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i 

53–942 2010

[H.A.S.C. No. 111–38] 

DEPARTMENT OF DEFENSE NATIONAL 

SECURITY PERSONNEL SYSTEM 

HEARING 

BEFORE THE

READINESS SUBCOMMITTEE 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

APRIL 1, 2009 
(II) 

READINESS SUBCOMMITTEE 

SOLOMON P. ORTIZ, Texas, Chairman 

GENE TAYLOR, Mississippi 

NEIL ABERCROMBIE, Hawaii 

SILVESTRE REYES, Texas 

JIM MARSHALL, Georgia 

MADELEINE Z. BORDALLO, Guam 

HANK JOHNSON, Georgia 

CAROL SHEA-PORTER, New Hampshire 

JOE COURTNEY, Connecticut 

DAVID LOEBSACK, Iowa 

GABRIELLE GIFFORDS, Arizona 

GLENN NYE, Virginia 

LARRY KISSELL, North Carolina 

MARTIN HEINRICH, New Mexico 

FRANK M. KRATOVIL, Jr., Maryland 

BOBBY BRIGHT, Alabama 

J. RANDY FORBES, Virginia 

ROB BISHOP, Utah 

MIKE ROGERS, Alabama 

TRENT FRANKS, Arizona 

BILL SHUSTER, Pennsylvania 

K. MICHAEL CONAWAY, Texas 

DOUG LAMBORN, Colorado 

ROB WITTMAN, Virginia 

MARY FALLIN, Oklahoma 

JOHN C. FLEMING, Louisiana 

FRANK A. LOBIONDO, New Jersey 

MICHAEL TURNER, Ohio 

CATHY GARMAN, Professional Staff Member 

JOHN CHAPLA, Professional Staff Member 

MEGAN PUTNAM, Staff Assistant 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2009 

Page 

HEARING: 

Wednesday, April 1, 2009, Department of Defense National Security Personnel System ....................................................................................................... 1 

APPENDIX: 

Wednesday, April 1, 2009 ....................................................................................... 33 

WEDNESDAY, APRIL 1, 2009 

DEPARTMENT OF DEFENSE NATIONAL SECURITY PERSONNEL 

SYSTEM 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Forbes, Hon. J. Randy, a Representative from Virginia, Ranking Member, 

Readiness Subcommittee ..................................................................................... 3 

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

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

WITNESSES 

Bunn, Bradley, Program Executive Officer, National Security Personnel System, Department of Defense ............................................................................... 4 

Crum, John L., Ph.D., Director, Office of Policy and Evaluation, U.S. Merit 

Systems Protection Board ................................................................................... 9 

Farrell, Brenda S., Director, Defense Capabilities and Management, Government Accountability Office .................................................................................. 7 

Perkinson, Darryl, National President, Federal Managers Association ............. 11 

APPENDIX 

PREPARED STATEMENTS: 

American Federation of Government Employees, AFL-CIO ......................... 117 

Brown, Richard N., National President of the National Federation of 

Federal Employees ........................................................................................ 105 

Bunn, Bradley ................................................................................................... 43 

Crum, John L. ................................................................................................... 77 

Farrell, Brenda S. ............................................................................................. 57 

Forbes, Hon. J. Randy ...................................................................................... 41 

Laborers’ International Union of North America .......................................... 124 

Ortiz, Hon. Solomon P. ..................................................................................... 37 

Perkinson, Darryl ............................................................................................. 92 

DOCUMENTS SUBMITTED FOR THE RECORD: 

[There were no Documents submitted for the record.] 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Mr. Ortiz ........................................................................................................... 129 
Page

IV 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mr. Forbes ......................................................................................................... 143 

Mr. Ortiz ........................................................................................................... 133 
(1) 

DEPARTMENT OF DEFENSE NATIONAL SECURITY 

PERSONNEL SYSTEM 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, READINESS SUBCOMMITTEE, Washington, DC, Wednesday, April 1, 2009. 

The subcommittee met, pursuant to call, at 2:45 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. We want to welcome 

you to today’s Readiness Subcommittee hearing on the Department 

of Defense’s (DOD) National Security Personnel System (NSPS). I 

want to thank our witnesses for making the time to appear before 

us today. Welcome. We are very happy to have you with us. 

Two years ago the subcommittee held its first oversight hearing 

on the Department’s new personnel system, NSPS. It was clear 

from that hearing and formal studies, it has gotten mixed reviews. 

The intent of NSPS was to help DOD respond to its 21st century 

resources needs. Two years ago I asked the question: Was it the 

right fix? That question is still valid today. 

I am pleased that the Department has now undertaken a comprehensive review of NSPS. This review response is to a letter that 

Chairman Skelton and I wrote asking that Secretary Gates discontinue converting employees to the new system until the administration and Congress can properly address the future of NSPS. 

Since the Department has only begun its review, I understand 

that our DOD witnesses will not be able to give us very many details. However, I do hope that DOD will share with us the guiding 

principle that would be followed in undertaking this view. And all 

our witnesses should be able to provide the subcommittee with information on the challenges and concerns that must be addressed 

in any review of NSPS. This includes such issues as hiring, fairness of the performance rationing ratings, payment of salary increases versus bonuses, employee acceptance and managers’ accountability. 

We also should take a critical look at the General Schedule (GS) 

system and incentives provided under that system. During the 

campaign, President Obama indicated that he would consider either a repeal of NSPS or its complete overhaul. This subcommittee 

will be actively involved in any proposals related to NSPS. 
2 

We also will look carefully at the civilian personnel management 

system in general since DOD’s employees are 26 percent of the 

Federal workforce. Indeed, staff has been conducting a several 

month long analysis of such system. 

Today’s hearing will help lay the groundwork for any action that 

needs to be taken following the results of the NSPS review and the 

President’s direction. 

Let me go back for a minute to the time of the enactment of 

NSPS in the year 2003. At that time Congress was told that a new 

system was necessary to provide the Department with greater flexibility in hiring employees. This would respond to the number one 

complaint of Federal managers: that is, the need to fix the complex 

and lengthy hiring process. 

In fact, the Merit Systems Protection Board, which is represented by one of our witnesses today, has stated that the Defense 

Department could be the model for reforming the government’s hiring process. However, DOD has made no effort to tackle what I 

consider to be one of the biggest challenges faced by the Department: attracting qualified new people to work for the military services and the defense agencies. 

Since passage of NSPS, the Department has focused its efforts on 

its own unique pay-for-performance system. But should each agency be allowed to grade its own personnel system, which appeared 

to be the trend of the last administration? I wonder if that is good 

for the employees and the government as a whole. 

Even within the Department there are now three separate personnel systems—NSPS, GS and wage grade—and I am asking 

should this continue? Of course, many employees that I have heard 

from, the answer is clear: Stop NSPS and return to the GS system. 

Giving incentives for good performance and improving hiring 

were key reasons for the creation of NSPS. However, Congress already has provided numerous flexible authorities to all government 

agencies to reward performance in the GS system. These were 

never used. 

Today we will hear from a variety of witnesses. No hearing on 

NSPS is complete without a hearing from DOD. None of the political appointees from the Bush administration who pushed for 

NSPS are still around. So today we will hear from the individuals 

tasked with the challenge of making it work. They are always the 

most knowledgeable about NSPS. 

We have mandated that the Government Accountability Office 

(GAO) conduct a thorough review of NSPS to ensure that adequate 

safeguards are in place to ensure fairness. We will hear about the 

most recent report and GAO, which has its own unique pay-for-performance system, has found numerous problems with the DOD system. 

I already have mentioned the Merit Systems Protection Board, 

an agency that we rarely hear from. The Board has done numerous 

studies on the government’s hiring system. They recognize that hiring is critical to any discussion on civilian personnel management. 

And they have put forth numerous recommendations on reforming 

the Federal hiring process. 

Finally, the Federal Managers Association represents the users 

of NSPS. As managers, they have some very strong views on NSPS 
3 

and what it will take to get it fixed or what we should do if NSPS 

is eliminated and we return to the GS system. I look forward to 

your testimony. 

[The prepared statement of Mr. Ortiz can be found in the Appendix on page 37.] 

Mr. ORTIZ. But before starting, I ask unanimous consent to include the statements for the record for the National Federation of 

Federal Employees, the International Federation of Professional 

Technical Engineers and the American Federation of Government 

Employees. 

