and use 

of flexibilities. Ultimately the flexibilities within the personnel system 

are only beneficial if the managers and supervisors who would carry 

them out are actually aware of their existence and of the best manner in 

which they could be used. Educating managers and supervisors is key 

to ensuring that agencies use all of the tools and flexibilities needed to 

manage their workforces to accomplish agency missions and achieve 

goals. For example, AFMC developed and distributed a Supervisor’s 

Guide to Work Force Planning to educate agency managers and 

supervisors on numerous flexibilities available to attract and retain 

quality employees. GSA’s Philadelphia office has educated its 

supervisors on human capital flexibilities with its “Human Resources 

Solutions Series” training, which includes topics such as employee leave 

and work schedules, options for dealing with performance and conduct 

problems, and balancing managerial flexibility and accountability under 

merit system principles.

• Inform employees of procedures and rights. In previous work, we 

have highlighted the importance of informing employees of personnelrelated policies and procedures and their rights under them.29 This 

communication helps in minimizing employee confusion and 

apprehension and ensuring that flexibilities are implemented fairly 

within and across the organization. Agencies can use a variety of 

methods to communicate this information. For example, GSA’s human 

resources manager in Philadelphia said that most updates concerning 

employee rights and procedures are communicated via GSA’s intranet 

Web site. The office also distributes an employee newsletter with 

information about related personnel policies and procedures. 

29See, for example, the following: U.S. General Accounting Office, Whistleblower 

Protection: VA Did Little Until Recently to Inform Employees About Their Rights, 

GAO/GGD-00-70 (Washington, D.C.: Apr. 14, 2000), and D.C. Courts: Implementation of 

Personnel Policies Requires Further Attention From the Courts’ Leadership, GAO/GGD00-75BR (Washington, D.C.: Apr. 12, 2000).
Page 36 GAO-03-2 Human Capital Flexibilities

Streamlining and Improving 

Administrative Processes

Agencies also need to streamline and improve administrative processes for 

using flexibilities and review self-imposed constraints that may be 

excessively process oriented. Indeed, our interviews with agency 

managers and supervisors revealed that they viewed burdensome and timeconsuming approval processes as a significant reason why they did not 

make better use of available human capital flexibilities. Although sufficient 

controls are important to ensure consistency and fairness in using 

flexibilities, agency officials should look for instances in which processes 

can be reengineered. This reengineering of processes for using flexibilities 

can assist the agencies in increasing efficiencies, decreasing costs, or both. 

In this effort, agency managers need to bear in mind that they should first 

determine requirements and design processes before developing any 

information systems to support the new processes. The following are 

elements and examples of how the agencies streamlined and improved 

administrative processes.

• Ascertain the source of existing requirements. As we have 

previously reported, some of the barriers to effective strategic human 

capital management in the federal government do not stem from law or 

regulation but are self-imposed by agencies.30 The source of these 

barriers can sometimes be a lack of understanding of the prerogatives 

that agencies have. For example, the head of State’s office responsible 

for overseas building operations asked OMB in May 2001 for a series of 

increased flexibilities to accomplish various personnel management 

goals. In its response, OMB noted that the department already had the 

authority to implement many of these requested changes. In another 

example, personnel policy at the Mint had required that job vacancy 

announcements for certain positions be publicly posted for at least 30 

calendar days. OPM, however, generally allows agencies the flexibility 

to post such announcements for as few as 5 business days.31 Mint 

officials told us that the Mint’s parent agency, the Department of the 

Treasury, had initially established this 30-day posting requirement and 

that the Mint’s original policy had been drafted to concur with 

30U.S. General Accounting Office, Transforming the Civil Service: Building the Workforce 

of the Future—Results of a GAO-Sponsored Symposium, GAO/GGD-96-35 (Washington, 

D.C.: Dec. 20, 1995), and GPRA: Managerial Accountability and Flexibility Did Not Work 

As Intended, GAO/GGD-97-36 (Washington, D.C.: Apr. 10, 1997).

