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37–887 2008

[H.A.S.C. No. 110–26]

THE NATIONAL SECURITY PERSONNEL

SYSTEM—IS IT REALLY WORKING?

HEARING

BEFORE THE

READINESS SUBCOMMITTEE

OF THE

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

HEARING HELD

MARCH 6, 2007
(II)

READINESS SUBCOMMITTEE

SOLOMON P. ORTIZ, Texas, Chairman

GENE TAYLOR, Mississippi

SILVESTRE REYES, Texas

LORETTA SANCHEZ, California

ROBERT A. BRADY, Pennsylvania

JIM MARSHALL, Georgia

MADELEINE Z. BORDALLO, Guam

MARK UDALL, Colorado

DAN BOREN, Oklahoma

NANCY BOYDA, Kansas

CAROL SHEA-PORTER, New Hampshire

JOE COURTNEY, Connecticut

DAVID LOEBSACK, Iowa

GABRIELLE GIFFORDS, Arizona

KATHY CASTOR, Florida

JO ANN DAVIS, Virginia

WALTER B. JONES, North Carolina

J. RANDY FORBES, Virginia

MIKE ROGERS, Alabama

JOHN M. MCHUGH, New York

HOWARD P. ‘‘BUCK’’ MCKEON, California

ROBIN HAYES, North Carolina

FRANK A. LOBIONDO, New Jersey

TOM COLE, Oklahoma

ROB BISHOP, Utah

CANDICE S. MILLER, Michigan

TRENT FRANKS, Arizona

CATHY MCMORRIS RODGERS, Washington

CATHY GARMAN, Professional Staff Member

JOHN CHAPLA, Professional Staff Member

CHRISTINE ROUSHDY, Staff Assistant
(III)

C O N T E N T S

CHRONOLOGICAL LIST OF HEARINGS

2007

Page

HEARING:

Tuesday, March 6, 2007, The National Security Personnel System—Is It

Really Working? ................................................................................................... 1

APPENDIX:

Tuesday, March 6, 2007 .......................................................................................... 33

TUESDAY, MARCH 6, 2007

THE NATIONAL SECURITY PERSONNEL SYSTEM—IS IT REALLY

WORKING?

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McKeon, Hon. Howard P. ‘‘Buck’’, a Representative from California, Readiness

Subcommittee ....................................................................................................... 2

Ortiz, Hon. Solomon P., a Representative from Texas, Chairman, Readiness

Subcommittee ....................................................................................................... 1

WITNESSES

Dominguez, Hon. Michael, Principal Deputy Under Secretary of Defense for

Personnel and Readiness ..................................................................................... 3

Gage, John, National President, American Federation of Government Employees (AFGE), AFL–CIO ......................................................................................... 5

Lacey, Mary, NSPS Program Executive Officer .................................................... 12

Masters, Dr. Marick F., Professor of Business, Katz Graduate School of Business, University of Pittsburgh ............................................................................ 9

Stier, Max, President and CEO, Partnership for Public Service ......................... 7

APPENDIX

PREPARED STATEMENTS:

Dominguez, Hon. Michael ................................................................................ 37

Gage, John ........................................................................................................ 47

Masters, Dr. Marick F. ..................................................................................... 66

Stier, Max .......................................................................................................... 57

DOCUMENTS SUBMITTED FOR THE RECORD:

United DoD Workers Coalition statement by Ron Ault ................................ 75

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:

Mr. McHugh ...................................................................................................... 85

Mr. Reyes .......................................................................................................... 86

(1)

THE NATIONAL SECURITY PERSONNEL SYSTEM—IS IT

REALLY WORKING?

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, READINESS SUBCOMMITTEE, Washington, DC, Tuesday, March 6, 2007.

The subcommittee met, pursuant to call, at 2:05 p.m. in room

2118, Rayburn House Office Building, Hon. Solomon P. Ortiz

(chairman of the subcommittee) presiding.

OPENING STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE FROM TEXAS, CHAIRMAN, READINESS SUBCOMMITTEE

Mr. ORTIZ. This hearing will come to order, and if you can take

your respective positions so that we can begin this hearing.

We want to welcome you all to today’s subcommittee hearing

under the Department of Defense National Security Personnel System. I want to thank our witnesses for making the time to appear

before us today. We know that our Department of Defense (DOD)

witnesses had to change schedules, and they had to alter their

plans, but, again, we appreciate you being with us today.

Congress created the National Personnel System, or NSPS, in

2003. Changing the way DOD manages its employees is a monumental undertaking, yet this committee has not held any hearings

on this system, and we have not had any hearings since back in

2003, and we have not had any oversight hearings since that time

back in 2003. So today’s hearing is important to illustrate what is

working and what challenges we have out there.

Congress understands the Defense Department is facing tough

challenges in managing its large civilian population of over 700,000

workers. We recognize that addressing the critical concerns of hiring, promoting and keeping talented individuals is essential to

NSPS. The new system was intended to help DOD respond to 21st

century human resources needs, but was it the right fix?

Regulations to putting the changes into place were published

only two years ago in November of 2005. Some believe that not

enough time has passed for us to see how NSPS is working. I disagree. Timely oversight is critical. Today’s hearings will understand the problems that DOD may have found in the early stages,

according to the elements of NSPS in place.

What is DOD hearing from its employees? How is DOD taking

care of concerns that have been raised by its employees? What is

needed to move the system forward? What, if any, legislation might

be needed to correct any problems that might be found? What role
2

are the employees’ unions playing in making the changes? These

are only a few areas that we need to review.

Today we will hear from the employees’ representatives themselves, who found many problems, leading them to file a lawsuit.

The union is an important partner in managing the workforce, so

we must understand their views of the system and listen to their

voices.

Our other two witnesses are well known for their research on

personnel systems. I look forward to your testimony.

But before starting, I would like to include a statement from

the—for the record from the Metal Trades Department, American

Federation of Labor-Congress of Industrial Organizations (AFL–

CIO), on the behalf of the United DOD Workers Coalition.

And I would like to talk to my good friend from California Mr.

McKeon for any remarks he might have.

[The information referred to can be found in the Appendix on

page 75.]

STATEMENT OF HON. HOWARD P. ‘‘BUCK’’ McKEON, A REPRESENTATIVE FROM CALIFORNIA, READINESS SUBCOMMITTEE

Mr. MCKEON. Thank you, Mr. Chairman. It is good to be with

you, and I thank you for holding this hearing to discuss the Defense Department’s initial implementation of the National Security

Personnel System.

Given both the size and scope of NSPS, which potentially affects

nearly 700,000 civilian employees of the Pentagon, or about onethird of the federal government’s nonpostal civilian workforce,

NSPS is among the most important matters that will come before

the subcommittee this session. This hearing will give the subcommittee members an opportunity to learn more about NSPS and

to question the Defense Department and other stakeholders not

only about NSPS implementation, but also about how NSPS has

begun to affect the workforce.

Congress enacted NSPS because it believed that a new way was

required for the Department of Defense to find a way to recruit, reward and retain our most talented employees, and to get the most

out of the federal workforce.

Furthermore, the enacted legislation recognized that DOD, given

its unique mission and the necessity for civilian employees to work

hand in hand with the brave men and women who wear the uniform of our armed services, certainly had need for a personnel system that differed from the rest of the federal government.

As you know, NSPS implementation has begun for only a portion

of the Department’s workforce and is being enjoined for the bargaining unit employees until decisions are rendered by the U.S.

Court of Appeals for the District of Columbia Circuit. We should

deal with that court decision when rendered and when the implications of it are thoroughly analyzed and not before.

My focus is to understand more fully how well the Department

is recognizing its challenges in starting a new civilian personnel

system and whether it has begun to provide a system that truly

does benefit both the Department and the magnificent civilian

workforce it employs.
3

Mr. Chairman, Mr. McHugh is in an intelligence meeting and

cannot be here today, but I would like to have questions that he

will submit answered in the record if that is possible.

Mr. ORTIZ. Today we have a panel of witnesses who will discuss

the Department of Defense National Security Personnel System.

Our witnesses today are Michael Dominguez, Principal Deputy

Under Secretary of Defense for Personnel and Readiness, and he

is accompanied by Mrs. Mary Lacey, NSPS Program Director. And

then we have other witnesses: Mr. John Gage, National President,

American Federation of Government Employees; Mr. Max Stier,

President and CEO of Partnership for Public Service; Dr. Marick

Masters, Professor of Business, Katz Graduate School of Business,

Pittsburgh.

Without objection, all of the written testimony will be submitted

for the record, and we are going to try to see if we can stay within

the five-minute rule so that we can be sure that everybody gets a

chance to ask their questions.

So, Secretary Dominguez, thank you. You can open up with your

statement.

STATEMENT OF HON. MICHAEL DOMINGUEZ, PRINCIPAL DEPUTY UNDER SECRETARY OF DEFENSE FOR PERSONNEL AND

READINESS

Secretary DOMINGUEZ. Thank you very much, Mr. Chairman and

distinguished members of this subcommittee. Thank you for the opportunity to talk with you about implementation of the National

Security Personnel System at the Department of Defense. And I

agree with you, sir, and Congressman McKeon that an oversight

hearing is welcome for us, and we welcome your interest in this.

NSPS is well under way. In fact, as of today we have close to

80,000 DOD employees operating under NSPS. Mrs. Mary Lacey,

the program executive officer responsible for design, development,

and implementation for NSPS, joins me here today, and together

we will be happy to take your questions.

You called this hearing today to ask us if NSPS is working. Recognizing that we are still early in the implementation process, my

answer is yes, NSPS is working. With Deputy Secretary of Defense

Gordon England leading the NSPS transformation, the Department

stays focused on successfully implementing NSPS. The design of

NSPS has been well thought out, well managed, and extensively

overseen.

We have moved very carefully and deliberately to design and implement a system that achieves the Department’s goal for a flexible

human resource system that is results-focused and performanceoriented. It is early in the journey as it will take years before the

Department realizes all of the results NSPS was designed to

produce, but we are already showing a powerful return on investment.

We are seeing an unprecedented training effort focused on performance management for employees and supervisors who are seeing greater communication between supervisors and employees.

People are talking about performance, results, and mission alignments. We are seeing increased flexibility and rewarding exceptional performance. Finally, we are seeing positive movement in be-
4

haviors and in organizational culture. These early returns are

cause for optimism as we continue to deploy the system.

Today, NSPS remains as vital to the success of the Department’s

mission as it was in November of 2003. This modern, flexible

human resources management system improves the way DOD

hires, compensates and rewards its civilian employees, while preserving employee protections and benefits, veterans preference, as

well as the enduring core values of the Civil Service. It provides

a performance management system that aligns individual performance objectives with DOD’s mission and strategic goals. Successful

implementation of NSPS will improve our ability to accomplish the

DOD’s mission.

The training component of NSPS deployment is one of the most

extensive civilian-focused training initiatives ever undertaken in

DOD. As of February 2007, about half a million training events

have taken place. In addition to training on NSPS mechanics, supervisors were trained in soft skills, how to coach, monitor, and

build a team. Employees also were offered soft-skill training, how

to communicate, improve writing skills, and interact with their supervisor. Importantly, training was not and is not now a one-time

event. Employees raise follow-up questions and concerns, and we

respond.