[The information referred to can be found in the Appendix beginning on page 105; a statement from the International Federation 

of Professional Technical Engineers was not available at the time 

of printing.] 

Mr. ORTIZ. And I would like to turn to my good friend from Virginia, Mr. Forbes, for any statement that he would like to make. 

Mr. Forbes. 

STATEMENT OF HON. J. RANDY FORBES, A REPRESENTATIVE 

FROM VIRGINIA, RANKING MEMBER, READINESS SUBCOMMITTEE 

Mr. FORBES. Thank you, Mr. Chairman. As you know, this hearing is important because it provides us an opportunity to gather 

relevant information and perspectives about the future of the National Security Personnel System. I can think of few programs this 

subcommittee has dealt with that were more controversial, more 

revolutionary, or more challenging to implement than NSPS. So I 

agree with the President’s directive to the Department of Defense 

to conduct a comprehensive review of NSPS. 

The Congress, primarily on initiatives originating in this subcommittee, made significant changes to NSPS in the 2008 Defense 

Authorization Act, and I believe we will again be faced with more 

decisions regarding NSPS once the recommendations and findings 

of the Department’s review are done and acted upon by the President. Until we know and have had a chance to analyze what the 

President proposes, I would caution the subcommittee from taking 

action to significantly change NSPS. 

Paying employees for the quality of their work is an underlying 

principle of most businesses and it should be an underlying principle in government. This is one of the underlying principles of 

NSPS, and I agree with this principle. The belief that people 

should be paid based on what they contribute is why so many are 

rightfully upset that American International Group (AIG) executives took on millions of dollars while their company was driven 

into the ground. The soundness of this principle is why the President has challenged our nation to provide extra pay to outstanding 

teachers while insisting that we stop making excuses for the bad 

ones. 

However, based on the reports of GAO and others, the implementation of a pay-for-performance system has been problematic. As we 

get to the questioning of our witnesses today, I would like to further explore with them what needs to be changed in NSPS to improve the pay-for-performance system and establish the credibility 

of it in the perception of NSPS managers and employees. 
4 

I am also interested in what alternatives the Department has to 

implementing the principle that we should reward those who are 

outstanding and ensure the few bad apples are removed from the 

important work that is nothing less than protecting our national 

security. 

So, Mr. Chairman, I join you in welcoming our witnesses and I 

look forward to their testimony. And I yield back the balance of my 

time. 

Mr. ORTIZ. Thank you. 

[The prepared statement of Mr. Forbes can be found in the Appendix on page 41.] 

Mr. ORTIZ. Today we are very fortunate to have a panel of distinguished witnesses who will discuss the Department of Defense National Security Personnel System. Mr. Brad Bunn is the Program 

Executive Officer, National Security Personnel System, Department of Defense; Ms. Brenda Farrell, Director of Defense Capabilities and Management, Government Accountability Office; Mr. John 

L. Crum, Ph.D., Director, Office of Policy and Evaluation, United 

States Merit Systems Protection Board; and Mr. Darryl Perkinson, 

National President, Federal Managers Association. 

Without objection, all the written testimony will be included in 

the record. And thank you again for giving us this information that 

we so much would like to hear about today. 

Mr. Bunn, you are welcome. And we look forward to your opening statements. 

STATEMENT OF BRADLEY BUNN, PROGRAM EXECUTIVE OFFICER, NATIONAL SECURITY PERSONNEL SYSTEM, DEPARTMENT OF DEFENSE 

Mr. BUNN. Mr. Chairman, Congressman Forbes, distinguished 

members of the subcommittee, thank you for the opportunity to 

speak with you today about the National Security Personnel System at the Department of Defense. NSPS implementation remains 

a critical area of focus for the Department. As of today, we have 

over 200,000 employees operating under the system. 

Today I would like to update you on our implementation, the 

challenges we have encountered and what is being considered in 

the upcoming comprehensive review of the program. We are in our 

third year of implementation and, like any major change initiative, 

we have had our share of both challenges and successes. As we consider how to best move forward with NSPS, I can assure you that 

the Department is committed to operating fair, transparent and effective personnel systems for our civilian workforce. 

In November of 2003, Congress authorized DOD to develop a 

more flexible civilian personnel management system to improve our 

ability to execute our national security mission. In November 2005, 

after a comprehensive design process, the Department and the Office of Personnel Management (OPM) jointly published final NSPS 

regulations. In April of 2006, we began our phased implementation 

of the system. 

Today the total number of NSPS employees is approximately 

205,000. Because the system may only be extended to our white 

collar workforce, and based on our policy to convert only non-bar-
5 

gaining unit employees, this represents most of the population that 

would come under the system. 

Before organizations converted, there was a comprehensive and 

extensive initiative to train senior leaders, managers, supervisors 

and employees on the core elements of NSPS on soft skills with a 

focus on performance management. This training represents one of 

the most extensive civilian-focused initiatives ever undertaken by 

the Department. 

We recently announced that we are delaying further conversions 

of organizations into NSPS pending the outcome of the upcoming 

review. During this review, organizations and employees already 

covered by NSPS will continue to hire, assign, promote, reward, 

and carry out other personnel actions necessary to accomplish their 

missions. 

Before I address the review, let me briefly describe where we are 

with implementation and some of the key issues we are facing. The 

original statute was enacted in November of 2003, and provided 

the Secretary of Defense and the Director of OPM the authority to 

establish a flexible and contemporary civilian personnel system to 

recognize the unique role that our civilians play in supporting national defense, while adhering to the fundamental tenets of the 

civil service system; namely, the merit principles. 

The Department and OPM jointly published those regulations in 

November of 2005. In the National Defense Authorization Act 

(NDAA) for fiscal year 2008, Congress made significant changes to 

the underlying NSPS statute, including repealing most of the labor 

relations adverse actions and appeals and a reduction in force provision. The core features of NSPS that we actually implemented 

were left essentially intact, including the pay banding and classification structure, compensation flexibilities, and the performance 

management system. 

The Duncan Hunter NDAA for fiscal year 2009 further clarified 

language regarding the staffing and employment provisions of 

NSPS. And over the last year the Department and OPM revised 

the NSPS regulations to conform to these statutory requirements. 

This past January, the Department completed its third cycle 

under the NSPS pay-for-performance system. Resulting in performance evaluations—— 

Mr. ORTIZ. I think your mike is gone. Try the other mike to see 

if it works. 

Mr. BUNN. Last fall over 1,600 NSPS pay pool panels convened 

to review and finalize performance appraisals and allocate performance-based salary increases and bonuses. Under NSPS, employees 

are evaluated on a five-level rating system with one being unacceptable and five representing role model performance. 

For the fiscal year 2008 performance cycle, the average performance rating was 3.46. The average performance-based salary increase was 3.67 percent with an average cash bonus of 1.94 percent. All NSPS employees rated above unacceptable received an additional general base salary increase of 1.74 percent and an average locality increase of 1 percent. 

The average total salary increase for NSPS employees in January of 2009 was 6.41 percent. To ensure fairness in the system, a 

number of safeguards were built into the process, including uni-
6 

form performance evaluation criteria, multiple-level reviews of recommended ratings, shared distributions and payout determinations, prohibition on the practice of forced distribution of ratings 

across the five levels and the employees’ right to challenge their 

performance rating through a formal reconsideration process. 

NSPS represents a significant change, particularly in the area of 

pay and performance management. Recognizing that this kind of 

cultural shift takes time, we have been paying close attention to 

the perceptions and attitudes of our workforce to assess our implementation and the design with an eye towards improving the system. 

Some common themes, both positive and negative, have emerged. 

What we know is that NSPS organizations are making meaningful 

distinctions in performance and associated rewards. We are also 

seeing improvement in communication between employees and supervisors and better alignment between performance plans and organizational mission and goals. 

NSPS employees are generally positive about certain aspects of 

the performance management system, including the linkage between their performance plans and the organization’s mission, the 

linkage between pay and bonuses and their performance. NSPS 

employees overall are generally more satisfied with their pay and 

the management of the organizations than their non-NSPS counterparts, and they are no more likely than non-NSPS employees to 

leave DOD for another job. These are results from our status of 

forces civilian survey that we have been taking over the past several years. 