31OPM allows agencies to post job announcements for even shorter periods than 5 business 

days in situations when inordinately large numbers of applications from well-qualified 

candidates are expected.
Page 37 GAO-03-2 Human Capital Flexibilities

Treasury’s. After Mint officials realized that this 30-day requirement 

flowed from its parent department, the Mint was able to work to modify 

the policy to require a minimum of only 5 business days for posting 

these job announcements.

• Reevaluate administrative approval processes for greater 

efficiency. In our interviews at the selected agencies, some managers 

and supervisors complained about the lack of time to initiate and 

implement the justification and approval processes that agencies have 

in place to use existing flexibilities. If senior managers within the 

agency want supervisors to use these flexibilities, supervisors must view 

the required initiation and approval processes worth their time 

compared to the expected benefit to be gained in using the flexibility. In 

simplifying processes to provide for greater efficiencies and improved 

quality and responsiveness, agencies have often turned to automation of 

paper-based personnel processes and procedures. For example, 

managers and supervisors at GSA’s Philadelphia office cited the agency’s 

recently automated processes for granting employees on-the-spot cash 

awards (ranging from $50 to $2,000). Previously, agency supervisors 

were required to complete lengthy justifications and send these forms to 

the personnel office for review. According to the human resources 

manager, the perceived burdens of the previous administrative process 

led to very few awards being granted. Now, according to GSA managers 

and supervisors, by accessing GSA’s intranet Web site, an agency 

supervisor can complete the award initiation process within minutes 

and on the next business day receive a certificate to present to the 

employee that shows what the award is for and when the employee can 

expect the money in his or her paycheck.

• Replicate proven successes of others. When developing processes 

and procedures for using flexibilities, agencies can potentially learn 

valuable lessons from other agency components or from other 

organizations altogether. These lessons learned could be instructive in 

developing ways to best implement such flexibilities along with 

determining which flexibilities are most effective. For example, 

officials at VBA’s Oakland office informed the agency’s Philadelphia 

office of the success they had in using the student cooperative program 

to recruit needed staff members for the office. This special hiring 

authority, called the Student Career Experience Program, allows 

agencies to appoint students who are enrolled or have been accepted for 

enrollment at least part-time at accredited institutions. After completing 
Page 38 GAO-03-2 Human Capital Flexibilities

their academic requirements, these employees can then be converted 

noncompetitively to term or permanent positions within 120 days.

Building Transparency and 

Accountability into the 

System

To ensure effective use of human capital flexibilities, agencies need to 

delegate authority to use these flexibilities to appropriate levels within the 

agency, and then agency managers and supervisors need to be held 

accountable—both for achieving results and for treating employees fairly. 

Agency managers and supervisors are more likely to support changes when 

they have the necessary authority and flexibility—along with 

commensurate accountability and incentives—to advance the agency’s 

goals and improve performance. Indeed, devolving decision-making 

authority to program managers in combination with holding them 

accountable for results is one of the most powerful incentives for 

encouraging results-oriented management. However, achieving a proper 

balance between managerial flexibility and adequate controls to ensure 

consistency and accountability can be a challenging endeavor. Moreover, 

agencies that expect their managers and employees to take greater 

responsibility and be held accountable for results must ensure that the 

managers and employees have the training and tools they need to fulfill 

these expectations. The following are elements and examples from the 

agencies we reviewed of how they built transparency and accountability 

into their human capital systems.