By the end of next month, the total number of employees who

will have transitioned to NSPS will exceed 114,000 more employees

than most Cabinet-level agencies. That is substantial progress, and

important attention that we have received from our senior leaders

has enabled us to sustain motivation in this.

One of the key ingredients is program evaluation, and that applies to NSPS. The Department has an ongoing evaluation effort,

a mechanism to monitor the effectiveness of NSPS and its effect on

the workforce to ensure the system is delivering the results we expect. Evaluation process includes in-depth analysis of personnel

data and statistics, employee surveys, structured interviews, and

other methodologies.

We have gained considerable experience in evaluation from our

personnel demonstration projects, and we are working closely with

Office of Personnel Management (OPM) to ensure we have a rigorous, objective analysis and the data upon which to base our assessments.

This is an important feature of our Spiral implementation approach in which we expect to make incremental adjustments to the

system going forward. In fact, based on feedback we already received from our employees and supervisors, we expanded our training program to include additional training on writing job objectives

and performing self-assessments. We are working to improve the

automated system that supports performance management, we developed a pay-setting guide, and we are developing a compensation

guide that will soon be available to supervisors.

So to answer your question, NSPS is really working. We believe

it is. We also know that fundamental organizational cultural

change takes time, and it can’t be achieved overnight, and we are

taking the time to do it right.

And thank you for providing the opportunity, and I look forward

to your questions.
5

Mr. ORTIZ. Thank you so much.

[The prepared statement of Secretary Dominguez can be found in

the Appendix on page 37.]

Mr. ORTIZ. Mr. Gage.

STATEMENT OF JOHN GAGE, NATIONAL PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES (AFGE)

Mr. GAGE. Mr. Chairman, members of the committee, my name

is John Gage, and on behalf of the more than 200,000 civilian employees of DOD represented by AFGE, I thank you for the opportunity to testify today.

Since 9/11, the Bush Administration has taken every opportunity

available to advocate for a profound erosion of Civil Service protections and collective bargaining rights for federal employees. First

in 2001, the Bush Administration reluctantly agreed that the terrorist attacks necessitated federalizing airport security functions,

But they also insisted that the legislation not allow security screeners the rights and protections normally provided to federal employees.

In 2002, the Bush Administration reluctantly agreed with Senator Lieberman that the creation of the Department of Homeland

Security (DHS) was necessary; however, the Bush Administration

insisted on a quid pro quo for that acquiescence, specifically that

federal employees who were transferred into the Department would

not be guaranteed the collective bargaining rights they had enjoyed

since President Kennedy was in office. In addition, the Bush Administration insisted that the legislation, which was eventually

signed into law, exempted the DHS from compliance with major

chapters of Title V, including pay classification, performance management, disciplinary actions, and appeal rights, as well as collective bargaining rights.

In 2003, then-Defense Secretary Rumsfeld insisted that the national defense authorization bill include similar provisions which

attacked the Civil Service protections and collective bargaining

rights of 700,000 DOD civilian employees. Despite months of debate over serious objections raised by AFGE and Representatives

and Senators from both parties, the national defense authorization

bill granted DOD the ability to write regulations creating the new

NSPS, a personnel system that removed many collective bargaining

rights and Civil Service protections from DOD civilian employees.

During this onslaught, AFGE’s support of collective bargaining

rights and Civil Service protections for Federal employees has

never wavered. Without these rights and protections, it will be impossible for the government to attract and retain high-quality employees, and our democracy as well as our national security will

suffer.

Mr. Chairman, I am here today to urge the Congress to repeal

the statutory authority for NSPS as provided under the 2004 Defense Authorization Act.

The Defense Authorization Act called for a new labor relations

system ostensibly for DOD to engage in national-level bargaining

with unions rather than negotiate the same issues at each local installation. In addition, the law addressed the need to retain an
6

independent third party to resolve labor-management issues. AFG

strongly supported both of these principles.

However, DOD showed its disregard of the latitude given by Congress and, contrary to the statute, drafted NSPS regulations allowing DOD to waive chapter 71 of Title V in its entirety. Specifically,

the relations go beyond the concept of national-level bargaining and

instead virtually eliminate collective bargaining over matters that

go to the very heart of employee issues, including overtime, shift

rotations, flex time, compressed work schedules, safety and health

programs, and deployment away from the work site.

In addition, the regulations eliminate the statutory right to collective bargaining by providing the Secretary unlimited power to

remove any subject from bargaining by unilateral issuance.

DOD also showed its disregard of Congress and drafted NSPS

regulations that replaced the current independent statutorily created Federal Labor Relations Authority and the Federal Service

Impasses Panel with an internal board whose members are directed solely by the Secretary. This internal board is not independent as required by statute. The board’s composition ensures that it

will lack impartiality and thus undermine the credibility of the collective bargaining system among employees.

AFGE, working with the other 36 unions of the United Defense

Workers Coalition, spent months participating in the congressionally mandated meet and confer process, offering DOD options and

alternatives that would have changed and enhanced current procedures without sacrificing the fundamental employee rights that

Congress intended to be safeguarded by the law.

We have produced and distributed a document entitled Contrasting Plans for the Department of Defense: Laborers Proposals for

Positive Change; however, despite months of meetings, DOD failed

to take the process seriously, and for all practical purposes ignored

the coalition’s proposals. DOD made clear they simply wanted unlimited authority with no effective outside review.

On the other side, the coalition took the process very seriously.

We listened carefully to DOD concerns, made concrete proposals to

address them in a constructive framework. We offered to engage in

national-level, multiunit, multiunion bargaining. We also offered to

speed up the time frames for bargaining to work with the new concept of postimplementation bargaining when necessary to protect

national security and defense, and to engage in mediation, arbitration processes by mutually selecting independent arbiters in order

to quickly resolve any bargaining disputes. We believe these

changes alone would allow DOD to succeed in implementing new

processes that would enhance the mission of the agency. But without having the requirements of chapter 71 and other normal bargaining procedures, DOD simply ignored the union proposals. Any

deviation from any proposal was met with a simple notation that

it was needed for national security.

At no time did DOD make any concrete showing how the failure

to have any of these due regulations impacted national security. If

DOD was acting in good faith, they could have made a national security explanation for each proposal. They had plenty of time to do

it and did not. They have had, since 2003, to bring forward post–

9/11 examples of the need for NSPS. The need simply does not
7

exist. It never did. And I might add since 2003, our locals are operating without incident under the current law.

Mr. Chairman, in my written testimony I have detailed the regulations’ effect on individual appeal rights and pay. These regulations are as damaging to the rights of employees to appeal adverse

actions and to have their pay system be free of political influence

as they are to the collective bargaining system.

In conclusion, the NSPS envisioned by the DOD regulations is

contrary to the 2004 Defense Authorization Act. The regulations

are unfair to employees, and, if implemented, they will undermine

the contribution to mission that DOD civilian employees have demonstrated so ably over the years.

On behalf of AFG and the coalition, Mr. Chairman, I strongly

urge the subcommittee to repeal the statutory authority for NSPS.

Thank you.

Mr. ORTIZ. Thank you.

[The prepared statement of Mr. Gage can be found in the Appendix on page 47.]

Mr. ORTIZ. Mr. Stier.

STATEMENT OF MAX STIER, PRESIDENT AND CEO,

PARTNERSHIP FOR PUBLIC SERVICE

Mr. STIER. Thank you. I appreciate the opportunity to be here.

My name is Max Stier. I am the President of Partnership for

Public Service. We are a nonprofit organization dedicated to inspiring a new generation into government service and transforming the

way government works. And the first observation I would make

here is that it is kudos to you for holding this hearing. It is absolutely vital for committees such as yours to look at these workforce

issues.

If you look across the government today, we face a number of

challenges that ultimately come down to something that we would

all agree is very basic, which is good government requires good people, and we need to ensure that we have the right people and they

are given the rights, the resources, in order to meet the challenges

of the future.

The 9/11 Commission said it best when they said the quality of

the people is more important than the quality of the wiring diagram. Typically in Washington, we have an awful lot of time spent

on wiring diagrams because they are easy, things you can do, you

can feel, you can touch. You know they are finished once you have

done it. The people issues are much more challenging, and they require sustained attention over a great deal of time and focus. And

as I said, it is a testament to this committee that you are holding

this hearing today.

I believe that there is a lot of common ground here. I believe that

most folks would agree that the government has to do things in a

different way than it was done in the past to meet the new challenges in the future. And people issues are core to the possible—

to the success of government in achieving its ultimate mission.

The system we have in place today, with respect to personnel

management, is largely a system that was created in a very different era. The personnel, the pay system was created in 1949, a

time in which the kinds of demands we had on the workforce and
8

the kinds of demands we had on our government were very different than we have today.

You said it exactly right, and that is that the issue is we need

to change. The questions are are these the right changes, and I

think this committee has an incredibly important role in ensuring

that those right changes are taking place.

So I would offer three recommendations to this committee from

the perspective of a nonprofit, nonpartisan organization thinking

about these issues across government.

First, with respect to the NSPS, we believe that you ought to

move forward or allow the Defense Department to move forward

with certain elements of the activity that is taking place, those elements that address hiring reforms, that address workforce reshaping, particularly the creation of a market-sensitive pay system that

is more sensitive to employee performance issues.

The reason why I say this is that we are not operating within

a vacuum. We have had extensive experimentation that extends

back 25 years with these same issues. In 1978, the last time that

Congress enacted a major reform of the Civil Service System, they

provided a mechanism to test out different things, and that demonstration authority has been tested out at the Defense Department quite extensively beginning with China Lake in 1979. And

one of the important facts to be focused on here is we have a record

that ought to be looked at in terms of how we can bring additional

changes to the rest of government.

In China Lake in 1979, 21 percent of the employees supported

the demonstration project. In 1978, that number was 71 percent.

We know some changes can work if they are done right. The key

is good implementation.

Number two, we think we ought to be separating out the changes

that are taking place in NSPS at least in two buckets. There are

some changes that are primarily focused on performance management systems. There are others that are focused on labor relations

and due process issues. Unlike with the first bucket, you do not

have the same record with experience with respect to these

changes in the demo projects on labor relations and due process

issues. You do not have the same record to be able to rely on that

these kinds of changes are necessary or actually promote more effective workforces. And we would advise this committee to treat

those changes very differently.

Third, we think that the reality is that these changes do take a

lot of time to understand and to be effectively put into place, and

that the key for this committee is going to be ongoing oversight.

And the key to successful ongoing oversight is going to require two

elements. Number one, like with the demo project statute, we

would advise this committee to require that there be an annual

outside evaluation of what is taking place at DOD. That is part of

the demo project. It is not part of NSPS. We think it ought to be.

We think there is a smaller set of indicators that this committee

can be looking at on a regular basis that will enable you to have

a better sense in real time about what is going on, and we provide

in our written testimony an outline of what those categories ought

to be, things like looking at recruitment, retention, skill gaps, performance distinctions. All data that is available to you has to be
9

done in collaboration with DOD. They collect a lot of information.

You need quality of indicators, not quantity. But at the end of the

day, you need real data that you can be looking at on a periodic

basis to understand what is unfolding on the ground.