However, other indicators are less positive. Employees and supervisors are struggling with the more stringent performance 

measures used in the evaluation process and employees are questioning whether the ratings are fair. Employees and supervisors, 

particularly those who are new in the system, often struggle to define measurable results-oriented job objectives and have difficulty 

in writing narrative assessments. 

We have also heard concerns from employees and supervisors 

about the increased administrative requirements associated with 

the performance management system and the transparency of the 

pay pool process, including whether forced distribution is occurring 

despite our prohibition on the practice. 

Both the Government Accountability Office and OPM in their formal assessments of NSPS highlighted many of these issues and 

pointed out that these kinds of reactions and perceptions are typical of broad change in management initiatives like NSPS. They 

noted that when there is a major change to a personnel system, 

employee attitudes and perceptions decline initially before employees fully understand and accept the new system. They also recognize that it generally takes three to five years for a new personnel 

system to gain acceptance. 

However, the Department has been taking steps to address many 

of these concerns, including expanding our pay pool training; offerings to include employees and supervisors; enhancing our online 

training tools and automated performance management systems; 

revising our policies to require organizations share aggregate pay 

pool results with the workforce; requiring defense components to 
7 

conduct a thorough analysis of pay pool results to identify and examine and remove barriers to similar rating and payout potential 

for demographic and other groups in the workforce, apart from differences based on individual performance or material job differences; and developing guidance for organizations designed to ensure that forced distribution of ratings is not occurring in the rating and payout process. 

On March 16 the Department and OPM announced a review of 

NSPS to assess whether the program is fair, transparent and effective. In addition, the Department decided to delay any further conversions of organizations to NSPS pending the outcome of this review. I can assure you that Deputy Secretary Lynn recognizes that 

there are a variety of viewpoints regarding NSPS, and is committed to a thorough examination that includes outreach to Congress, other Federal agencies, personnel management experts, 

labor organizations, employees and other key stakeholders. 

You asked that we discuss what is being considered in the program review. We expect that it will include a review of the underlying design principles of NSPS, the current policies and regulations and the extent to which the system is achieving its goals. We 

expect the review to also focus on key issues of fairness and transparency, not only in the design but also in the implementation. It 

is likely that the review will include visits to organizations operating under NSPS to speak directly to employees, supervisors and 

senior leaders who are operating under the system to gain their 

perspective. 

In addition to examining the various reports and assessments already conducted, the team will also obtain views on NSPS from 

labor unions, managers and professional associations, employee 

groups, Members of Congress and their staff, and recognized experts in personnel management. The goal is to obtain an objective, 

thorough assessment of the program resulting in recommendations 

to the Deputy Secretary and the Director of OPM on a way forward 

for NSPS. 

Mr. Chairman, we look forward to continuing to work with this 

committee on the way forward for NSPS. And thank you for your 

ongoing support for our DOD civilian workforce. I look forward to 

your questions. 

Mr. ORTIZ. Thank you so much. 

[The prepared statement of Mr. Bunn can be found in the Appendix on page 43.] 

Mr. ORTIZ. Ms. Farrell. 

STATEMENT OF BRENDA S. FARRELL, DIRECTOR, DEFENSE 

CAPABILITIES AND MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. FARRELL. Thank you, Mr. Chairman. Chairman Ortiz and 

members of the subcommittee thank you for the opportunity to be 

here today to discuss GAO’s most recent report on the implementation of DOD’s new human capital system for managing civilian personnel, the National Security Personnel System. 

It is important to note that strategic human capital management 

remains on GAO’s high-risk list that was updated in January 2009. 

The area remains high risk because of the continuing need for a 
8 

governmentwide framework to advance human capital reform to 

ensure the Federal Government civilian workforce can respond to 

the challenges of the 21st century. 

NSPS represents a huge undertaking for DOD, given its massive 

size and geographically and diverse workforce. Importantly, NSPS 

could have far-reaching implications not just for DOD but for civil 

service reform across the Federal Government. While GAO supports human capital reform in the Federal Government, how such 

reform is done, when it is done and the basis upon which it is done 

can make all the difference in whether such efforts are successful. 

Specifically, we have noted that Federal agencies must ensure 

that performance management systems contain appropriate internal safeguards. We have developed an initial list of safeguards 

based on our extensive body of work reviewing performance management practices by leading public sector organizations. 

In 2008 Congress directed GAO to evaluate, among other things, 

annually for three years, the extent to which DOD implemented internal safeguards as specified in NSPS law. Today I am here to discuss the finding and recommendations in the first of these reports. 

Specifically, my statement focuses on two areas: one, the extent to 

which DOD has implemented safeguards to ensure the fairness, effectiveness and credibility of the new system; two, how the DOD 

civilian workforce perceive NSPS and what actions DOD has taken 

to address these perceptions. 

First, while DOD has taken steps to implement internal safeguards to ensure the new system is fair, effective and credible, we 

found the implementation of three of the safeguards could be improved. For example, DOD does not require a third party to analyze rating results for anomalies prior to finalizing the ratings. And 

thus it does not have a process to determine whether the ratings 

are nondiscriminatory before they are finalized. Without a 

predecisional analysis, employees may lack confidence in the fairness and credibility of NSPS. 

To address this finding, GAO recommended that DOD require a 

predecisional demographic and other analysis. However, DOD did 

not concur, stating that a postdecisional analysis is more useful. 

GAO continues to believe that our recommendation has merit. 

Second, although DOD employees under NSPS responded positively regarding some aspects of performance management, DOD 

does not have an action plan to address generally negative perceptions of employees under NSPS. According to DOD’s surveys of civilian employees, generally employees under NSPS are positive 

about some aspects of performance management, such as receiving 

feedback and linking pay to performance. 

However, employees who had the most experience under the new 

system showed a negative movement in their perceptions. For example, the percent of NSPS employees who believe NSPS will have 

a positive effect on DOD’s personnel practices declined from an estimated 40 percent in 2006 to 23 percent in 2007. 

Our ongoing work is reviewing DOD’s latest survey results. Some 

negative perceptions also emerged during discussion groups that 

GAO held. For example, employees and supervisors were concerned 

about the excessive amount of time required to navigate the process. While it is reasonable for DOD to allow employees some time 
9 

to accept NSPS, not addressing persistent and negative employee 

perceptions could jeopardize employee acceptance and successful 

implementation of NSPS. 

As a result, GAO recommended that DOD develop and implement an action plan to address employees’ concerns. DOD partially 

concurred with GAO’s recommendation, but has yet to develop an 

action plan. 

In summary, we recognize that DOD faces many challenges in 

implementing the new system. NSPS is a new program and organizational change requires time to gain employees’ acceptance and, 

most importantly, trust. 

Moving forward as DOD and OPM embark on a study of NSPS, 

DOD has a unique opportunity to consider our previous recommendations as well as all of the safeguards key to ensuring that 

performance systems in the government are fair, credible, and effective. 

Mr. Chairman, that concludes my opening remarks. I will be 

happy to take questions when you are ready. 

Mr. ORTIZ. Thank you. 

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

Mr. ORTIZ. Dr. Crum. 

STATEMENT OF JOHN L. CRUM, PH.D., DIRECTOR, OFFICE OF 

POLICY AND EVALUATION, U.S. MERIT SYSTEMS PROTECTION BOARD 

Dr. CRUM. Good afternoon, Chairman Ortiz, Ranking Member 

Forbes, and members of the subcommittee. Thank you for the opportunity to testify today regarding the challenges related to recruiting and hiring candidates for Federal civilian jobs. 

U.S. Merit Systems Protection Board (MSPB) conducts independent studies of Federal civil service systems to determine the 

workforce is managed under the merits principles and free from 

personnel practices. In doing so we have identified a set of key 

challenges the government faces in terms of recruiting and selecting the next generation of Federal employees. 

The research MSPB has conducted on Federal hiring and the recommendations we have offered to the President and Congress are 

particularly relevant to discussions regarding the National Security 

Personnel System. In fact, DOD has cited many of the same challenges we have seen in other agencies as reasons for needing to establish new hiring flexibilities. 

Our studies have shown that there are several key barriers that 

have often prevented qualified applicants from seeking employment 

with the Federal Government. These include the length of the process, the complexity of the process, the use of ineffective candidate 

assessment tools, the absence of an effective marketing strategy, 

the lack of human resources and supervisory expertise and training 

in these areas, and the fragmented hiring approach used by many 

different Federal agencies. 