• Delegate authority to use flexibilities to appropriate levels 

within the agency. In a recent report, we found that only about onethird of agency managers we surveyed from 28 agencies believed that 

they had, to a great or very great extent, the authority they needed to 

help accomplish agency goals.32 Providing managers and supervisors 

with such authority gives those who know the most about an agency’s 

programs the power to make those programs work. This delegation of 

authority is equally important when implementing human capital 

flexibilities. For example, the Department of the Treasury delegated 

authority to IRS and its other bureaus to establish their own policies on 

superior qualifications appointments (SQA), a flexibility that allows 

agencies to hire individuals at advanced rates of pay based on the 

individuals’ superior qualifications or special needs of the agencies. To 

32U.S. General Accounting Office, Managing for Results: Federal Managers’ Views on Key 

Management Issues Vary Widely Across Agencies, GAO-01-592 (Washington, D.C.: May 25, 

2001).
Page 39 GAO-03-2 Human Capital Flexibilities

expedite timely approval in hiring situations, IRS in turn redelegated this 

approval authority for SQAs to the human resources officers within 

each of the agency’s business units. In another example, VBA in 

Philadelphia delegated authority to immediate supervisors to approve 

on-the-spot monetary awards for their employees without review by 

senior managers. VBA supervisors said that under this delegated 

authority they simply complete a short form and present it to the 

employee, who can then proceed to the on-site credit union and receive 

cash, all within 1 hour. 

• Hold managers and supervisors directly accountable. Agencies 

must develop clear and transparent guidelines for using flexibilities and 

then hold managers and supervisors accountable for their fair and 

effective use. Managers need to be held accountable for their 

contributions to results and recognized and rewarded for those 

contributions. Internal and external parties, such as agency human 

resources offices, offices of inspectors general, and OPM, can help to 

ensure transparency in the use of flexibilities through appropriate 

review and oversight. For example, according to the senior human 

resources official at GSA’s Philadelphia regional office, the human 

resources office monitors supervisors’ granting of employee awards to 

ensure that supervisors are effectively using this flexibility. This list of 

award amounts and frequencies (without personal identifiers) can be 

provided to supervisors within the region so that they know how their 

use of such flexibilities compares with that of other regional 

supervisors.

• Apply policies and procedures consistently. While recognizing 

differences in each individual’s job performance and competencies, 

supervisors need to make concerted efforts to apply policies and 

procedures for using flexibilities consistently. Our review at the seven 

agencies showed that a significant reason why supervisors have not 

made greater use of flexibilities is supervisors’ fears that some 

employees will view the use of various flexibilities as somehow unfair. 

The consistent application of policies and procedures helps to lessen 

employee fears because decision-making criteria are well defined, 

documented, transparent, and applied the same way in similar 

situations. For example, after some concerns expressed by newly hired 

IRS employees about possible inconsistencies, the agency developed 

guidelines for its managers to use in determining if a job applicant 

qualifies for a recruitment bonus. According to IRS officials, these 
Page 40 GAO-03-2 Human Capital Flexibilities

guidelines helped to ensure consistent application of recruitment 

bonuses based on the specific backgrounds of new employees.

Changing the Organizational 

Culture

Organizational culture represents the underlying assumptions, beliefs, 

values, attitudes, and expectations generally shared by an organization’s 

members. Because an organization’s beliefs and values affect the behavior 

of its members, changing the organizational culture related to outdated 

personnel-related approaches is crucial to effectively using human capital 

flexibilities. Changing this culture is important particularly in areas related 

to ensuring the involvement of senior human capital managers in key 

decision-making processes and decreasing managers’ and supervisors’ 

resistance to change. Agencies also need to address managers’ and 

supervisors’ concerns that employees will view the use of flexibilities as 

inherently unfair, and the belief that all employees must be treated 

essentially the same regardless of job performance and agency needs. By 

addressing such organizational culture issues, agencies can better assist 

managers and staffs in developing creative ways to employ tools and 

flexibilities to address human capital challenges. The following are 

elements and examples from the seven agencies we reviewed of practices 

they implemented to change their organizational cultures.