I look forward to any questions you might have and appreciate

the opportunity to be before you today.

Mr. ORTIZ. Thank you.

[The prepared statement of Mr. Stier can be found in the Appendix on page 57.]

Mr. ORTIZ. Dr. Masters.

STATEMENT OF DR. MARICK F. MASTERS, PROFESSOR OF

BUSINESS, KATZ GRADUATE SCHOOL OF BUSINESS, UNIVERSITY OF PITTSBURGH

Dr. MASTERS. Thank you. It is a pleasure to be here this afternoon. My name is Marick Masters, and I am a professor of business

and public and international affairs at the University of Pittsburgh, where I direct a Center on Conflict Resolution and Negotiations. I teach in the areas of human resource management, negotiations, labor management relations. I have studied Federal-sector

personnel issues for about 25 years. I have done—I did my dissertation in the early 1980’s on the topic. I have also been a university administrator, and I have dealt with some of these performance appraisal systems in practice, actually evaluating professionals and professional staff.

I am also a coequity partner in a consulting firm. My two partners are retired Coast Guard vets; retired at the old age of 43, I

might say. And I do a lot of consulting with management, mainly

in the private sector, to some extent in the public sector.

I should also note in the interest of full disclosure that I am a

former candidate for Congress. I ran in the 18th District in 1992

for the Democratic nomination, and I took some money from Federal employee unions and postal employee unions. I have tried to

be objective. It hasn’t tainted my viewpoint at all, I can tell you.

I don’t taint my viewpoint for anybody.

I am here to focus on the National Security Personnel System of

the Department of Defense. I want to comment of four aspects of

it: the plan overall, pay for performance, employee appeals and

labor management relations. If you would like for me to comment

in more detail, I would be happy to do so in writing.

I must admit I want to compliment the Administration for taking

on a very difficult task. It is easier to criticize than it is to compliment, and I want to highlight those things that I think they

have done right.

I believe very strongly in a strong civilian component. I have a

son, Sergeant Masters, who is in the 3rd Infantry at Fort Stewart,

Georgia. He has done two tours of duty. He is undergoing surgery

for his knee next month. I hope he has got a good Army doctor or

nurse. So I believe very strongly in promoting a civilian sector.

The NSPS plan, its final regulations, let me comment briefly on

a few of those things.

It is very consistent, apart from the labor-management relations

part, with trends in the private-sector research that has been done.

There is nothing really new about what it is doing. There is grow-
10

ing use, numerous studies, I could cite you chapter and verse,

about the use for pay for performance. If you are in the private sector and don’t use pay for performance, they will look at you like

you are crazy. There is an increased emphasis on performance

management. That is true in government and the private sector.

There has been an increased use in nonunion discipline procedures, grievance procedures, those kinds of things, and a traditional role for that in the unionized sector. And there has been an

increasing emphasis in both the union and nonunion sectors on negotiating flexibilities.

I prefer the term ‘‘organizational’’ to ‘‘managerial’’ flexibility because I think it implies a lot more to what management can do to

move an organization forward. I applaud DOD for its efforts in this

regard, and I think it is moving in the right direction, and I have

worked with companies that have actually negotiated much more

difficult things with unions to achieve some of the things that DOD

has done.

Pay for performance. It is certainly complementary. What it is

trying to do here—there are some concerns that I have, and I

haven’t had first-hand knowledge of this, so let me raise some concerns that I have.

I am concerned that there may not be enough money in the pay

pool to receive the salary increases or bonuses that are meaningful.

That is number one. You have got to give more than four, five, six,

seven, eight percent. My doctoral student told me seven percent is

the magic number, and he knows better than I because he just took

his preliminaries in this area. You have got to have a meaningful

amount of money.

The process is heavily based on supervisory ratings. There is no

way of saying that you can do it systematically wrong. That is my

concern about this. You can do things systematically, but you can

still end up with the wrong result, and I have dealt with these

kinds of things, evaluating professionals, and they are very subjective.

Now, I compliment DOD for the training that it has pursued in

this. I have looked at some of the training materials, and they are

very good. And for such a system to work requires employees and

managers have confidence in the system.

Now I am going to skip ahead. I am not certain that that precondition is here. I would like to be able to talk to managers away

from their supervisors and find out what they really think about

this system and—but let me go to the—the adverse action part of

it raises questions about procedural justice. I will skip over that

and go to what I think is the fundamental weakness of this plan

and what is the hurdle for making it realize the other objectives,

and that is its labor-management system.

If I had given an assignment to somebody to say, I want you to

design a flexible management system with labor-management systems consistent with national security, I may or may not have

come up with this plan. If I had given an assignment to somebody

and said, I want you to come up with a plan that eviscerates collective bargaining as much without explicitly outlawing it, I would

have come up with this plan. And I have sat on the opposite side
11

of the table advising companies that this is what you should do if

you want to do it.

So basically they have expanded management rights, they have

shrunk the scope of bargaining, and they have created what is—

you know, it is comical to call the Security Labor Relations Board

independent. It violates all pretense of independence.

I shall not comment on the extent to which the unions have been

involved so far in the design process, but I will say the meet and

confer is a very low standard, as is consultation. I had an assignment as a doctoral student to rank public-sector laws as to what

they extended to unions. Meet and confer is about the lowest thing

that you can extend. All you have to do is hold a meeting, and you

have met your obligation.

I might say a mind is like a parachute. It works best when it is

open. I get the impression—I don’t have any factual basis to say

this, but I get the impression that the process could have been

more open, and I think the courts agree with that.

I applaud DOD for taking on a difficult task. I applaud the Administration generally for paying attention to the management

part of Office of Management and Budget (OMB), and I hope that

these reservations are helpful in having them move forward on certain dimensions. But my principal concerns lie in the

confrontational approach taken to labor. If you want them to go

along for the ride, you might want a more collaborative approach

than what has been done so far.

Thank you.

[The prepared statement of Dr. Masters can be found in the Appendix on page 66.]

Mr. ORTIZ. I am going to start off with one question, and then

I am going to allow other Members to ask questions. But the Government Accountability Office (GAO), when it reviewed the Department’s implementation efforts, emphasized the

importance of the employee buy-in to the new system. And what

are the specific mechanisms that are in place for continuous employee involvement; and in particular how is DOD evaluating manager and employee feedback or how the new system compares with

the old one, the performance appraisal process, improvement in

measuring performance, the time it takes for managers to review

employee performance, and the overall operation and strength of

the system?

And I have a lot more questions, but maybe we can open up with

this question, and hopefully maybe you can, you know, touch on it

and enlighten us as to how this is going to happen.

Secretary DOMINGUEZ. Thank you, Mr. Chairman.

Let me go back to—I guess it was early 2004, spring of 2004, before Mary came into the picture, when Deputy Secretary England,

at that time Secretary of the Navy England, became very involved

in NSPS and helped us restructure it in a way that did exactly

what you are talking about. We stopped the implementation of it

and then went out and did a very extensive employee feedback and

comment-gathering process. And that extensive involvement with

employees through town halls, through focus groups, through Web

things, through the Web, through surveys, through e-mail, through

leadership, right? We went out and got leadership together, got
12

them understanding what needed to be done and then pushed them

out to talk to people and receive feedback.

So we have made a major effort from the beginning to communicate with employees, to seek feedback from employees, and we

have changed what we are doing as a result of that feedback.

Ms. Lacey can give you a lot more specifics, but, you know, I

know that that feedback is ongoing. I have done the town halls. I

have been out there and talked to people. I have grabbed commanders and pulled them into sessions where we talked to them

about NSPS, talked to them about what their responsibilities are

in NSPS and getting out and communicating to people, and leading

that change face to face, nose to nose with people out there.

I mentioned in my oral statements a quite extensive performance

evaluation, program evaluation activities that we do have underway.

So, Mary, do you want to add anything?

STATEMENT OF MARY LACEY, NSPS PROGRAM EXECUTIVE

OFFICER

Ms. LACEY. Thank you, Mr. Chairman. Let me add a few things

about systemic collection of information from employees.

We have a status of forces survey that we put out yearly or biyearly within the Department, and we are already—we have already added questions to that survey so we can get specific feedback on the National Security Personnel System from employees

and supervisors, and, in fact, we have oversampled the population

that is in NSPS to ensure that we do get robust data.

I have a Web site that I get hundreds of questions in, that we

respond to questions from employees, but that tees up areas where

they are concerned. And I use that to shape additional communication and training material that we need to put in the hands of employees and managers.

We are working already in capturing some of the information

that we know from our laboratory demonstration experience and

work with GAO and OPM that if we don’t capture it now, we won’t

get it; but that is some of the feedback, the—actually what happened with the Spiral 1.1 employees, the first group in, so that we

can capture that for evaluation purposes in the future. And in addition to that, we are continuing to have discussions with the unions

that represent some of the employees in the Department of Defense.

So there is a multitude of methods that we are employing to continue to get the employee feedback.

Mr. ORTIZ. See, before I pass it on to my good friend from California, one of the things is that the five members that would be selected or have been selected to make the evaluation, you know, because when we look at all of the different workers, the workforce,

there is different skills, different occupations, and if I was to be

evaluating somebody, I want to be sure that I understand the skills

that they perform. Otherwise I don’t think I would be able to make

a good evaluation.

I hope I am getting across—you know what I am talking about?

If I am a mechanic, and I am supposed to be evaluating a me-
13

chanic, and I don’t have that expertise, it would be very hard for

me to evaluate that individual. But we can come back to that.

Let me yield to my friend from California.

Mr. MCKEON. Thank you.

As I stated earlier, this is important to address. I appreciate your

testimony.

Based on your experience so far with NSPS, I would like each of

you to tell me weaknesses that you have seen in the implementation of what you would do to change that, to overcome those weaknesses.

We will start with you, Mr. Secretary.

Secretary DOMINGUEZ. Thank you, Congressman. I will cover a

little bit. Again, Mary has a lot more detail about it as the program

executive.

From the lessons learned from the implementation of Spiral 1.1,

we learned that we needed to move away from a fixed conversion

date. We brought everybody in Spiral 1.1 in on one day. That was

tough on a lot of organizations and tough on a lot of people, and

one of the things we learned was why we need to do that, let us

spread it out, give people a window, and then let commanders

bring their organizations in when the mission allows and when

they feel like their unit is ready to go. So that was a no-brainer,

great fix.

The second is we got a lot of feedback from people about we need

more training on writing performance objectives and doing feedback and doing self-assessments. So we bumped up the training in

that area.

We need more IT tools to help people and supervisors do the performance evaluations and record it and—you know, and just

streamline that process. We need more IT tools.

And then we need to be able to help managers figure out how

to set pay. When you bring someone in, and you have got a pay

band, instead of GS–7, where do I start them in their salary? How

do I think about that? And in the performance evaluation and

award, how do I think about the split between bonus and salary,

and what should I be doing and considering about that?

So we are developing guidelines and tools and information for

managers on those things, and that is the stuff that we heard.

And do you need to add anything?

Thank you, sir.

Mr. MCKEON. Mr. Gage.