I will briefly discuss these issues in turn. First, with respect to 

the length of the hiring process, MSPB research has shown that it 

is not uncommon for successful candidates to wait five months or 
10 

more to receive job offers. Of course the longer the process takes, 

the more likely attrition is likely to occur. 

The second barrier to effective recruiting and selecting a highquality workforce is the complexity of the process. Decentralization 

in the hiring process has added to the complexity because there is 

no standard application for Federal employment. 

A third issue of concern regarding the Federal Government’s 

ability to hire a high-quality workforce is how Federal employers 

assess the relevant qualifications of job applicants. The assessment 

tools many agencies use are simply not effective predictors of assessing a job. 

Fourth, the Federal Government often fails to market itself effectively. Vacancy announcements are often poorly written, difficult to 

understand, and filled with jargon and unnecessary information. 

Consequently, many announcements can actually discourage potential applicants from applying for Federal jobs. 

The fifth area of concern is the current expertise of Federal 

human resources staffs and selecting officials. Previous Federal 

downsizing efforts resulted in the loss of human resource institutional knowledge that has not yet been fully restored. Hiring officials often do not have the knowledge they need to effectively carry 

out their role in the hiring process. This lack of expertise can create redundancies and bottlenecks. 

Finally, the Federal Government has moved toward a decentralized hiring process and the proliferation of human resource flexibilities and appointing authorities. The benefit of this approach is 

that agencies may tell their hiring authorities to better seek their 

mission needs. However, it also results in fewer economies of scale 

across the government, increased competition among agencies, and 

increased confusion among applicants as to why agencies use different hiring procedures. All these factors can affect merit principles and the ability of individual agencies to hire high-quality applicants. 

The MSPB offers several recommendations to guide, reform, and 

improve the Federal hiring process. We believe these recommendations would be relevant toward the improvements NSPS is also 

seeking in its hiring process. 

First, agencies should manage hiring as a critical business process, not an administrative function that is relegated solely to the 

human resources staff. 

Second, agencies should evaluate their own internal hiring practices to identify barriers to high-quality, timely, and cost-effective 

hiring decisions. The MSPB is in the process of performing its own 

hiring makeover to identify redundant and unnecessary steps and 

to improve our communications with applicants throughout the 

process. Many agencies would probably be surprised to see that 

many of the barriers they face were self-imposed. 

Third, we recommend that agencies, with the assistance of OPM, 

employ rigorous assessment strategies that emphasize selection 

quality, not just the cost. In addition, we recommend that agencies 

implement sound marketing practices and better recruitment strategies, improve their vacancy announcements and communicate 

more effectively with applicants. These reforms should encourage 
11 

applicants to await a final decision rather than to abandon the 

Federal job search in favor of employment elsewhere. 

Also we recommend that agencies prepare the human resources 

staffs and selecting officials to carry out the full range of services 

necessary to implement an efficient recruitment and hiring system. 

When DOD began implementing NSPS, the Department put significant resources on training human resources (HR) staffs, managers and employees on the new pay-for-performance processes. If 

agencies devoted similar resources to ensuring their HR staffs and 

managers are prepared to carry out their hiring duties, this would 

greatly reduce bottlenecks in the process. 

Agencies should take the majority of these steps without having 

to change existing rules and regulations. Implementing these recommendations should help agencies ensure that they are hiring 

qualified employees in a timely manner, from all segments of society, after fair and open competition, while treating applicants fairly 

and equitably as described by the Merit Systems’ principles. 

Again thank you, Mr. Chairman, for the opportunity to appear 

this afternoon and I would be happy to respond to questions from 

you or other members of the subcommittee. 

Mr. ORTIZ. Thank you. 

[The prepared statement of Dr. Crum can be found in the Appendix on page 77.] 

Mr. ORTIZ. Mr. Perkinson. 

STATEMENT OF DARRYL PERKINSON, NATIONAL PRESIDENT, 

FEDERAL MANAGERS ASSOCIATION 

Mr. PERKINSON. Chairman Ortiz, Ranking Member Forbes, and 

members of the subcommittee, my name is Darryl Perkinson, and 

I am here today representing the over 200,000 managers and supervisors in the government in my role as the National President 

of the Federal Managers Association (FMA). Currently I serve as 

the nuclear training manager at the Norfolk Naval Shipyard. I recently completed 29 years of service with the Navy, and the last 

23 in management. Please keep in mind that I am here on my own 

time and my own volition representing the views of FMA and do 

not speak on behalf of the Department of Defense. 

Throughout my career I have spent time in three separate pay 

systems: wage grade, General Schedule (GS) and now the National 

Security Personnel System. Over the past 18 months I have been 

involved with NSPS as a rating official and an employee being 

rated. Nearly all of FMA’s DOD members are now operating under 

NSPS. 

As stakeholders are the ultimate success or failure of this system, we appreciate the opportunity to appear before you today. The 

face of America’s workforce is changing. A model once attracted for 

employing the most talented members of the workforce, the civil 

service now seems unreflective of the expectations of today’s job 

seekers. The current General Schedule pay system and performance review methods are antiquated. FMA managers believe a 

switch to pay-for-performance is necessary to compete with the private sector and also to encourage and reward high performance. 

The time for rewarding employees simply for longevity has passed, 

and many managers want to be rewarded for the job they do. 
12 

We are realizing, however, that NSPS is not delivering on its 

promises. The implementation of NSPS has caused a fundamental 

shift in culture at DOD, a shift for which our members were not 

adequately prepared. Going into the system, the biggest concern 

among our members was how the funds in the pay pools would be 

distributed. 

In 2007 Congress determined that all NSPS employees rated 

above unsuccessful must receive no less than 60 percent of the 

General Schedule raise appropriated by Congress. It is absolutely 

critical that an employee rated a three or above receive no less 

than the General Schedule pay raise. Issues of fairness and low 

morale will certainly surface if valued performers were to receive 

pay raises lower than their GS counterparts. Avoiding this situation is necessary to promote confidence in the system. 

We are also finding there is a lack of concrete business rules that 

allow for a transparent and fair deployment for pay-for-performance. We have heard several reports of the pay pool panels being 

out of touch with objectives and job functions of the employees they 

are rating. If the panel is the ultimate authority on the final evaluation and is able to adjust the supervisor’s rating, employees 

should have access to their evaluation before the panel engages in 

that review. 

We have heard reports of great pressure from the panels to lower 

ratings, especially in the cases of poorly written self-assessments, 

despite claims from DOD leadership that this should not occur. The 

pay pool panels heavily rely on one’s written assessment, even 

though these evaluations are not required. 

The panels are also too focused on the impact they have on the 

share value. The sole purpose of the pay pool panel should be to 

ensure fairness, transparency and consistency exists in the system. 

This is an issue I personally experienced. During the last cycle I 

rated seven employees and the sub-pool panel took particular issue 

with the rating of one of them, mostly because they did not feel his 

self-assessment was up to snuff despite my repeated claims that he 

was my ‘‘go to’’ person. In the end the panel won out, and I do not 

feel that this employee was properly rewarded. 

DOD currently employs workers enrolled in three different pay 

systems. This is simply unacceptable. The problem is exasperated 

when raises among equally performing employees differ. It is the 

recommendation of FMA that DOD establish cohesion within the 

Department in order to foster a sense of equality among the workforce. 

Many members of FMA are calling for us to return to the General Schedule system. However, this is not as easy as one might 

think. First and foremost, we must ensure employees’ pay is protected. Employees who excel under NSPS and who were appropriately rewarded by increases in salary beyond the GS schedule 

scale should not be penalized by losing current pay or eligibility for 

future pay raises. Given that the average pay raises under NSPS 

have far exceeded the GS raises, many employees are now a GS 

level or two above where they were when they entered NSPS, 

sometimes without added responsibility. 

We must ask ourselves what the options are for these employees, 

and I lay out some suggestions in my written testimony. I also dis-
13 

cuss several performance awards that are available to GS employees that we feel have been underutilized. We are encouraged the 

Department heeded calls to halt further implementation of NSPS 

until an independent review of the system could take place. While 

the details of this process are unknown, we strongly suggest employee groups, both managerial and unions, be invited to participate. The unique experience of these employees allows them to convey what is working, what is not, and what is actually going on at 

the ground level. 