• Ensure involvement of senior human capital managers in key 

decision-making processes. A fundamental reorientation is required 

to ensure that human capital leaders take a “seat at the table” as full 

members of the top management team rather than isolating them to 

provide after-the-fact support. By expanding the strategic role of human 

capital officials beyond providing traditional personnel administration 

services, agencies are in a better position to integrate human capital 

considerations when identifying the mission, strategic goals, and core 

values of the organization as well as when designing and implementing 

policies and procedures. The senior human capital manager at IRS, for 

instance, has been heavily involved in the agency’s recent restructuring 

initiative as well as its overall strategic direction. Recognizing the 

importance of this strategic role, he also recently devolved the agency’s 

human resources office into three units; two are strategically focused 

and the third is transaction focused. 

• Encourage greater acceptance of prudent risk taking and 

organizational change. Managers and supervisors need to have an 

appropriate attitude toward risk taking and proceed with new 

operations after carefully analyzing the risks involved and determining 
Page 41 GAO-03-2 Human Capital Flexibilities

how they may be minimized or mitigated. Managers and supervisors 

will at times resist making changes because they would have to work in 

new and unfamiliar ways. Although managers and supervisors can 

initially be uncomfortable exercising newly delegated authorities, they 

will often gain confidence as they better understand their importance 

and become more experienced in exercising them. For example, IRS’s 

regional office in Oakland hired a consultant to conduct training for 

managers that promotes creative thinking, empowerment for decision 

making, and prudent risk taking. The training course is an ongoing 

process with managers returning each year to ensure their continued 

comfort with and use of principles covered in the training. In another 

example, according to a senior human resources official in State, 

managers in the department’s Office of Logistics Management were 

initially hesitant to allow the use of alternative work schedules for 

employees in that office but finally accepted use of the flexibility when 

they realized that it would not drastically affect the office’s operations.

• Recognize differences in individual job performance and 

competencies. In previous work looking at the practices of private 

sector organizations regularly cited as leaders in the area of human 

capital, common principles of human capital management we identified 

include the importance of recognizing differences in employees’ job 

performance and competencies.33 Rather than follow the federal 

government’s traditional approach of compensating federal employees 

strictly based on their status at a particular grade level, agencies should 

look at using performance management systems, including pay and 

other meaningful incentives, to more clearly recognize individual job 

performance as well as employee competencies. In an example of 

recognizing differences in individual job performance, GSA’s Public 

Buildings Service (PBS) created a performance measurement and 

incentive awards system for its regional offices and its employees in its 

“Linking Budget to Performance” initiative. Under this initiative, each of 

PBS’s 11 regional offices strives to achieve preestablished goals for nine 

standard performance measures. On the basis of each region’s 

performance, monetary incentives can be provided based on employees’ 

contribution to the region’s accomplishments. Furthermore, an 

example of recognizing differences in employee competencies is 

demonstrated with State’s use of retention allowances for employees 

33U.S. General Accounting Office, Human Capital: Key Principles From Nine Private 

Sector Organizations, GAO/GGD-00-28 (Washington, D.C.: Jan. 31, 2000).
Page 42 GAO-03-2 Human Capital Flexibilities

who obtain job-related degrees and certifications in the information 

technology field.

Conclusions The insufficient and ineffective use of flexibilities can significantly hinder 

the ability of federal agencies to recruit, hire, retain, and manage their 

human capital. To deal with their human capital challenges, it is important 

for agencies to assess and determine which human capital flexibilities are 

the most appropriate and effective for managing their workforces. On the 

basis of our review at seven selected agencies, the most effective 

flexibilities cited were work-life policies and programs, monetary 

recruitment and retention incentives, special hiring authorities, and 

employee incentive awards. Our review at the seven selected agencies also 

found several categories of additional flexibilities that agency and union 

officials cited as being potentially helpful in managing their workforces. If 

such additional flexibilities are desired, agencies should develop business 

cases to justify the need for the authority to implement these additional 

flexibilities. Although comprehensive civil service reform will likely be 

necessary to address the federal government’s human capital challenges, 

agencies need not wait in seeking additional flexibilities where clear 

business cases have been established.