Mr. GAGE. There has been little evidence of NSPS on our work

sites, but I must say that when you insist on abrogating employee

rights and protections in order to put in a new personnel system,

this is no way to start, this isn’t anything for the middle, and it

certainly can’t be the end.

The rights issue is extremely important to any acceptance of a

new personnel system. When you come to some of the—our people

who are veterans, they are tearing apart tanks on overtime down

in Anniston, and you tell them that you are going to lose rights to

put in a new personnel system, just not going to accept it, sir, and

I think this abrogation of rights has to stop.

Mr. STIER. I would reiterate my earlier comment that, A, it is

really too early to know what the consequences are in terms of both
14

pro and con, I think, in implementation. They have one performance cycle only with the first Spiral that is completed in January

of 2007. And to me, I think the vital question right now is in addition to, as I alluded to earlier, separating out the different kinds

of things that are taking place in the system, because I think there

are some that have a background of support from the demo projects

and some there don’t, but I think the critical piece right now that

I would advise this committee to pursue is to ensure that you are

getting right data to understand on an ongoing basis what is happening. DOD is absolutely collecting very important information.

You don’t need to see all of that information, but you do need to

agree to some small subset that is an appropriate representative

from your perspective about what is going on on the ground.

I would also suggest that there is obviously a governmentwide

requirement for a survey of employees. I think it is very important

DOD’s oversampling NSPS’s population. But in addition to an annual selection of material, you can engage in pulse surveys of that

NSPS population so that you can be looking at a more frequent

basis at some of the impact that is taking place on the ground.

I think that they are going to be interested in much greater detail than you ever will be and should be, but that there is a small

subset of indicators that you—I think would help your ability to ensure that that is—what is happening is what you want to see happen.

Dr. MASTERS. I haven’t seen enough data to really comment

about the progress so far with pay for performance, but I am very

glad they are collecting a lot of it, and I would like to know what

benchmarks they are looking for and how they measure the change

they expect in evaluations. I commend them for doing all they have

done so far.

But if I were to recommend a change, I would scrap the labormanagement relations part of the regulations. I really think that

that is the monkey wrench that is going to keep you from moving

this organization forward.

Mr. ORTIZ. Mr. Loebsack.

Mr. LOEBSACK. As a new member of this committee, I am kind

of on a steep learning curve as far as these issues are concerned,

new Member of Congress, I should say as well. But I want to thank

all of you today for your testimony, and in particular I guess I want

to thank Dr. Masters for his comment about collective bargaining

because I think they are right on.

I do have some questions also, Mr. Gage. I have some questions

of Mr. Stier, for example.

You said at the outset there are differences from now and 1949.

Maybe you could elaborate some of those differences other than the

fact that it is 2007, and that was 1949, and maybe the national security issue that was part of that. But I think it is important for

us to recall that in 1949, the Soviet Union exploded a nuclear

weapon. In 1949, we were at the beginning of the Cold War, and

the next year we had the Korean War. We have had a lot of national security threats, and I think this is important for the Honorable Dominguez also to keep in mind for people in DOD who adopted this system and are trying to implement this system.
15

I think there are differences—other differences. For example, I

am sure Mr. Gage might very well agree with me that the labor

movement is a lot weaker than it was at that time and an easier

target than it was at that time.

Those are some of the things that immediately come to mind for

me when I hear you say there are differences between now and

1949. But maybe you can either refute those differences that I

mentioned or add to them.

Mr. STIER. If I might say, I am a Hawkeye from Iowa City.

Mr. LOEBSACK. That doesn’t get you off the hook. I went to Iowa

State.

Mr. STIER. Everyone has their weaknesses.

But in any event, I think in direct answer to your question, I

have no dispute with the similarities that you are describing. I

think fundamentally the nature of the government work force, the

nature of the challenges that we expected to address has changed

dramatically. So looking at the absolute demographics in 1949, and

excuse me for round figures, but you are looking at a professional

workforce of 70 percent clerical and 30 percent professional, whereas today it is the opposite. Now you have got 70 percent professional and 30 percent clerical. You are talking about a workforce

that is much more dominated, rather than by repetitive tasks, than

by knowledge workers, a much more fragmented knowledge workforce that in many ways requires individualized attention and

treatment, so that it is a different world in terms of trying to attract talent into a regimented, compartmentalized system that did

work in 1949 that doesn’t work today.

There are some wonderful photos of the workforce in 1949 and

earlier with these, you know, giant, you know, full-floor cube farms

where people are filing papers. That is not what Federal workers

are doing today.

We need to be looking at systems that are both going to attract

and retain and get the most out of that knowledge workforce,

which is, as I suggested, very different.

Mr. LOEBSACK. Do you believe in collective bargaining?

Mr. STIER. Absolutely. As I suggested earlier in my testimony,

both written and oral, my view is that you are really dealing with

apples and oranges here. There are some sets of changes that engage in looking at the hiring flexibility and workforce reshaping, in

market-sensitive pay, in performance management systems. All of

those things I think are really important for us to be looking at

DOD and across government to ensure that we are able to motivate

and attract and retain the right workforce.

I don’t believe that you have that same record of support for the

labor relation changes, nor, very importantly, something we haven’t

talked about here, the due process issues, the adverse actions and

appeal issues, where I think fundamentally, at the end of the day,

we need a workforce that buys into any system, any new system

that we are adopting. And that is—you know, you can have the

best system in the world. It ain’t going to work if the workers don’t

believe in it, and that is something we need to see here.

Mr. LOEBSACK. Just to sort of bring me up to speed.

Maybe, Mr. Dominguez, you can answer. What were the problems that were identified in the first place? I know we are getting
16

at the end of my time here, but why did this system come about

in the first place? What were the problems that Secretary Rumsfeld

or others saw that they believe had to be remedied?

Secretary DOMINGUEZ. Congressman, first let me say congratulations on your election. Welcome to the Congress.

I find myself facing a steep learning curve perpetually. The problems were many, as Mr. Stier mentioned about, just the fundamental change in the workforce and the nature of work in our environment, but, more importantly, specifically about the national defense as contrasted with 1949. I love the good old days with the Soviet Union because they were an understandable threat. They were

a predictable threat. They were a stable threat. We could build

against them. It was strength against strength, and ours was better.

We are dealing today in a global environment against asymmetric threats. Nobody is going to come against us strength to strength

because they will lose. They understand that. So they are coming

at us in ways we cannot anticipate and ways we are trying to

imagine before they hit us.

There is a rapid change through technology in the nature of our

business, both at the warfighting end and in the business operations end, where we need to be able to implement that change

rapidly to both fragility in terms of delivering our product on the

battlefield, but also in terms of stewardship of the taxpayers’ resources so we get the most into the teeth of the DOD.

And so those things are fundamentally different as is the imperative to transform around performance and to move to a performance and results culture as opposed to a culture of activity and seniority.

Mr. LOEBSACK. Thanks.

Ms. BORDALLO [presiding]. I wish to thank the gentleman from

Iowa, and the Chair recognizes Ms. Shea-Porter.

Ms. SHEA-PORTER. Thank you, Madam Chair.

Don Rumsfeld was never accused of being warm and fuzzy, and

neither has the Department of Defense ever been accused of being

warm and fuzzy, and I don’t think that is a responsibility, by the

way. But I am very concerned about what I have been hearing.

Let me quote a little bit of the language here where you have

been talking, Mr. Dominguez, about this program and the great

work that you are doing now.

Ms. SHEA-PORTER. Unprecedented training, for example, and indepth analysis and other skills. And it makes me wonder if what

is different, why you weren’t doing that to begin with for a workforce to try to improve a workforce that was already in place. Because it seems to me that when you had so many complaints about

this switch, and they weren’t in your town hall meetings, they were

not positive responses to this, and it was actually stated that you

were trying to weaken the unions. I don’t understand. And then

not allowing a union to be present and a union to engage in collective bargaining. I get suspicious at what you are really trying to

do was bust the labor unions. And so I ask you to please address

that.

Secretary DOMINGUEZ. Thank you very much. Let me speak first

to the training effort.
17

I have, been for most of my life, a public servant, in the Army

from 1971 to 1980, as a civil servant beginning in 1983 with the

few, you know, years out to dabble in dot com business and Beltway bandits. But most of my career has been in the civil service

or in public service in DOD.

And as a civil servant, a career civil servant, I have never witnessed this amount of training going into focused on improving the

skills in the civil workforce.

Ms. SHEA-PORTER. Let me ask you, could you have done that and

still allowed the unions to have collective bargaining?

Secretary DOMINGUEZ. NSPS was the catalyst for that transformational change. Now, we did design a labor relation system

that was to be the partner for the NSPS, so that revised and modified the labor relation system. That has not been implemented. It

is enjoined by the courts right now. And we are not doing anything

with it until after the court rules. And I believe that we did design

a system that did allow for collective bargaining. But it also followed the law which said that—not meet and confer—but continuing collaboration was the sole and exclusive process for the labor

to be involved in the development of the NSPS.

Ms. SHEA-PORTER. Let me take another tack then. You mentioned that you were in the military. And the military, again, goes

by rank. And so has civil service. A certain amount of time and you

have to assume—and perhaps you have to tighten the process—and

I wouldn’t argue about that, to make sure that people perform at

the level that they are hired at and they continue to perform in

order to have their promotions. But it has worked very well in the

military, for the most part, to have a certain amount of time at

rank before you reach another rank, and the same thing for the

civil service system. My concern, and you stated it yourself when

you said, when you get a new employee, you have to ask yourself,

how do I think about that pay band?

Well, the reason that they had the civil service was so that there

would be more objective criteria, that it wouldn’t be left up to did

you like this person? Was this person a friend of so-and-so? Was

this person politically connected? It was to level the playing field

and have you concentrate more on what the particular skills were.

So if they are hiring the wrong people to begin with, you certainly should be looking at personnel. But once you hire somebody,

it seems to me you should be doing the ongoing unprecedented

training that you talked about, and that you should be a certain

amount of time in grade. Because what it does is it gives the employees a sense of confidence that they are being promoted or being

left behind—which is the option in civil service not to promote. But

they are being promoted or left behind based on certain criteria.

When you switch over to this kind of system and you leave a

union out and you leave collective bargaining out, it leaves a lot of

reasons for employees to be suspicious about who got promoted and

why.

And by the way, I know it already exists inside to a certain extent in civil service, but at least you can look at certain steps and

say, there is a certain amount of time and a certain level of performance.
18

So what would make your system so much better and make it

so crucial to replace this civil service that was put in there to give

the employees the confidence that it was a fair system and that

they were safe from any kind of retribution or any kind of pressure,

political or otherwise?

Secretary DOMINGUEZ. Ma’am, I don’t believe that we left the

unions out. And I believe there is a role for organized labor in the

system that we did design——

Ms. SHEA-PORTER. May I just add that even if there is a so-called

role there, by not even allowing an independent third party to come

into the process states by having an internal review within the

DOD that does not make sense. If you really wanted to look as if

you are hearing the employees, the unions and they have an opportunity, why not allow somebody from the outside to come in instead

of an internal review by the DOD?

Well, when you are not allowing a third party to do arbitration

and when it is closed inside the DOD, I am not really sure, but it

looks to me, again, as if you are trying to take away the voice of

the unions.