Any pay system, whether it be NSPS, General Schedule, or something entirely different must adhere to certain principles. As Congress debates where to go with the pay system at DOD, I include 

many suggestions for improvements in my written statement, including adherence to merit principles, adequate funding for performance awards and engagement between employees and managers. It is imperative that any system stand by the principles of 

objectivity and transparency. We must take a cautious and deliberate path as we move forward. 

Thank you for this opportunity to appear before you today. And 

I am happy to answer any questions you may have. 

Mr. ORTIZ. Thank you so much. 

[The prepared statement of Mr. Perkinson can be found in the 

Appendix on page 92.] 

Mr. ORTIZ. You have given us very, very important testimony 

today. And I know that the members will have a lot of questions 

to ask. 

One of the questions that I have, you know, for employees converted from GS to NSPS, did the Department develop a system to 

make that decision? If NSPS is repealed, how would DOD reconvert back to the GS system? And what are the Department’s other 

options? In other words, converting to a hybrid of NSPS and the 

GS or any other option? What potential challenges do you foresee? 

How long will the process take? 

And, briefly, if you all can give us some feedback. And I don’t 

want to take too much time because we have a lot of good members 

here who would like to ask questions as well. 

Mr. BUNN. Thank you, Mr. Chairman. One of the issues that will 

likely be taken up by a review panel and the little bit of details 

that I can share with you on that is that it is likely going to be 

an external review to ensure that there is independence, so that it 

is an objective review. But we haven’t determined all the details of 

who is going to be doing it, how long it will take. But certainly one 

of the things that will be under their purview is to look at the various options for moving forward. And at this point all the options 

are essentially on the table, to include making changes to the existing system all the way to the more extreme option of reverting 

back to the GS. 

I can’t say that we have done a lot of work to analyze the impact 

of that kind of an option. I can tell you that the fundamental principle that we will likely follow is to ensure that we do no harm to 

the employees if they do revert back to the General Schedule, similar to our approach to converting people to NSPS, ensuring that no 

pay was lost. 
14 

So those are the kind of things that we would be looking at. We 

would certainly be interested in hearing from the Federal Managers Association, other groups on their ideas, if that is an option 

that is taken by the Department and OPM. 

Mr. ORTIZ. Do you feel that there might be room for modifications? 

Mr. BUNN. Well NSPS, Mr. Chairman, was developed to provide 

flexibility. And part of that includes evolving over time. So there 

has always been an expectation that as we implement the system 

and evaluate that implementation and the design of the system, 

that there would be changes over time. So the current structure of 

the program, including the regulations and the policies, they are 

built to change over time and they can certainly do that. 

So most of the changes that we could foresee, we would be able 

to make those changes under the current regulatory statutory 

structure, including changes to the performance management system, the rules around pay-for-performance. On the implementation 

side, we are always looking for ways to improve how we implement 

the system, how we train our workforce, how we communicate to 

the workforce to ensure that there is fairness and transparency in 

the program. 

Mr. ORTIZ. Anybody who would like to add anything to the question? 

Mr. PERKINSON. Mr. Chairman, I think the key point for us is we 

have taken 205,000 people and put them in a system that there is 

no doubt that we have seen it work in several areas. It works in 

several areas and it hasn’t worked in others. And we have shared— 

we will share and we have shared the complications that we have 

seen with the system as it presently works and some of the disparities that do occur in our different agencies and organizations. 

I feel that with the fairness to the people that have gone in the 

system—and we don’t want to lose the fact that we did reward people in this particular system for pay-for-performance—and we 

think from our standpoint that was the right direction to go. We 

don’t want to lose that ground, but we also want to protect them, 

whatever options come out after we do our review. 

Mr. ORTIZ. Ms. Farrell. 

Ms. FARRELL. Mr. Chairman, we would probably advise what we 

advised when NSPS was first introduced as a concept: Move cautiously. We would recommend giving the study that my colleague 

from DOD has mentioned with DOD and OPM time to look at the 

aspects. 

NSPS, as you know, is very broad. It covers performance management, classification, compensation. There are so many moving 

parts. And first be sure what it is you want to fix before you move 

forward to fix it. There are no specific rules that we are aware regarding how to convert back, if that were the option determined to 

take. But there are demonstration projects that have been conducted, say, at the U.S. Army laboratory where they did write rules 

in their regulations about converting back. It basically, though, was 

directed at pay. 

And as you have already heard from other panel members, there 

are roles and responsibilities and things are changing. But there 
15 

are some other rules in these demonstration projects that might be 

looked at as a point. 

Mr. ORTIZ. I just have one—would you like to add something? 

Thank you. I just have one more question and then I will yield to 

my good friend from Virginia. 

Why has the experience with pay-for-performance in defense laboratories demonstrated your program has been so much more positive than DOD and NSPS experience? And I ask GAO and DOD. 

Maybe they can add something to that. 

Mr. PERKINSON. From the FMA perspective, we had some folks 

that—one of our chapters in China Lake, they were run under the 

demo projects. And I think one of the things that Ms. Farrell 

brought up was they moved cautiously as they implemented the 

demo projects, whereas when we implemented across agency lines 

in the different departments, we had a tendency for things to—the 

different ways that business rules could apply didn’t leave a consistent base for the projects to go out. So we had individual pockets 

created at the different agencies or the facilities. 

So with the demo projects, they were concentrated on what they 

did and they moved cautiously. So I think that was the success of 

those. 

Mr. BUNN. If I could add something, Mr. Chairman. We did use 

some of the lessons that we learned from defense laboratories and 

other personnel demonstration projects as we have designed NSPS. 

One of the things I want to point out is that as we implemented 

those, the early years of those implementations did experience 

some of the negative perceptions and attitudes that we are seeing 

in NSPS. The important difference between NSPS and those demos 

is that the nature of the workforce and those laboratories were different. It was a professional workforce. It was homogeneous for the 

most part. And the flexibilities were very much designed for that 

kind of organization. 

NSPS organizations and the way we designed NSPS, it is not the 

same kind of implementation. We have rules that are more standard across NSPS and weren’t as tailored to those workforces. So 

there was a—you know, in some ways there were important parallels. We are experiencing the same kinds of things in the early 

years that they have experienced. And OPM and, I believe, GAO 

has pointed to those as well. But there are also important differences. And we have attempted to learn the lessons from the 

demonstration projects and we have continued to do that. 

Mr. ORTIZ. I would just add that performance management is 

something that we have talked about. NSPS touches compensation 

and hiring and performance management. But true performance 

management touches everything throughout the organization. The 

goals cascade through the organization and touches how you hire, 

how you motivate, how you reward. And NSPS is very broad, much 

broader, I agree, than what we have seen at the demonstration 

projects. And it takes time. It takes five to seven years, when we 

have looked at results-oriented organizations that do use such type 

of management. 

Mr. ORTIZ. Anybody else? If not, I yield to my good friend from 

Virginia, Mr. Forbes. 
16 

Mr. FORBES. Thank you, Mr. Chairman. Again I want to thank 

our witnesses for your expertise and for sharing it with us today. 

I am going to have a number of questions with some degree of 

specificity I would like to submit to you in writing, where you can 

think about them and just give us answers so we can get information. While we have got this brain trust here, I want to do a more 

macro question. I think all of us would agree anytime we have a 

personnel system, it is never going to start off perfect. 

The second thing, it is never going to be implemented perfect. 

And I remember the days in law school; I used to envy the law 

school professors because all they had to do was stir the pot and 

ask questions, but never answered anything. When you get to be 

a judge or lawmaker, ultimately we have got to pull that hot stuff 

from stirring all around, and we have to answer the questions. 

One of the questions we are going to have to answer is this: Do 

we continue to tweak the NSPS system? Or at what point do we 

ditch it and say we are going to go back to the GS system, or do 

we ever get there? 

And what I would like to ask you is just your individual perspectives. Do we continue working and trying to tweak this and make 

it better? Or do we ditch it and go back to the GS system? Because 

both of them have pitfalls. It is not a clear-cut question on either 

one of those. 

And from your individual perspectives, seeing all you have seen, 

know all the questions we can stir up, know that we can say well, 

this is a problem here, this is a problem there, what do you think? 