The appropriate and effective use of flexibilities is essential to ensuring 

that employees’ rights are protected, agencies adhere to merit system 

principles, and employees are shielded from prohibited personnel 

practices. To ensure the most effective use of human capital flexibilities, it 

is important that agencies (1) plan strategically and make targeted 

investments, (2) ensure stakeholder input in developing policies and 

procedures, (3) educate managers and employees on the availability and 

use of flexibilities, (4) streamline and improve administrative processes, 

(5) build transparency and accountability into their systems, and (6) 

change their organizational cultures. By more effectively using flexibilities, 

agencies would be in a better position to manage their workforces, assure 

accountability, and transform their cultures to address current and 

emerging demands. 

Agency Comments and 

Our Evaluation

We provided a draft of this report on September 4, 2002, to the Director of 

OPM, the Secretary of Defense, the Commissioner of IRS, the Director of 

the U.S. Mint, the Secretary of Veterans Affairs, the Administrator of GSA, 

the Under Secretary for International Trade, and the Secretary of State. 
Page 43 GAO-03-2 Human Capital Flexibilities

OPM, Defense, IRS, the Mint, VA, GSA, and ITA provided comments on the 

draft report. These agencies either generally agreed with the information 

presented or did not express an overall opinion about the report. In some 

cases these agencies provided written technical comments to clarify 

specific points regarding the information presented. Where appropriate, 

we have made changes to this report to reflect these technical comments. 

State did not provide comments on this report.

The following summarizes significant comments provided by the seven 

agencies.

• In her written comments (see app. II), the OPM Director noted that OPM 

was pleased that our report acknowledges the need for greater 

personnel flexibilities in cases where existing law constrains OPM in 

providing policies and programs to assist agencies in accomplishing 

their missions. In technical comments, OPM raised concerns, however, 

about our position that individual agencies could be authorized 

additional legislative flexibilities if they develop sound business cases 

that such flexibilities are needed. OPM stated that its obligation is to 

review and analyze all agencies’ requests to use additional flexibilities or 

create additional flexibilities to ensure that they promote the efficiency 

and effectiveness of the federal government and do not create an unfair 

competitive advantage for selected agencies. In this regard, OPM 

commented that it supports the need for a standardized approach to 

governmentwide flexibilities. As we noted in this report and in previous 

reports and testimonies, comprehensive legislative reform of the civil 

service will likely be necessary to address the federal government’s 

human capital challenges. We believe, however, that agencies need not 

wait in seeking additional flexibilities where clear business cases have 

been established for such flexibilities. It is possible that civil service 

reform could provide a broader range of agencies with a more standard 

set of human capital tools and flexibilities to manage their workforces. 

Ultimately, in addressing civil service reform, policymakers will likely 

want to consider the potential needs of individual agencies along with 

the governmentwide need to manage competition between agencies for 

skilled employees. We added a discussion of this issue to the report in 

the section dealing with agency and union officials’ views on authorizing 

additional flexibilities.

• In its technical comments, OPM also emphasized that the outstanding 

scholar hiring program can only be used as a supplement to competitive 

examining and should not be viewed as an “alternative” hiring authority. 
Page 44 GAO-03-2 Human Capital Flexibilities