Secretary DOMINGUEZ. That was not our intent. I am hopeful

that the system that we designed doesn’t do that. We did strive to

create boards for adverse action appeals and labor relations that

could work—could do their work objectively, and independently,

but that would be mindful of our mission which is a national security mission.

And the consequences of us not getting our mission right were

too profound to, you know, continue down the track we were going.

Ms. SHEA-PORTER. But——

Secretary DOMINGUEZ. Congress agreed with us.

Ms. SHEA-PORTER. But most of your jobs couldn’t possibly come

just under security. And you are not allowing independent third

party review to process firing appeals. And I realize you have some

security issues. But it can’t possibly apply to all of the employees

that you have.

Are all jobs that security conscious that you can’t allow an independent third party to review firing?

Secretary DOMINGUEZ. There are, in NSPS design, still avenues

people can take to the merit systems protection board. So those

paths remain open.

And as I said, we try to design in—what we wanted to design

in was boards that understood the national security mission and

put that mission foremost in their thinking and then thought

about, you know, how to adjudicate issues and conflicts between

management and the workforce in that context so that the national

security mission always was a feature in the decision making. That

is not case in the current systems and that is what we tried to

build in.

Ms. SHEA-PORTER. But it is not an independent third party review.

Secretary DOMINGUEZ. I disagree, Congresswoman.

Mr. ORTIZ [presiding]. We can come back to that question. And

let me yield back to my good friend, Mr. Jones from North Carolina.
19

Mr. JONES. Mr. Chairman, thank you very much, and Mr. Secretary and Ms. Lacey, I couldn’t help but think you know the shadow of Donald Rumsfeld is still around here. This system was his

creation. I just—I feel like it is another failed policy, quite frankly.

I say that because ever since this was instituted—and let me ask

you, at this point, how much money has been spent to implement

this program as of today? How many billions of dollars?

Secretary DOMINGUEZ. Sir, let me—certainly not billions. But let

me try and put this in context for you.

Mr. JONES. Sir, I want to be respectful. My staff just came. We

have votes in the Banking Committee next door, but just give me

a ballpark figure as of today how much money has been spent to

try to move this program forward?

Secretary DOMINGUEZ. $65 million.

Mr. JONES. $65 million?

Secretary DOMINGUEZ. That is correct.

Mr. JONES. What would be the projection—did anybody at the

table disagree with that figure? What have you—and I am not trying to get tit for tat, I am not, but I want to know, does anyone

else agree that that is the amount of money that has been spent

so far on everything to implement this program?

Mr. GAGE. I disagree.

Mr. JONES. Would you give me a figure?

Mr. GAGE. I don’t know the figure but overall figure it is certainly in the hundreds of millions. They spent 65 million on lawyer’s fees.

Mr. JONES. Well the reason I asked that I will tell you at Camp

Lejeune, Cherry Point, and Seymour Johnson in the third district,

I have had base commanders to tell me quite frankly that they

truthfully—and this goes back before we went into Iraq by the

way—that they think that this is just a waste of the taxpayer’s

money. And when I see what we are spending in Iraq—which is billions and billions and billions of dollars, and here at Walter Reed,

we can’t even take care of the wounded. And here we have a program that is already—part of the program is in the Federal Court

system because it is being challenged. And I have employees down

in my district—and quite frankly, and I agree with them—that this

program—I just think it is not going to accomplish what you think

because as the lady said before me that we have, if the workers

and Mr. Stier, I believe, and Dr. Masters both said, if you don’t get

the employees to buy into the program, it is not going to work.

And I had a great relationship with Secretary England. I think

he is a very fine man. But I told him up front that the problem

is if you cannot bring the players together, you can’t have a victory.

And there has been a—I am not talking about you two nice people. I am not saying this about you. But what was coming down

from the mountain when this thing first started was an arrogancy

that didn’t care what the people at the bottom of the mountain felt.

And that was the federal employee.

And I wish him well. But my point is—I know I am doing most

of the speaking—but I am telling you that this program has serious

problems to it. And until you understand that the federal employee,

who has spent many years of their life, we have battled this thing

with the depot, Mr. Ortiz and myself for years. We have battled
20

this thing so we are somewhat familiar with it. But I will tell you

today that if you think this program can go forward, then I am

going to tell you, you have to learn to work together and to realize

you can’t have it just one way or the other way. It is not going to

work.

Secretary DOMINGUEZ. Thank you, Congressman. First thing I

want to tell you, we stopped the initial implementation of NSPS because the way it was being moving forward, it was not mindful of

the employee feedback. And we went out—and that is the strategic

pause—back in early of 2004. And we went out and collected that

feedback. And we had extensive engagement. And we continue that

engagement today with employee feedback, including the meet and

confer and the collaboration with organized labor.

So we—I agree with you. We need employee buy-in. We designed

the system who is—one of the key performance parameters is credible and trusted. It has to be credible and trusted by the employees.

And we are working very hard at that.

We are not implementing the labor system that we designed. It

is enjoined by the courts. When they point the way through, we

will either move forward the way they dictate or come back to the

Congress for additional authorities, you know, or many other whatever options there are. But we—the courts have a role on the labor

system.

On the performance management piece, the human resource system, people in that system are excited. The people in spiral 1.1 are

excited. The leaders in spiral 1.1 are excited. They are out connecting with 1.2 and 1.3, spreading that excitement, sharing their

knowledge and pumping them up about getting in because they

love where they are. And we are basing that also on the 25 years

of knowledge around these kind of systems in the laboratory and

acquisition experiments we have done in the DOD.

Mr. JONES. Well, I thank you for that. And my time is up. I just

hope, Mr. Chairman, that as you move forward and the committee

moves forward, that we can get a better understanding of the cost

of this program of where it is today, where it started from, where

it is today and where it is going to be down the road.

Because I don’t question your numbers at all. I don’t have the

knowledge to question. And I really do not. But I am just of the

firm belief that with this country going, we are going financially

broke as a country. And with this failed policy in Iraq—and it is

a failed policy—I don’t know how we can put much more stress, financial stress on our military. And sometimes you need to say,

well, maybe right now we need to put this on the back burner until

we get more in a better financial situation to move forward.

And if this is going to cost billions of dollars, I hope this committee will look at it very carefully before we give the green light to

move forward. Thank you, Mr. Chairman.

Mr. ORTIZ. Thank you so much. The gentlelady from Guam is

heard now.

Ms. BORDALLO. Thank you very much, Mr. Chairman.

Mr. Secretary, thank you for your testimony today. I represent

Guam. Our island is home to service members and their families

stationed at Anderson Air Force base and Naval Base Guam. And

it is planned that Guam will become home to a significant number
21

of U.S. Marines and their families who will be relocated from Okinawa, Japan in the coming years.

Additionally, an increase in the number of Air Force and naval

personnel stationed on Guam is planned. So we are looking at several thousand personnel.

The increase in overall uniform personnel on Guam will likely require an increase be made in the number of civilian personal assigned to Guam’s bases. Guam’s bases have a strong reputation for

providing service members and their families a high quality of life.

This is, in part, the product of the efforts of our Federal civilian

workforce on Guam’s bases which includes many skilled employees

hired from within the local community.

Now, I am concerned that the high quality of life traditionally

enjoyed by service members and their families stationed on Guam

may suffer due to the fast pace at which activity in Guam’s bases

will grow in the coming years. And that is, I want to make sure

that the Department of Defense continues to provide for a committed federal civilian workforce to support operations in mission requirements on Guam’s bases.

Can you please describe for the subcommittee how this personnel

system, the NSPS, will achieve this goal, as number of facilities,

range of activities, and the overall operational tempo on Guam increases at a fast pace? And also, how does the NSPS account for

the interests of the civilian workers of the department assigned to

Guam’s bases and their commitment to and record of providing for

a high quality of life for them?

Secretary DOMINGUEZ. Thank you, ma’am. I think the way I

would answer the question is, to describe just two aspects of NSPS

that I think are relevant here.

The first is that NSPS is a results-oriented, performance-based

system. It requires command to be clear about what the mission is

and to articulate clear and compelling goals and objectives that

command wants to achieve, and that, as required in the NSPS statute, individual civil servant performance plans can hook right to

those goals. So the system that we have designed and deployed

here, because it is results-focused and performance-based, you get

this powerful alignment around what the mission is and what we

have got to accomplish.

In order to make that system work, leaders have to lead. That

is part of why we did such a massive investment in training is to

teach people the skills because we did hear from the workforce, I

don’t believe my supervisor knows how to do this.

And for the most part, our employees were right there. And so

we invested in that. And in this system, leaders have to lead. They

have to do the hard work of coaching, mentoring, performance feedback and importantly, setting goals and objectives that are clear,

understandable, compelling to people. And so that is, NSPS will

work there.

The second thing it does is because of the pay bands, because of

the structure of NSPS, there is huge agility in being able to move

people to different tasks as that mission unfolds, as the objective

changes, and you need to swing the workforce to deal with a problem and eradicate it, you have the flexibility of doing that more

easily in NSPS to move people into different positions again with,
22

you know, all the right merit protections and those kind of things,

and you know, with consultation, recognizing the value of the employees.

But the system is more agile that way, and so as problems

emerge, you can line the workforce up around compelling objectives

that are tied to their performance plans and they can solve it for

you.

Ms. BORDALLO. I guess, Mr. Secretary, what I wanted from you

was would the system be able to handle a massive increase like we

are getting on Guam, 8 to 10,000 Marines and their families. Are

we prepared? Are we on your horizon?

Secretary DOMINGUEZ. Mary is prepared to jump in on that one.

Ms. LACEY. Ma’am, in fact, it is exactly that kind of thing that

NSPS is going to shine at. We have provided for additional flexibility—structured flexibilities—to ensure that we can hire faster,

bring people on board quickly and match then, the right person to

each particular job, taking the greatest advantage of their skills.

We have also provided for market-based pay. We realize when

something like that happens, a rapid growth on a base, in fact, people can become hard to find. And people are being hired left and

right for not just as civil servants, but for some of the other support infrastructures that start to build around a base. And so we

have provided for some flexibilities to make coming to work for the

Department of Defense even more attractive with some pay flexibilities that we could not have achieved under the old system.

Ms. BORDALLO. I am glad to hear that positive response. Good.

And I will bring the message home. Thank you.

Mr. ORTIZ. Mr. Rogers.

Mr. ROGERS. Thank you, Mr. Chairman. This would be for either

the Secretary or Ms. Lacey, either, in following up on your interaction with the gentleman from North Carolina as well as the

gentlelady from Guam. You talked about the interaction you had

with the workforce during this transition, spiral 1, and how you

had people buying into it and positive feedback, and then you

talked with the gentlelady from Guam about hearing from some

employees that their supervisor didn’t know how to do their job.

They were right, and you came back and worked them in that.

I would like for you to tell me what would you say the three primary concerns that the DOD heard from its workforce during this

transition spiral 1, and what you have done to address these those

three primary concerns for the workforce? That is either one of you.

Secretary DOMINGUEZ. Thank you. I will take a shot at that.

The first thing we heard was, I am not sure this will be fair. I

am not sure my supervisor will do this fairly. Okay, second thing

we heard was, I am not sure that they have the skills to do it.