Continue to tweak it, modify it, or ditch it and go back to GS? 

And if each of you would give us your perspectives on that, I 

would appreciate it. 

Mr. BUNN. Well, I think that is one of the issues that this review 

team is going to look at and wrestle with. My experience is that 

these kinds of systems are only successful when we have full commitment on the part of leadership, the line management in organizations, all the way up to the senior leadership. And in the Department of Defense that is both a civilian leadership as well as the 

military leadership. 

This review, this time-out that we are taking, gives the new leadership in the Department of Defense under the new administration 

an opportunity to grapple with those fundamental questions and 

the underlying design principles of NSPS. And, really, I think what 

is going to happen is they are going to struggle with figuring out 

what things are implementation issues and what things are fundamental design or systemic kinds of issues. And, frankly, where we 

are in implementation now, we are just now far enough along in 

our implementation to start seeing and discern those things. But 

ultimately, trying to get back to your question, it could go either 

way. 

Mr. FORBES. Brad, let me just—you have immunity here. There 

is no liability. We are just trying to get our arms around it. We 

really respect all of your opinions. 

From what you know now—and I realize there are a million different things, and I know what they are going to try to do—what 

are each of your opinions? Is it worth tweaking and making it 
17 

work? Can we get there? Is that the way to go? Or do we need to 

ditch it? 

Mr. BUNN. I think the—you said immunity, right? 

Mr. FORBES. You have got immunity. 

Mr. BUNN. I think there have been examples and demonstrations 

of successful systems like NSPS that we can point to and say they 

made it work over there. I think we can look at that and see—at 

least see a potential future where there is an NSPS and that have 

overcome and tackled these major problems. 

We have addressed the issues that, Mr. Chairman, you mention 

in your opening statement and, Congressman Forbes, you mentioned. And that given time, we can overcome those. But the other 

side of that is that there are fundamental issues that, Mr. Chairman, you raised, one of them being multiple systems across the 

Federal Government, agency unique kind of systems. And I think 

this will probably open a debate about whether that is the right approach for the Federal Government. 

So I think it is a healthy debate that we need to have. And I 

think that we need to have this review so that the new administration can embrace the program if we are going to move forward with 

it, and then at the very least get clarity so that our workforce 

knows what it is going to be operating under. 

Mr. FORBES. I don’t have a lot of time. Ms. Farrell, Mr. Bunn is 

still teaching law school on me. What do you think? If we go back 

to GS, are we going to have to make major changes in GS? Where 

do we go? What do you think; keep it, tweak it, go back to GS? Do 

we have to make major changes? 

Ms. FARRELL. My agency would say—and I agree with my agency—tweak it. We strongly believe in performance management and 

the benefits that can be derived. It is not that you can’t get results 

from the GS system, but performance management has given DOD 

the opportunity to reenergize and refocus their efforts and look at 

how they hire and how they develop and how they pay with the 

flexibilities. Give them more time to work through this. 

Mr. FORBES. Thank you. Dr. Crum. 

Dr. CRUM. Yes. I am going to say something slightly different, 

which is that the issues that are faced by DOD are also faced by 

other Federal agencies so that, in fact, if we wait for DOD to reservice a proving ground, we would be waiting some time and fail 

to capitalize I think on an opportunity to improve the civil service 

at the present time; where now we can capitalize on the economy 

to bring in people, which maybe we otherwise could not if in fact 

we had the right systems in place. 

We will ultimately still be facing the same sort of retirement tsunami, for instance, in a few years that was talked about by GAO 

and others. Even though that may be delayed because of the economy, it will come up. We need to solve the same problems from 

other agencies, not just DOD. 

Mr. FORBES. Mr. Perkinson. 

Mr. PERKINSON. Congressman, I have a constituency that probably whatever answer I give you will be the wrong one. 

Mr. FORBES. So would we. 

Mr. PERKINSON. I am going to speak from my experience, being 

a supervisor and head of an organization that already has—we 
18 

have the three systems. I have to manage those three systems. I 

have wage-grade people assigned to me, I have General Schedule 

and I have NSPS employees. My personal feeling is that if at the 

end of the review we are going to come up and say we will go back 

to GS, we ought to go back to GS now, because that only gives me 

two systems to have to work with. I truly do think, though, we 

need to look across the board agency-wide at all the different aspects that are going on. 

In the Internal Revenue Service, for instance, with the FMA organization, they have the pay-for-performance system. Social Security is looking at it. So we need to come back with basic principles 

that we are looking at, that all the agencies can adhere to, that we 

have one pay-for-performance system and some principles laid out 

there that we all can use as a standard. I think that is the direction we need to go so we don’t have multitudes of pay-for-performance systems that we are trying to operate under. 

But if I had my gut feel in what would serve me better at Norfolk Naval Shipyard today, I would say go back to GS. 

Mr. FORBES. Thank you. And thank, all of you, for your answers. 

And Mr. Chairman, thank you for your patience. 

Mr. ORTIZ. Thank you. Ms. Shea-Porter. 

Ms. SHEA-PORTER. Thank you, Mr. Chairman. Well, your last 

comment certainly got my attention. And I wanted to ask you to 

please elaborate the reason for that, Mr. Perkinson. Why would you 

go back? 

Mr. PERKINSON. Well, right now, one of the difficulties in being 

a good, competent manager is the different types of rules we are 

under. Under the wage-grade system, of course, I have got to deal 

with different rules and responsibilities, and plus they are getting 

a structured raise that is dictated by the wage survey system. And 

the General Schedule, the bargaining unit employees that I have, 

they are coming under the congressionally approved pay raise. And 

then I have the NSPS folks that we are giving raises to. We are 

rewarding performance. 

So it is a management nightmare to kind of have to explain why 

you are not—why certain aspects or certain people are not getting 

the same consideration that another group is getting. 

For instance, the new question at my activity is, from our General Schedule bargaining unit, when are we going to get paid for 

our performance like the NSPS folks? When the survey came out 

and the results of the payout, they got 3.9 percent. Okay. So the 

average payout for the NSPS folks was 6.4. Legitimate question. 

But it is a tough one to manage through when you have got those 

different types of attitudes and people that you have to motivate 

to get your job done on a daily basis. 

Ms. SHEA-PORTER. But if they had the choice—I thought I heard 

you say that you would go back to the GS. 

Mr. PERKINSON. I said as a manager I would go back to the General Schedule because it would make it easier for me. There are— 

and I included in my written testimony—there are different flexibilities with the General Schedule system where we can pay for 

performance. Quality step increase, those type of activities, there 

are some tools in the General Schedule system where we can reward performance. 
19 

Ms. SHEA-PORTER. I have to say I have a family member who has 

lived and been happy under the GS system for a long time. 

Mr. Bunn, I have been hearing some complaints—and not from 

my family member. I have plenty of complaints but not about this. 

I have been hearing complaints from Federal employees that under 

the system they don’t feel comfortable talking to a manager about 

something they don’t like, or a suggestion, because they fear that 

they do not any longer have the protective structure around them 

and that later they will be punished for being so frank. And so they 

tend to find somebody who has the courage or the good standing 

with their boss, so that they won’t have to worry. 

What are you doing to make sure that doesn’t happen? I am sure 

that happens. But what are you doing to acknowledge it and to 

work on that? I mean, that is why we have got the system to begin 

with, the original GS, so that it would be fair and equitable and 

people could understand. I know there are problems. But at least 

we understood if you were here a certain amount of time, you performed at a certain level, you could expect that the job would not 

go to the relative who just showed up two days ago. 

Mr. BUNN. Well, one of the things we did early on in the system 

was a fairly extensive training effort with our supervisors and 

managers. They are really the people who have to make this work 

because that is where we are putting this discretion. We are putting discretion in the hands of supervisors and managers who now 

have more influence over the pay outcomes of their workforce. So 

that was a conscious choice the Department made. That is one of 

the underlying principles of pay-for-performance. Part of it is the 

design of the performance management system and ensuring that 

you have a structured evaluation system that measures performance against objective criteria. 

So when we designed the performance management system we 

established benchmark criteria against which individual performance is measured, and then ultimately rewarded under the pay-forperformance system. Training our supervisors and employees in 

understanding how that works and setting results-oriented goals 

and objectives aligned with the mission, those are all parts of our 

implementation training and continues to be part of NSPS training 

going forward. 