OPM expressed concern that we not recommend that agencies use this 

program for a purpose other than that for which it was intended. We 

noted in the draft report, however, that this program was intended to 

serve as a supplemental hiring tool. Our report states that many agency 

officials we interviewed viewed this program as effective because the 

program allows the agency to hire more quickly given that the agency 

does not have to rank and rate candidates as usually required under the 

standard competitive hiring process. Although OPM does not include 

the outstanding scholar program as an alternative hiring or staffing 

option in its Flexibilities Handbook, many of the agency officials we 

interviewed viewed this program as an effective flexibility, and the 

program meets the definition of human capital flexibility that we used in 

this report. Our report, however, does not recommend that agencies use 

this program to circumvent the standard examining process. As with 

many of the flexibilities available to agencies, the outstanding scholar 

program could be used in inappropriate or inefficient ways. As we note 

under key factors for effective use of flexibilities, agencies must build 

transparency and accountability into their human capital systems to 

ensure that managers and supervisors are held accountable for the fair 

and effective use of these flexibilities. In response to OPM’s concerns 

on this issue, we added additional language to the report to emphasize 

that this program is to be used as a supplement to competitive hiring 

and to note OPM’s statement that agencies must have an established 

pattern of competitive examining into the covered jobs before agencies 

can use this program.

• Defense’s comments, provided by E-mail through its Office of Inspector 

General, did not express an overall opinion about the report. However, 

the comments noted that it appeared we were asserting in the report 

that telecommuting had been clearly shown to increase employee 

productivity. We noted in the draft report that our discussions with 

agency and union officials about telecommuting brought about strongly 

mixed views, including its effect on employee productivity and the 

challenges of managing such a program. Still, we changed the text to 

clarify that some managers and supervisors told us that telecommuting 

has not been shown to increase employee productivity and that 

telecommuting is not practical for all occupations or situations.

• In written comments (see app. III), the IRS Commissioner stated that he 

generally agreed with the list of available human capital flexibilities that 

agency and union officials cited as most helpful for managing their 

workforces. Nonetheless, he said that these flexibilities may not be as 
Page 45 GAO-03-2 Human Capital Flexibilities

important in the long run as some of the more deep-rooted changes to 

human capital management policies and practices that agencies like IRS 

have undertaken recently to improve their workforces’ performance and 

accountability. He noted that IRS’s recently acquired statutory 

flexibilities, such as a broadbanding pay system and an expedited and 

flexible hiring process, were instrumental to achieving the agency’s 

transformation to a modern, business-like organization. He stressed the 

importance of providing additional flexibilities to federal agencies so 

that they can manage their workforces in a manner comparable to the 

private sector.

• In written comments (see app. IV), the Mint’s Director stated that the 

report provides an objective, balanced review and assessment of the 

issues surrounding the implementation of human capital flexibilities. 

She commented that the report would serve as a useful tool that 

policymakers could use to guide federal agencies seeking to employ 

greater flexibilities to manage their workforces.

• VA provided comments by E-mail through its GAO liaison. VA agreed 

with the information presented and had no additional comments on the 

draft report.

• GSA’s comments, provided by E-mail from its Office of Human 

Resources, were largely clarifying and technical in nature and did not 

express an overall opinion on the report. In a point similar to that made 

by Defense, GSA commented that our report should more fully draw 

attention to the drawbacks of telecommuting in our discussion of worklife programs. Again, we added clarifying text indicating that some 

managers and supervisors told us that telecommuting has not been 

shown to increase employee productivity and that telecommuting is not 

practical for all occupations or situations.

• In written comments from ITA (see app. V), the Under Secretary for 

International Trade said that the report thoroughly and comprehensively 

addresses the critical issue of the programs needed to manage the 

federal workforce. In addition, he emphasized the need for the 

additional flexibilities mentioned in the report.

We are sending copies of this report to the Chairman and Ranking Minority 

Member, House Committee on Government Reform, and its Subcommittee 

on Civil Service, Census and Agency Organization, and other interested 
Page 46 GAO-03-2 Human Capital Flexibilities

congressional parties. We will also send copies to the Director of OPM, the 

Secretary of Veterans Affairs, the Secretary of State, the Secretary of 

Commerce, the Secretary of the Air Force, the Secretary of the Treasury, 

and the Administrator of GSA. We also will make copies available to others 

upon request. In addition, the report will be available at no charge on the 

GAO Web site at http://www.gao.gov.

If you have any questions about this report, please contact me or Edward 

Stephenson on (202) 512-6806. Key contributors to this report are listed in 

appendix VI. 