Again, this requires leadership. We didn’t have to do that. It is not

how we grew up. How are they going to magically do this overnight, our supervisors? The third is which we heard, the money

won’t be there.

Okay. Fair. Here is what we did on fair. Extensive training—extensive training to everybody on this. The second is that we built

this goal and objective, this framework of setting goals and specifying objectives and aligning your performance plans to those objectives. All right. So that is a structured disciplined process.
23

And we put lots of training into what the right kind of—how do

you write those clear compelling objectives.

The second or the next thing we did was the evaluation structure

itself. It is not just a supervisor doing the grade and turning it in

and that is it. Done deal.

There are review groups of peer managers to look at these things

across an organization.

Mr. ROGERS. How that is review triggered?

Secretary DOMINGUEZ. It is required. It is a normal part of the

process.

Mr. ROGERS. So once a evaluation is done it is automatically sent

for peer review?

Secretary DOMINGUEZ. Yes, sir and they, these peer managers in

this panel make sure that there is nothing out of line, that the

grading was fair and balanced across the enterprise. And that

grading is against competency, statements of performance, what a

fully successful performance looks like that was validated across

our enterprise with the people in the enterprise.

So that has been specified. Here is what it looks like, you know,

to be at, to perform at this level.

There is an appeal rights. So if still someone thinks this isn’t

right, there is an appeal to a higher authority.

Mr. ROGERS. What is that higher authority? How does that work?

Secretary DOMINGUEZ. It is the pay pool manager, so it will vary

from place to place but it is, you know, typically a commander two

or three levels above where this thing is happening.

Second issue is knowledge. They don’t know how to do this. Well,

you are right. We didn’t do this. We didn’t used to do this in civil

service. We had no experience with it except in our demos. So we

built a training program to teach people how to coach, how to mentor, how to set performance objectives, how to do the strategic planning, how to do the feedback. We are giving skills to our leadership

to allow them to lead. And that is a major effort.

And we did practice. You know, when you went in, you go in the

spiral 1.1, halfway through that year, you did the payout in practice, you went through every step. You made all the evaluations.

You did all the rankings. You calculated scores. You did the payout, right, and you learned from that practice about how to do this

and how to make the system work so that when you did it for real

and your effecting somebody’s pay, you had already been through

it.

Then the money. We went—Mary and I went to the Under Secretary of Defense Comptroller and said, we have to do something

different. NSPS requires a different approach to things. And with,

in cooperation with her, went to the Deputy Secretary. And he set

aside the performance pool up front. That is unheard of. You don’t

fence money—particularly O&M dollars—in the Department of Defense, except we did for this program because we had to tell employees that money is going to be there.

And he set that money aside.

Now, the other thing we did, was we moved the evaluation period

for everybody to the end of the fiscal year, so that the end of the

fiscal year then you begin doing the evaluations and then you do

the payout in the end of January and that is early enough in the
24

fiscal year that the money is still there. So you know, if you have

the payout in September, you know, stuff can happen and you may

be short of cash. In January, we are not short of cash. So these

things told the workforce the money will be there. We will put it

in. You can see it. And we will guarantee it.

Mr. ROGERS. I thank you.

Thank you, Mr. Chairman.

Mr. ORTIZ. Thank you. Mr. Courtney.

Mr. COURTNEY. Thank you, Mr. Chairman.

I apologize. I was at other meetings and didn’t hear a lot of the

testimony and questions, and my question may be covering ground

that has already been traveled, so I apologize for that. But one

thing I have to say, just reviewing the documents both from staff

and the witnesses that, you know, this obviously has not been a

smooth implementation of the system to say the least. I mean, to

have a Federal court strike down provisions of significant portions

of the plan obviously is not insignificant. And it has already been

a year or will be a year, I guess, when the anticipated appellate

court decision is expected, which is, in some people, might view is

a lost year.

I am just curious whether or not there was any attempt by the

government to sit down and negotiate with the other side rather

than continue to litigate away at this issue.

Secretary DOMINGUEZ. Sir, this statute was pretty clear, that

continuing collaboration was the sole and exclusive process for the

engagement with organized labor in the development of NSPS.

We believe the statutes also clear once we are into NSPS, then,

other things like Mr. Gage has made reference to, national level

bargaining as opposed to bargaining at the 1,600 different localities

which we do today. But the statute, from our point of view, was

very clear that continuing collaboration was the sole and exclusive

process and we followed that process.

Mr. COURTNEY. How about you, Mr. Gage, do you have any comments on whether there has been any attempts to try and find

some common ground?

Mr. GAGE. We would welcome it. We still think we have the best

ideas from our members and from supervisors and from the generals and the captains on the ground on how collective bargaining,

on how appeals, and on how pay could be handled. I think our

ideas are better.

And we would certainly welcome sitting down with DOD and

having a real discussion that was two-way.

Mr. COURTNEY. I guess my question would be, then, would you

agree that the only way to sort of find that common ground would

be to have Congress modify the statute, or is there a way to do it

without congressional action, which seem to be you know, the Secretary’s position.

Mr. GAGE. I don’t think there is a way, given the history of this

thing for the last several years, that there is a way to get it back

to a positive personnel system for employees. I think the horse is

way out of the barn with employees. They saw DOD come after

their rights right out of the box and that has that has made a very

telling impression on employees. So, I am very much in favor—plus

we still haven’t had DOD trying to reach out at all to resume any
25

discussions even after the court cases, so I think we need congressional action.

Mr. COURTNEY. Again, that seems to me that you know, if both

sides sort of feel there is a gap here, and there may be a need for

congressional action by that is one area you guys can agree on. I

mean, it seems helping us sort of find where that balance is would

be a lot more helpful than just going in, and as I said, litigating

and rehashing because as we all know, appellate courts aren’t the

last stop in the system either. And it sounds like both sides, you

know, regardless of the outcome, are probably going to continue

sort of this grinding it out.

And in the meantime, you know, the system is really not going

to have any real clear direction until the courts act and then Congress may act. So why don’t we just sort of cut to the chase?

Secretary DOMINGUEZ. Sir, I believe that we have appealed. We

believe the law was clear. We believe we followed the law. That is

now being adjudicated by the courts.

At this stage, I don’t—I urge the Congress not to act. I urge the

Congress to refrain from acting until after we get a ruling by the

appellate court.

Mr. ORTIZ. Thank you.

Mr. Gage, clearly the court was critical of certain aspects of the

NSPS, but not so critical that they halted the entire implementation. And I know that maybe when you talk to some lawyers they

have different opinions, you know, just like reading the Bible, you

know, different interpretations. But how do your employees, the

American Federation of Government Employees interpret what the

court said about NSPS in terms of the future of NSPS. Maybe you

can——

Mr. GAGE. Well, our members were very happy that a court stood

up and stopped this theft of the rights that had been in place for

so long. And I hate to see that we are at this point, Mr. Chairman.

I really do. Our men work very hard every day, our men and

women in DOD. And they feel like what did they do wrong that

suddenly their rights are being taken away? It is almost like their

patriotism is challenged.

And I don’t know, maybe it has gone too far. But I know one

thing. Our people, and from what I am told from our workers, we

are never giving up our rights. We are never giving up these rights,

especially for the reasons that have been put forward by DOD. So

there is a bitterness out there, Mr. Chairman, and I don’t know

how that bitterness can be solved. I think we ought to start over.

I think NSPS should be repealed.

Mr. ORTIZ. Mr. Masters and anybody else who would like to respond to this question, what is the way ahead for NSPS, and do

you think Congress should consider major changes to the underlying legislation?

Mr. STIER. Sir, I am happy to jump in here. I would say that obviously, Congress has a very important role here. This is a vital

component of our defense. We talk a lot about military transformation. The civilian workforce is a hugely important component

of our defense establishment and needs a lot of attention, I think

from Congress more generally.
26

The way forward I would suggest is first, you do have a Federal

appeals court that is likely to rule very shortly here. And the reality is that that will undoubtedly inform both DOD and the employee groups positioning here as well your own.

And so would I presume that it makes some sense to wait at a

minimum before you review this until the court has—or not until

you act or until the court has ruled, since we expect a ruling fairly

soon.

Number two irrespective of the way the court rules, I think you

can separate out different elements of the NSPS, those that are,

again, that are engaged around the labor relations, the due process

issues aren’t ones that from the partner’s perspective we can see

evidence or that supports the notion that it is vital to make those

changes in order to be able to create a more performance sensitive

and effective organization. However, we don’t believe that the GS

system, the one created in 1949, and a number of the preexisting

hiring authorities, that it was the status quo is the way forward.

And we would propose that this committee, instead of trying to

change those, rather put into place a set of indicators that permit

you to have a better understanding about what is happening on the

ground and whether those changes are, in fact, making the kinds

of affirmative productive opportunities available to us that the Defense Department would like to create. And I believe that those indicators are things that would inform your decision making as well

as other policy makers.

And finally, I think you might—if you were going to add anything—propose that there is some kind of independent evaluation

and more detailed evaluation that is akin to what takes place underneath the demonstration project authority that was created in

1978.

Mr. ORTIZ. Mr. Masters.

Dr. MASTERS. I agree with much of what was said just now. I

don’t think Congress should wait for the courts to act. I think Congress should determine what the labor management rights of employees are and the appellate rights in adverse actions of employees are. I don’t think you need the courts to tell you what to do

in that.

The fact of the matter is this Administration, if you look at its

history from February of 2001, has by executive fiat, tried to abrogate labor management rights. And I say that as an objective observer. There is no way of naysaying that. They have done things

that are just mind-boggling in the degree of temerity that they

have in singularly striking these rights.

And I would hope to hear a better advocacy from administrative

representatives of the program that is on the rule books now. And

if they don’t want to defend it, why are they litigating it now? They

could be like DHS and drop their litigation and move on. But DOD

has chosen not to do that.

I think it is time for Congress to intervene and settle this battle.

I don’t think anybody else is going to do it for you.

Mr. GAGE. If I may, Mr. Chairman, I completely agree. I have

done a lot of contracts. And the ones that are good are made where

both the parties reach agreement. When you have a third party

like the courts that is going to write the labor relations system, you
27

know, both sides are going to hate it, and it is not going to work

and it won’t be the end of it. That is why I think Congress really

has to step in. And I really think it is the obligation and responsibility of Congress to get this straight.

Mr. ORTIZ. Mrs. Shea-Porter, do you have a question?

Ms. SHEA-PORTER. Yes, I do. When I was studying for my masters degree in Administration, I heard in class—and this was way

back when—a lot of the words that you were using, Mr.

Dominguez, talking about coaching, training, doing feedback, objective management, review. None of this is new. This has been

around for a long time.

I have friends who work in the federal government who have

given their heart and soul to this country because they are patriots.

And they did that. They did objective management. They did feedback. It almost sounds like an aspersion when you say my manager

didn’t know how to lead. I am certain there were some managers

who did not know how to lead. It has always been thus. But it is

also true that that was a hard working force. And so, if you want

to make the change for other reasons then we can talk about that.

But to act as if the workforce was not producing, and that is why

you were forced to do this for national security reasons, I am just

having trouble with it, and obviously I am.