Ms. SHEA-PORTER. That sounds wonderful. But how do you extract the part—in every person—which is, I like this one better, or 

I didn’t like the work that one did because I thought we should 

have used—— 

Mr. BUNN. The issue of favoritism. 

Ms. SHEA-PORTER. Or for whatever. There are people who don’t 

even recognize it in themselves, and you could train them forever 

and they could agree with you about the objectives but not recognize that they are not using those objectives, that their outlook is 

colored by starting off with a certain perception. 

So how do you account for that? And how do you try to pull that 

out of the recipe? 

Mr. BUNN. I think what you have to look at, then, is what safeguards do we have in the system. And in fact that is what my colleague from GAO has done most of her work on in looking at 

NSPS, and GAO has actually found that we do have safeguards in 
20 

the system. Part of that is multiple layers of review in the performance management process, so that first-line supervisor is not the 

final say in the performance evaluation process; that a higher level 

of review looks at the rating, and at that point that could catch 

some of those kinds of behaviors if there is a bias, if there is favoritism going on. 

And then the pay pool process, which is the panel process that 

we instituted as part of NSPS, and the performance evaluation 

where you have a panel of senior leaders from within the organization reviewing the outcomes of the rating process to ensure that 

the criteria is applied appropriately, consistently, and fairly across 

the organization. So those are the most significant safeguards that 

we have. 

Ms. SHEA-PORTER. But of course it is the massiveness of the job, 

and I know how hard Federal employees work. They really can’t sit 

down and find out all the nuts and bolts in a particular work station, in a particular issue. It is just not possible. But if that were 

working, Ms. Farrell, could you please tell me why the satisfaction 

rate is dropping? It would seem to me—did you say about 26 percent now? 

Ms. FARRELL. Twenty-three. 

Ms. SHEA-PORTER. It would seem to me that over, you know, a 

couple of years, as people became a little more accustomed to it, 

that the rate would stay the same or maybe even rise a little bit 

instead of plummeting. 

Ms. FARRELL. It did plummet, and typically with a transformation of this major end scope, you will see a plummet. There 

hasn’t been enough time to pass to see if that is going to be a consistent trend. We will be looking at this year’s and next year’s results as well to see, but typically it will plummet, it will level off, 

and hopefully it will go back up. 

But if I may go back to your first question regarding the safeguards, as Mr. Bunn said, we did look at the internal safeguards, 

and training is one. Training and retraining. And we cannot emphasize enough that the training has to be continuous. It is not just 

up front when you launch the system, but you have to keep doing 

it with the supplementals. And we did give kudos to DOD regarding training that was needed by all employees up front and then 

specialized training on different aspects of the system, et cetera. 

But the predecisional analysis that I referred to that DOD disagrees with, that is an opportunity for a third party that is outside 

of the chain of command to be—to conduct an analysis to look for 

anomalies that may need further investigation in terms of a particular individual or certain groups, inconsistencies that warrant 

investigations; not to necessarily change the rating to make it look 

ideal for a certain type of distribution, but to see if something 

needs to be investigated, to make sure that the employee is receiving a rating that is a comparison of what they did with their objective and the other performance indicators, and then take steps and 

change it if a mistake was made. But that is something that DOD 

does not require, and it could help, help, ensure what you are talking about. 

Ms. SHEA-PORTER. I remember a couple of years ago when we 

had the hearing and the report on that side of the table was pretty 
21 

sunny, that people were happy, that their money was better, that 

they thought it was fair, that they were getting recognized. So it 

is interesting to me to see this happen again and see that what my 

initial suspicions were seem to be possibly coming true under this 

system. So thank you all. I appreciate it. 

I yield back. 

Mr. ORTIZ. Mr. Rogers. 

Mr. ROGERS. Thank you, Mr. Chairman. 

Ms. Farrell, I wanted to talk a little bit to follow up on a question. Tell me about these ratings. The employees participated in a 

rating program where they rated their satisfaction level. Is that 

what you were saying had plummeted? 

Ms. FARRELL. She was referring to some remarks in my opening 

statement about employees’ overall dissatisfaction. Those who had 

been under the system the longest when we look at DOD’s employee survey results, there was dissatisfaction expressed from 

2006 to 2007, and it plummeted from about 43 to about 27 percent. 

Mr. ROGERS. Just among those in NSPS? 

Ms. FARRELL. Yes, those who were in NSPS for the longest. As 

you know, NSPS has been phased in. Again, that is why we believe 

an action plan is needed to address such concerns, to find out what 

is behind that statement that they are dissatisfied that NSPS will 

have a positive impact on the personnel practices, and to dig deeper and address those concerns. 

Mr. ROGERS. Was there a similar review or sampling of the wage 

grade in the GS employees to see if they were satisfied with their 

pay system? 

Ms. FARRELL. There are statistics that surveyed the GS, and 

there are statistics that show those who are under—for certain 

questions, those who are under NSPS have a more favorable view 

than when they were under the GS system. So there are positive 

indicators as well. 

Mr. ROGERS. But I am trying to compare apples to apples. Currently a snapshot of the employees in the three systems, does one 

stand out as being much less desirable than the other two? 

Ms. FARRELL. It is mixed. When we looked at what data is available, it is a mixed report card right now. 

Mr. ROGERS. Okay. Staying with you, you talked about finding 

a way to reassure employees that it is fair and equitable. What 

kind of ways do you think that you are going to be able to do that? 

Ms. FARRELL. One of the safeguards that Congress mandated for 

DOD to include in the NSPS system is to involve the employees in 

design and implementation. Now, we are past design, but we are 

well into implementation. Again, one way to involve the employees—and I am not saying that DOD does not. They hold town hall 

meetings. They have focus groups. They conduct this status of survey for civilians that is projectable to the entire population on a 

regular basis, asking questions about NSPS; but it is take that survey result and document what the employees’ concerns are, and 

take action, hold somebody accountable with coming up with something to respond to the employees, and that would be pulling the 

employees into the implementation part at this point. 

Mr. ROGERS. As a part of your review, did you all look at in the 

NSPS system employees that had gotten significant bonuses and 
22 

kind of review where the complaints were that they were inequitable? 

Ms. FARRELL. No, we did not look at individual cases, and the 

survey results I don’t believe break down the type of information 

that you are trying to get to. It would come up in our focus group 

discussions, but nothing that would be projectable. 

Mr. ROGERS. Well, Mr. Perkinson talked about his situation with 

his employees and how he found it to be unfair from a manager’s 

standpoint. And it would be good if you could take the pay raise 

situations where there has been expressed concern that it was unfair the way it worked out and look at them and see if there is 

some way we could remedy that. 

But, Mr. Perkinson, do you know of any way we could do that? 

Mr. PERKINSON. There is a mechanism in NSPS that allows—it 

is called reconsideration, and it is a process that can work by the 

employee. But it comes back to a point that was made earlier 

about, you know, the employee has got to have the desire and the 

knowledge to want to go make that reconsideration. And I think in 

some cases what happens is the employee is frustrated and says, 

‘‘I will just accept what I get,’’ rather than make the effort to ask 

for reconsideration. I do know of a personal experience where somebody did ask for reconsideration, and it was accepted, and the process worked. So there is a tool in NSPS that does allow for the employee to make a challenge to a rating if they think it is inappropriate. 

Mr. ROGERS. My depot employees are very apprehensive about 

this NSPS and its equitable nature, which leads me to want to 

know how do employees feel about the wage grade and the General 

Schedule? I would love to see some apples-to-apples employees survey among those three groups, because if we follow what Mr. Perkinson indicated would make his life simpler and got rid of NSPS, 

I would like to know that the people who are in wage grade and 

GS and say, that is a good thing, and not say, you made it worse. 

So I would just like to see that survey. 

Thank you, Mr. Chairman. 

Mr. ORTIZ. Ms. Bordallo. 

Ms. BORDALLO. Thank you, Mr. Chairman. 

I have a question for Mr. Bunn. In fact, I have a series of questions. First, the issue of implementing this system is of great importance to our civilian workforce, and the halt in further implementation of this system allows us time to get the process right 

and make sure it is fair and equitable for all civilian employees in 

DOD. 