J. Christopher Mihm

Director, Strategic Issues
Page 47 GAO-03-2 Human Capital Flexibilities

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

The objectives for this study were to provide information on 

• agency officials’ and union representatives’ views on (1) the most 

effective flexibilities for managing their workforces, (2) additional 

flexibilities that would be the most helpful in managing their 

workforces, and (3) whether employee rights could be protected if 

additional flexibilities were authorized and implemented within 

agencies and

• key practices that agencies should implement for effective use of human 

capital flexibilities, along with specific examples of such practices from 

selected agencies.

To respond to the objectives of this report, we conducted this work in two 

phases and gathered information from a variety of sources using several 

different data collection techniques. During phase one of this review, 

which was completed from May to December 2001, we first interviewed 

representatives from OPM, the federal government’s human resources 

agency; MSPB, a federal agency that hears and decides civil service cases, 

reviews OPM regulations, and conducts studies of the federal government’s 

merit systems; and NAPA, an independent, nonpartisan, nonprofit, 

congressionally chartered organization that assists federal, state, and local 

governments in improving their performance. We interviewed 

representatives of these three organizations to gather background 

information on the federal government’s experiences with and use of 

human capital flexibilities and to obtain suggestions about which federal 

agencies we should consider for a more detailed review during phase two 

of our study. We also reviewed numerous reports issued by these 

organizations on governmentwide human capital issues and the use of 

various human capital flexibilities in federal agencies. In addition, we 

reviewed previous GAO reports on a broad range of human capital issues.

During phase one of this study, we also gathered information for our two 

objectives by conducting semistructured interviews with (1) the human 

resources directors of the 24 largest federal departments and agencies and 

(2) representatives from 4 national organizations representing federal 

employees and managers—National Treasury Employees Union, American 

Federation of Government Employees, National Association of 

Government Employees, and Senior Executives Association. To produce a 

general summary of the human resources directors’ views, we first 

reviewed their responses to the open-ended questions we had posed to 

them. Based on our analysis of those responses, we identified a set of 
Appendix I

Objectives, Scope, and Methodology

Page 48 GAO-03-2 Human Capital Flexibilities

recurring themes and then classified each director’s responses in accord 

with these recurring themes. At least two staff reviewers collectively 

coded the responses from each of the 24 interviews and the coding was 

verified when entered into a database we created for our analysis. 

During phase two of this study, which was done from January to May 2002, 

we conducted semistructured interviews with managers and supervisors, 

human resources officials, and local union representatives from seven 

federal agencies we selected for more detailed review—the Air Force, GSA, 

IRS, ITA, the Mint, State, and VBA. We interviewed over 200 officials at 

these seven agencies. Our interviews with these agency and union officials 

focused on their views about the most effective flexibilities, additional 

flexibilities needed, and protection of employee rights. We also asked 

these officials to confirm and provide examples of the key practices we had 

identified on the basis of our interviews with the human resources 

directors and our related human capital work. To produce a general 

summary of these agency and union officials’ views, a staff reviewer coded 

their responses to our questions according to the recurring themes we had 

developed. A separate reviewer verified the coding when entering the 

information into the database we created for our analysis. We sought to 

obtain views from a broad and diverse set of officials who would have 

relevant knowledge and experience regarding human capital flexibilities. 

We did not employ random selection in our choice of individuals to 

interview; thus the responses we obtained should not be viewed as a 

representative sample of all managers and supervisors, human resources 

officials, or local union officials at the seven agencies. 