I would like to talk about that pay for performance part. This is

a government. This is not business. If I were running a business,

then I would look at certain criteria differently. But the government’s business goes on day after day. And we don’t—although we

need to save money and I have certainly talked loudly about being

fiscally conservative and responsible, and that is an issue I have

about the cost of this. But also we have to recognize that there is,

it is a different set of standards.

You can work within the system that exists now—or let me rephrase that and ask you, can you work within the system that is

there right now? If you have been remiss about the training, can

you correct the training within the system that we have now?

Within the civil service, are you able to deliver what you are trying to deliver with the change there? Is it possible to do that without wrecking the whole system?

I believe that you had 58,000 comments when this was offered.

And the majority of them were negative. Two thirds of the DOD

employees I believe were union. You can’t help but think that this

really didn’t have as much to do with cleaning up as it was taking

away union rights.

So can you do the work that I think is laudable—some of it I am

sure you need to do. Can you do that and shouldn’t you do that

within the system now and allowing the unions to be there and be

part of the whole process and recognizing—and I would like us all

to recognize—the commitment of this workforce through the years?

Secretary DOMINGUEZ. Congresswoman, let me first correct what

I fear is a misunderstanding.

I implied no aspersions on the quality of the civil workforce of

which I have been a part.

Ms. SHEA-PORTER. I am sure you did not mean to.

Secretary DOMINGUEZ. The important thing is that those were—

that was the feedback we received from employees when we were
28

talking to them during the strategic pause about going into pay

banded, performance driven system where your pay was determined by your supervisor’s evaluation of your performance, right,

as opposed to moving away from the civil service.

So when we went to our employees with, here is the concept

around NSPS that we derived out of the lab demos and acquisition

demos, the feedback we got from our supervisors or from our employees were, I am not sure my boss can be fair, and I am not sure

my boss knows how to do this. So that is the feedback we got,

which then led to the training program.

Now, and so within the context of moving forward with NSPS.

Can we do this? The answer is no. NSPS is just—is a catalyst

for a greater global comprehensive transformational change in the

culture and ethos within the Department. It is moving the Department to a results-based, performance-driven organization, away

from a focus on inputs and activity toward are we achieving the

mission? Are we accomplishing what we set out to do? How do we

know it? How did everybody contribute to doing that?

So that is the big change. That change needs to happen. That

revolutionary change was embraced by Secretary Rumsfeld, embraced by President Bush as part of his managing for results in his

Presidential management agenda, but more importantly, was actually first tabled in the public sector by the Congress of the United

States and the Government Performance and Results Act.

This is about turning us into a performance driven, results delivering organization. And NSPS is a critical piece of that and a catalyst for that transformation.

Ms. SHEA-PORTER. Maybe I am missing something here, but I

have pretty close knowledge about some other federal agencies that

have done exactly that. And as a matter of fact, I went back and

looked at the language and it was very similar to what you are

talking about now—results driven and you know this is for promotion, and they had standards and they had people, not just one

employer but others looking to review promotions and review

whether there were work coming in and their work flow.

I don’t hear anything different. But I am not as familiar with the

Department of Defense. I would like to think that you have had

some skilled managers through the year, that you are not suddenly

finding out that you have not done it right at all.

But other agencies have been doing this. I have the sheets of

paper from personnel showing this and from management showing

exactly the same buzz words you are using now. So are you telling

me that just within the DOD, they weren’t following good management techniques and that this is a new change?

Secretary DOMINGUEZ. I am telling you that the culture of results, the obsession with performance, the association of reward—

particularly in terms of your compensation—with results, with your

contribution to accomplishment of the mission, is part of a change

and the propagation of that ethos across the Department of Defense. NSPS is a key part of that. The training that we are doing

is a key part of that.

And in addition to the focus on results, NSPS provides us agility

in managing the workforce to deal with an agile threat. And it provides us market sensitive pay so the ability to respond more rap-
29

idly to the marketplace to bring in and retain the high quality talent we need in our workforce to deal with the national security

threat that we face.

So NSPS is about all of those things. And it is a package deal.

And that package, I feel very strongly is very good for the country

and very good for the national defense.

Ms. SHEA-PORTER. But other agencies have done exactly what

you are talking about and I don’t understand the difference. Thank

you.

Mr. ORTIZ. You know, I have been here for 25 years and I have

worked with government employees for a long time. Morale is very,

very important. For us to be able to produce, you know, the products that we have, to fixing airplanes, tanks and so forth and so

on. They tell me that there had been a cloud out there for a long

time beginning with the A 76, base closure commissions, and now

new regulations.

I think that we are going through some very critical times now.

We are fighting two wars. We have seen an exodus of very knowledgeable employees just walk out the door.

All you have to do is take a look at Walter Reed Hospital. You

know, there is a lot of things going on. And I think that this is a

time when I hope that we can find middle ground.

And I think that the courts were right in coming in and looking

at it. We need to come, and like Lyndon Johnson used to say, it

is time for us to sit down and reason together for the good.

My friends, we are going through critical times. Huge deficits.

Supplementals. What we don’t want to do is break the morale of

the workers. But we are willing to look at both sides. Thank God

that we have great federal workers who do a great job. But they

have been demoralized for a long period of time.

I can remember when we had the A 76 and they would come to

us and talk about it. Then we had at base closure. They didn’t

know what bases were going to be shut down. And now they say

now we have a new regulation.

One of the things that I would like to know, and maybe you can

help me. DOD is going to appoint five members, it is a five-member

board. Is that correct when I say that? The evaluators who evaluate, maybe you can fill me in. Who appoints them? DOD?

Ms. LACEY. Sir, I think we have a couple of different kinds of

evaluators. We have used that word loosely here today. If you are

talking about the evaluator for an individual person, their performance, that is one set of evaluators. But in terms of the evaluation

of the program itself, we actually have about five evaluations already ongoing.

Mr. ORTIZ. Let’s start, one particular base.

Ms. LACEY. Sure.

Mr. ORTIZ. Who select those employees to evaluate—let’s say we

have 3,500 employees at that base. Who selects who is going to

evaluate the other 300 some odd employees.

Ms. LACEY. Okay, the evaluation of the individual performance

are folks—first, the first level is between the supervisor and the

employee. That is where the fundamental performance contract is

to begin with, that written contract about what is expected. And so

that supervisor will evaluate the individual’s performance against
30

some standards that have been written and validated DOD wide

for what that performance looks like.

That particular evaluation will then be reviewed by a group of

peer managers at that base, at that site, who are knowledgeable

of the kind of work that is done. So you will have supervisory mechanics reviewing the work of mechanics. They will have subject

matter expertise and knowledge. And then the work of that panel

will be reviewed by a high level authority.

Now depending on how large a base is, how many people are in

the command, the ultimate person on that base could be a—could

be the two-star general, or it could be a smaller at a lower level,

depending on the size of the work unit. So for example, sir, you

have 20 civilians down in Corpus Christi that will be reviewed by

the head civilian there subject to the commanding officer. So it is

going to depend on organization by organization.

Mr. ORTIZ. But I go back to my question, who appoints these people that do the evaluation?

Ms. LACEY. The commander of that organization, ultimately, the

head civilian or military commander of that organization will designate who the officials are on that base. They will be line managers. It is ultimately the job of supervisors to evaluate employees’

performance.

Mr. ORTIZ. But if I had it in for Mr. Courtney here because I just

didn’t like him, you know, and I want him out. What safeguards

are there to be sure that he gets a fair hearing?

Ms. LACEY. Actually, sir, there are quite a few safeguards, and

perhaps in many cases, more than there are today, because today

we have situations where it is only the first level supervisor that

reviews an individual’s performance. Under NSPS, there are multiple looks at that. And in addition, we put in place a DOD wide

standard for that performance. So you have those benchmarks.

Employees also have the ability to request a reconsideration of

that.

Now what that is going to look like with our representative employees remains to be determined, because we have negotiated

processes already for those sorts of things. But the way it is now,

and the way we ran it for spiral 1.1, employees that felt they were

not given fair treatment, were not objectively evaluated, had the

opportunity to appeal to the second or third level above. And they

did.

We had employees that asked for reconsideration. They had the

opportunity to make their case to clear up any misunderstandings.

And, in fact, ratings were changed as a result of employees providing additional information.

So, we have provided for that. And we will continue to provide

for that. In fact, I think personally that is an incredibly important

part of the process. If employees don’t feel like they have been

given fair treatment, I want to hear about it. I want to know so

we can go back in and correct it, provide the training that supervisors need or employees need, and clear the air so that we can

focus on outcomes.

Mr. ORTIZ. Mr. Gage.

Mr. GAGE. Yes. Mr. Chairman, taken what Mary just said, I am

a supervisor, and I think this employee has done an excellent job
31

under the standards that he has been given, performance standards at the beginning of that appraisal period. But I don’t give the

employee at that part my evaluation. I go to this peer group, which

Ms. Lacey is saying that this is a safeguard from employees.

What the supervisors do in there is they get a quota of forced

distribution of the number of outstandings they can give, because

they only have a certain pot of money. It is called a forced distribution. It is against merit principles. And I think we will end up in

court if they are not going to be able to rate the employees on exactly what they should be instead of going to a peer group of supervisors who then jockey around and see how many outstandings

they are going to give rather than really giving the employee what

he deserves because of his work against those supposedly objective

performance standards.

And for Ms. Lacey to say they go up in the levels, we don’t need

a company union. We don’t need management to look upon the

judgment of another manager and look upon the judgment of another manager to determine fairness.

We have situations in place. It is called binding arbitration. And

that is what we have. And that is what we insist on keeping.

Secretary DOMINGUEZ. Sir, let me—there is no force distribution.

The managers can give as many ‘‘outstandings’’ as they want. They

can score it as high or as low as the situation warrants based on

an objective evaluation of the performance. The review groups, the

peer review of an individual supervisor’s decision is important in

this system because you need to be able to reach across the enterprise and ensure there are common standards, common objectives

set, common evaluations across an enterprise under the command

of this one individual.

So there was fair and equitable treatment of all people across the

enterprises. That is what those review groups do is there is a dialogue with managers. It is not about forcing a distribution. It is

about ensuring consistency in the evaluations across the enterprise.

Mr. ORTIZ. I can remember one time when we had a group of employees from a workplace come and complain to me about they

were being written up because they couldn’t perform. They came to

me and said we can’t perform because we don’t get the parts. You

know, and this human nature, you know, it plays a part in all of

this. So I am glad we are beginning to air this out and see. Like

I said before, maybe we can find a middle ground because this is

too important to completely neglect, and find a way to work together. And I will tell you what, and we have got some wonderful

employees and I know what you are telling us, Mr. Secretary, and

you are telling us in good faith that you think this program is

going to work, but I am just going back to what my experience has

been in my 25 years here.

Mr. Courtney.

Mr. COURTNEY. Listening to the Secretary defend the Secretary’s

position to litigate where you obviously feel the President and the

Congress passed this perfectly formed, crafted proposal, I mean, I

practiced law for the last 25 years, and I was—an old timer used

to say to me if you want perfect justice, you are going to have to

wait until you go to heaven. And we would always sort of remind

clients and people who have to make decisions about people who
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have to contest and litigate that at some point there is no perfect

justice and you have got to sit down and find that common ground.