We selected the seven agencies for various reasons, including their variety 

of existing human capital challenges and their range in use of available 

human capital flexibilities. Specifically, we included Air Force because the 

Department of Defense, Air Force’s parent department, historically has 

represented a large percentage of civilian federal employees and we had 

previously reported that the Air Force lacked sufficient acquisition and 

logistic capabilities. We included GSA because it had displayed a high use 

of monetary incentives compared to other large federal agencies based on 

our review of data from OPM’s Central Personnel Data File (CPDF). IRS 

was included based on congressional requesters’ interest in including an 

agency with a strong union presence, and IRS was frequently cited as an 

agency that had recently received increased authority to implement a broad 

range of human capital flexibilities. ITA was included because the 

Department of Commerce, ITA’s parent department, had shown a high use 

of monetary incentives, and we had previously reported that ITA lacked an 
Appendix I

Objectives, Scope, and Methodology

Page 49 GAO-03-2 Human Capital Flexibilities

experienced staff to monitor and enforce trade agreements. We selected 

the Mint because it was originally a candidate to receive performancebased organization (PBO) status in the late 1990s and it continued to seek 

additional human capital flexibilities when it did not receive this PBO 

designation.34 We selected State because our review of CPDF data showed 

it to be a low user of monetary incentives, and it had recently established 

an often-cited skills development program for its information technology 

employees. Lastly, we included VBA because the Department of Veterans 

Affairs, VBA’s parent department, continued to actively seek authority for 

increased human capital flexibilities, and we had previously reported that 

VBA was lacking a sufficient workforce of skilled claims processors. 

For the Air Force, we focused on work at Wright-Patterson Air Force Base 

in Dayton, Ohio, and Langley Air Force Base in Hampton, Virginia. For 

GSA, IRS, VBA, and the Mint, we focused our work at their field offices in 

the Philadelphia and San Francisco metropolitan areas. At State, we 

concentrated our work on the IRM Bureau, the Bureau of Administration, 

and the Bureau of Overseas Buildings Operations in Washington, D.C. At 

ITA, we focused our work primarily on the headquarters office in 

Washington, D.C. Our agency selection process was not designed to 

identify examples that could be considered representative of all the human 

capital flexibilities used at the seven agencies reviewed or the federal 

government as a whole. 

In addition, we collected and analyzed data from CPDF on the extent of use 

of human capital flexibilities, both governmentwide and for the seven 

federal agencies we reviewed in more detail. We also collected and 

analyzed documents from the seven selected agencies on their experiences 

with and use of human capital flexibilities. We did not attempt to verify the 

usage data we gathered. We conducted our audit work in accordance with 

generally accepted government auditing standards.

34A PBO is a discrete management unit that commits to clear management objectives, 

measurable goals, customer service standards, and specific targets for improved 

performance. In exchange for these commitments, the agency may be granted flexibilities 

to deviate from some governmentwide requirements, such as certain personnel and 

procurement processes.
Page 50 GAO-03-2 Human Capital Flexibilities

Appendix II

Comments from the Office Personnel 

Management ApendxiI
Appendix II

Comments from the Office Personnel 

Management

Page 51 GAO-03-2 Human Capital Flexibilities
Page 52 GAO-03-2 Human Capital Flexibilities

Appendix III

Comments from the Internal Revenue Service ApendxiI
Appendix III

Comments from the Internal Revenue Service

Page 53 GAO-03-2 Human Capital Flexibilities
Page 54 GAO-03-2 Human Capital Flexibilities

Appendix IV

Comments from the U.S. Mint ApendxiIV
Page 55 GAO-03-2 Human Capital Flexibilities

Appendix V

Comments from the International Trade 

Administration ApendxiV
Page 56 GAO-03-2 Human Capital Flexibilities

Appendix VI

GAO Contacts and Staff Acknowledgments ApendxiVI

GAO Contacts J. Christopher Mihm or Edward Stephenson, (202) 512-6806

Acknowledgments In addition to the persons named above, K. Scott Derrick, Charlesetta 

Bailey, Tom Beall, Ridge Bowman, Molly K. Gleeson, Judith Kordahl, Sylvia 

Shanks, Shelby D. Stephan, Gary Stofko, Mike Volpe, Gregory H. Wilmoth, 

and Scott Zuchorski made key contributions to this report.

(450042)
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