At some point it seems like you are giving us no other choice but

to act as a coequal branch of government if this problem doesn’t get

resolved. And it just seems to me that when you look at least at

the materials that were prepared by staff here, that when the regulations were issued by the Department and the comment from the

GAO and the federal district court came in so negatively, you have

got a problem. And you have got to deal with it, and I mean, what

I am hearing is that you don’t want to deal with it. You want to

have us do nothing and the courts will hopefully rule in your favor.

And to me, that just seems like a very unfortunate posture for the

government to be in, as the chairman said, dealing with such a

critical area of our government.

And you don’t have to comment, but I thought I would share my

old friend’s view of decisions like that about whether you just have

to pursue at all costs an outcome.

Mr. ORTIZ. Thank you so much.

I think that this has been a good hearing today. We certainly

welcome all of your testimony, and there might be some members

who couldn’t be with us today because they were attending another

hearing, but we will—if they have some questions, we will submit

them to you, and you can respond for the record.

Hearing no questions, thank you so much, and this hearing is adjourned.

[Whereupon, at 3:55 p.m., the subcommittee was adjourned.]
A P P E N D I X

MARCH 6, 2007

PREPARED STATEMENTS SUBMITTED FOR THE RECORD

MARCH 6, 2007

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DOCUMENTS SUBMITTED FOR THE RECORD

MARCH 6, 2007

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QUESTIONS AND ANSWERS SUBMITTED FOR THE

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MARCH 6, 2007

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QUESTIONS SUBMITTED BY MR. MCHUGH

Mr. MCHUGH. I have heard a number of concerns from civilian employees at Fort Drum, New York, in my 23rd Congressional District regarding the implementation

of NSPS. The new system appears to leave a great deal of discretion in the hands

of managers to determine pay raises and to impose adverse actions without adequate employee recourse. How are you training people to be good managers and how

do you measure whether the management system under NSPS is working?

Secretary DOMINGUEZ and Ms. LACEY. The NSPS has flexibilities, but their use

is not unconstrained. First, under NSPS, employees continue to have the same protections as other federal employees—merit systems principles, due process, whistleblower protections, and protection against illegal discrimination and prohibited personnel practices. Additionally you identify two areas of concern where we have built

in additional procedural limits to ensure fairness and consistency.

While the adverse actions and appeals portions of NSPS have not been implemented due to on-going litigation, there is no greater level of discretion for managers to impose adverse actions under these regulations, nor any less employee recourse available, than exists under Governmentwide provisions of title 5, United

States Code. The regulations recognize the critical nature of the Department’s national security mission and provide for greater individual accountability, which is

accomplished without compromising guaranteed protections of due process.

As for pay raises, managers do have greater discretion in making pay decisions

than before NSPS, however we included multiple internal review processes to ensure our system is fair to our people. For instance, our design built in checks and

balances so our employees receive full and fair consideration during the appraisal

process. Senior officials review performance plans to ensure consistency and fairness

across the organization. There are multiple review levels to make sure performance

ratings are based on documented accomplishments, make sense and are consistent

within the pay pool. Also, all employees have the right to request reconsideration

of their ratings through a formal process.

Managers and supervisors, including military supervisors and managers, are key

to the success of NSPS. Extensive training is given to ensure their understanding

of the system and the key role they play. Courses focus heavily on the performance

management aspect of NSPS, such as setting clear goals and expectations, communicating with employees, and linking individual expectations to the goals and objectives of the organization.

The Department is also focusing attention on the behavioral aspects of moving

into NSPS to better prepare the workforce for the changes NSPS brings. Course offerings such as interpersonal communication, team building and conflict management help facilitate interaction between employee and supervisor. More than a half

million training instances have already taken place—and this number will steadily

rise as more workers transition to NSPS.

Oversight and assessment of human capital management, regardless of the personnel system, are part of the Department’s Human Capital Accountability system.

To assess management under NSPS at a system-wide level, we are following the

practices of the Government Accountability Office and the Office of Personnel Management used for assessing human capital systems. This includes monitoring patterns of how authorities are being used, general trends in complaints, and workforce

attitudes. Specific examples of criteria to measure are trends in opinions of employees, supervisors, and managers about matters relative to mission alignment, quality

of new applicants and those being hired, action on problem employees, usefulness

of performance feedback, and trust in supervisors and managers.

Mr. MCHUGH. As more information comes to light about the widely publicized

problems at Walter Reed Army Medical Center, it appears that private-public job

competition, referred to by many as the ‘‘A–76 process,’’ sapped the facility of needed

workers. While NSPS and A–76 are two different programs, they are advertised as

ways to achieve efficiencies and improve performance. To put a finer point on the

issue, how will you ensure that NSPS works to actually improve the functioning of

the federal workforce? What criteria will you use to measure that improvement?

Furthermore, it seems to me, based on the February 2006 D.C. District Court ruling
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and union concerns that while the Department awaits the outcome of the appeal to

the district court decision, and perhaps continues further legal action if the appeal

is not favorably considered, the Department will be setting up the same kind of

workforce sapping environment created by the A–76 process at Walter Reed. Why

doesn’t the Department act now, without further litigation, to address directly with

the workforce the significant shortcomings identified by the courts with regard to

labor-management relations and grievance appeals?

Secretary DOMINGUEZ and Ms. LACEY. Working from the premise that good

human resource management practices are necessary for employees to be effective,

we plan to look at areas where we expect NSPS to contribute rather than try to

measure granular improvements in employee operational effectiveness. There will

be a measured implementation to ensure that managers and supervisors build upon

their experiences and training. Examples of criteria to measure NSPS contributions

include higher retention rates for high performers than low ones, pay consequences

for those who perform below a fully successful level, supervisor satisfaction with applicants under NSPS and with the ability to make organizational changes in an acceptable amount of time; positive feedback from the workforce and managers on any

improvements in communication, organizational awareness, or work integration related to the performance system; positive trends in opinions of NSPS employees, supervisors and managers about matters like mission alignment, quality of those

being hired, action on problem employees, frequency and usefulness of performance

feedback, and trust in supervisors and management.

The NSPS statute authorized the Secretary and the Director of the Office of Personnel Management to design a labor relations system and adverse actions and appeals processes that recognize the Department’s national security mission while preserving collective bargaining and employee rights. On May 18, 2007, the United

States Court of Appeals for the District of Columbia ruled that the Department’s

regulations complied with the law and overturned the D.C. District Court ruling.

In order for DoD to implement labor relations, adverse actions, and appeals portions

of NSPS, the court must issue a mandate to implement the decision. In the interim,

while DoD awaits the court decision to implement the mandate, unions have requested to stay the mandate’s issuance.

QUESTIONS SUBMITTED BY MR. REYES

Mr. REYES. A large segment of the civilian Department of Defense work force is

made up of personnel who perform unique tasks that do not exist in the private sector, in particular those working in the intelligence community. One of the proposed

merits of NSPS is the idea of pay for performance. The current GS schedule is based

on performance and tenure and is transparent to ensure fair treatment and pay for

federal employees. However, the NSPS would do away with these safeguards. I am

concerned that without the transparency provided by the current GS schedule intelligence easily could become subject to abuse and politicization. For example, a high

performing individual could be stymied in promotion or performance pay opportunities for providing assessments and intelligence that that may be at odds with the

views of US policy makers. As a result, individuals may feel more compelled to alter

their judgments to ensure promotions or higher pay. Has DOD considered the potential negative impact of the National Security Personnel System on the production

of fair and impartial intelligence assessments? What action is DOD taking to ensure

that intelligence personnel will not feel pressured to alter or shape their analysis

in order to achieve promotions or pay bonuses?

Secretary DOMINGUEZ. DoD Intelligence professionals are under the auspices of

the Defense Civilian Intelligence Personnel System (DCIPS). The DCIPS legislation,

Title 10, United States Code, Sections 1601–1614, was enacted in October 1996 and

provides the Secretary of Defense the authority to establish a separate personnel

system to meet the unique needs of the intelligence community. The legislation provides the authority to hire, develop, and retain a diverse, versatile, and highly qualified workforce to perform both Defense and National Intelligence missions. DCIPS

is the Defense Intelligence pay-for-performance personnel system. DCIPS is being

implemented within the Department in coordination with both the Director of National Intelligence (DNI) and the Under Secretary of Defense for Personnel and

Readiness (USD(P&R)).

Under DCIPS, similar to NSPS, employees and management are subjected to

greater accountability, performance documentation, and transparency. The layers of

checks and balances within the systems provide the civilian employees with greater

protection from abuse and politicization. High performing employees will receive significantly greater compensation in pay and rewards under NSPS and DCIPS than
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they would have under the GS system. Under NSPS, and DCIPS in the case of the

DoD Intelligence Components, there are multiple safeguards during both the performance rating and the performance pay decision processes. For intelligence employees, those safeguards will include review of the supervisor’s rating of performance by both the next level in the chain of command, and an additional review at

yet a higher level to ensure that there is consistency and fairness across the organization. If an employee believes that he or she has been treated unfairly in the process, there remain avenues of redress through the grievance and equal employment

opportunity protection processes. Similar processes are included to protect employees during the pay decision processes. To ensure the process works properly, all supervisors and managers will be evaluated on their effectiveness in the management

of their employees and the performance-pay decision processes.

Under the GS system, pay increases are for the most part automatic—either as

a result of the annual government-wide pay raises or periodic within-grade increases. Because there is little direct relationship between compensation and performance management, it is difficult to reward high-performing employees under

this system.

Under DCIPS and NSPS, employees will be provided specific, measurable performance objectives at the beginning of each annual performance period that detail

what is expected, and how outcomes will be measured. The performance management system’s processes and procedures are transparent to the employees. As an example, under DCIPS, an intelligence analyst’s performance objectives will detail the

types of analyses that are expected, and the quality of those analyses will be evaluated based on the extent to which they represent a collaborative approach to the

development of the analytic judgment; the quality of the technical analytic product

based on competencies developed under the aegis of the Director of National Intelligence for all intelligence community analysts; the critical thinking that went into

the product development; and the personal leadership demonstrated in the development of the product—including demonstration of the courage to stand up for one’s

judgments in the face of opposition. Those accomplishments will be documented, and

reviewed by others both within and, if necessary, outside the chain of command to

assess the value of the work products against established standards for the occupation.

If there should be pressure from policy makers or superiors to modify judgments

to conform to a desired answer, it is far more likely that the employee will have

a documented, evidentiary basis for challenging inappropriate treatment than would

be likely under the GS system.

The design of both the NSPS and DCIPS is intended to develop accountability

from the top down. At the Senior Executive level, the Department will establish objectives of accountability for results, transparency of processes, personal integrity,

and fairness in the management of personnel. Under the performance-based compensation systems represented by the NSPS and DCIPS, those values and expectations will cascade throughout the Department with results evaluated and used to

improve our performance as a Department in both the national security and intelligence worlds; and documented for oversight. DCIPS will contribute to fostering the

environment and culture under which production of fair and impartial intelligence

assessments occurs, as NSPS will contribute to meeting mission requirements in

other areas of the Department.

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