Now, on Guam—I represent the U.S. territory of Guam. The commanders in the Air Force and the Navy are moving toward implementing a joint region concept that was dictated by a 2005 Base 

Closure and Realignment (BRAC) decision. I have heard from several constituents on Guam about concerns they have regarding how 

civilian personnel will be treated for purposes of promotion and eligibility for other civilian jobs within their specific service. 

Now, similarly, NSPS allows—the rules allow each individual 

military organization or service to determine how much funding is 

available for raises and bonuses, which leads to inconsistency 

among all DOD organizations. 
23 

What action can be taken to require more consistency in the 

budgeting of NSPS among the various organizations to ensure 

more fairness in payouts? 

The second part of that question: What impact does joint basing 

or joint region implementation have on civilian employees who are 

part of the NSPS system? 

And, third, has DOD factored in the complexities of joint base 

implementation into how the NSPS system would be implemented 

on Guam and at other installations facing similar joint basing requirements? 

Mr. BUNN. I will start with the joint basing issues first. We are 

in the process of planning for implementing the joint basing decisions, and in some of those cases, it does involve bringing organizations from different services together under a single umbrella and 

under a single service, which also means, whether it is NSPS or 

wage grade or GS, there are some different ways that the services 

handle personnel management, and that includes funding for pay 

pools, funding for performance awards on the wage grade and GS 

side as well. So some of the consistency issues don’t just apply to 

the NSPS pay pool funding; they kind of apply across the board. 

But one of the things that the review will—and I know I sound 

like a broken record, Mr. Chairman, but one of the things that the 

review will take up is the issue of managing a workforce under 

multiple systems, and what impact and what challenges that presents, and what we could possibly do to mitigate those challenges, 

and also fundamentally whether that is something that we can live 

with. 

Specifically for the joint basing, we do know that there are 

some—which is another word for ‘‘reorganization’’ essentially is 

what is going on—there will be some moves of employees off of 

some service rolls onto the joint base rolls, and generally once they 

move onto the rolls of the new organization, they will be treated— 

say, a Navy civilian moves onto the Army rolls, they will be treated 

as an Army civilian, and that includes whatever personnel policies 

apply to those—to the Army population. So that is generally how 

we are approaching it. 

Now, there are some issues with respect to bargaining unit employees who move from an organization into an NSPS organization, 

and I know that issue has come up on whether that is going to 

cause them to be moved into NSPS, and whether that might 

have—have an implication with respect to our delay in further conversions. The bottom line on that is that if they are bargaining unit 

employees, and they are moving to a new organization, again, regardless of the NSPS/GS issue, there needs to be a determination 

that is made by the Federal labor relations authority with respect 

to their bargaining unit status and whether they still are a member of a bargaining unit. And until that process happens, which 

generally takes several months, we wouldn’t change the system 

that they are under. So if they are under GS, they wouldn’t change 

to NSPS until the bargaining unit issue is clarified. 

Ms. BORDALLO. I see. 

I would like to get Mr. Perkinson’s suggestions on this. 

Mr. PERKINSON. With the joint basing issue, it sounds to me like 

if we were consolidating, we were bringing people so there is a con-
24 

sistency, that is a proper way to look at it. In particular you can 

look at our organization and make the rules the same so that there 

is the transparency and equitability on how the payments are. 

That seems like it would be the right way to go for the employees 

and for the managers as well who have to work in that system. 

Ms. BORDALLO. Thank you. 

And I have one more quick question, Mr. Chairman, if I could. 

Mr. ORTIZ. Go ahead. 

Ms. BORDALLO. All right. Guam is in the midst of a major military realignment, and the key component of this realignment is the 

transfer of 8,000 marines and 9,000 dependents from Okinawa, 

Japan, to Guam, as well as an increase in all the other services: 

the Air Force, the Navy, and Army. And in the end we expect a 

large increase in civilian DOD personnel. 

It is important that any civilian hiring system on Guam be flexible enough to provide incentives for workers to remain on Guam. 

So we are doing our part as a Congress to pass comprehensive pay 

locality legislation for the nonforeign Cost of Living Adjustment 

(COLA) areas, but we need to be mindful of keeping options open 

for certain types of compensation and recruiting and retention incentives when implementing an NSPS on Guam. 

So to that extent I understand that NSPS tends to put a significant amount of employee compensation at risk by moving payroll 

dollars into performance-based pay pools. How has DOD ensured 

that employee compensation is not artificially affected by budget 

constraints and ensure that NSPS-covered employees—that they 

have their at-risk compensation sufficiently protected from budget 

fluctuations? 

Mr. Bunn, I guess you would be able to answer that. 

Mr. BUNN. Yes, ma’am. 

One of the provisions in the statute, the underlying statute, for 

NSPS is to ensure that as employees move into NSPS, that they 

are not disadvantaged from the standpoint of overall compensation. 

So our policies, the rules that we put in place for how we fund 

NSPS pay pools and how we fund civilian compensation under 

NSPS, essentially protect those funds. And, in fact, we require our 

components to certify every year that the funds that are allocated 

for purposes of NSPS compensation pay for performance are no less 

than what would have been allocated had those employees at that 

population not converted to NSPS. 

So we protect that money, and we ensure that the money is 

available, and that it is allocated. It is now—under NSPS, it is now 

expended under the pay-for-performance process and under those 

rules, and that is how the compensation is distributed, but the 

money is there. 

Ms. BORDALLO. Thank you, Mr. Bunn. 

Thank you, Mr. Chairman, for giving me some extra time. 

Mr. ORTIZ. Mr. Bishop. 

Mr. BISHOP. Allow me, I think, about four questions that are 

more general, and to whomever wishes to respond, it is fair game. 

The first one just deals across the board. Is there still a consensus by the four of you that incentive bonuses have some kind 

of role? Should they be maintained in some form or another, not 

necessarily the one you have now, but are incentive bonuses a le-
25 

gitimate factor that should be maintained in the compensation system? 

Mr. PERKINSON. Yes, sir. I think it is a factor that needs to be 

kept on the table and utilized as a tool. Incentive bonuses and paying people for doing above and beyond their normal expected duties 

is something that we need to do. 

Mr. BISHOP. Is there any disagreement with that, then? 

One of the things I thought that was a purpose of NSPS was to 

try to reduce the number of pay grades, scales, so that they were 

more in line with the regular Federal workforce. Is that still a 

plus? Is it still a goal? Should there be more steps in pay grades? 

Should it be reduced? Should DOD be significantly different vis-avis the rest of the Federal workforce? 

Ms. FARRELL. I believe you are referring to broadbanding. 

Mr. BISHOP. Yes. 

Ms. FARRELL. And that is a management flexibility that does aid 

with hiring. When you are bringing someone into the Federal Government, because you have banding, there is a broader range of 

compensation that you can offer them rather than having them 

come in, which is traditionally they come in, and it is step one, period, that is it. So actually broadbanding can help to make DOD 

more competitive to bring people in and reward them that way. 

Mr. BISHOP. Is that still a plus that should be a goal regardless 

of what you do with this system? 

Mr. PERKINSON. I think that broadbanding would be a tool that 

we need to utilize in the workforce, though we have got to be careful on how we utilize it, and that we utilize it fairly, you know, because it is sort of like—we don’t want to run amok like baseball 

salaries do for getting the best player. You know, we want to have 

some kind of reasonable—— 

Mr. BISHOP. Careful. I like the Yankees, so—— 

Mr. PERKINSON. I understand. 

Mr. BISHOP. Okay. But that still is a concept that it is fair game. 

Mr. PERKINSON. Yes. 

Mr. BISHOP. I know in depots, and I have one obviously as well, 

there is an aging civilian workforce. There is going to come a time 

when there is going to be a serious drop in the resources and manpower that we have. 

Does NSPS system, in your view, either help or hinder in that 

particular challenge of attracting new people that are going to be 

coming into the system? Once again, it is open for people who want 

to take it. 

Dr. CRUM. I think it gives management more options and to what 

they pay new people when they come in, thereby creating greater 

flexibility, greater ability to hire someone. That would be the main 

thing in terms of sort of attraction and retention of those people. 

So I do think it gives that sort of flexibility. 

Mr. PERKINSON. I agree with that assessment to a point. And 

what I want to bring up as a caution is that some of the feedback 

we are getting from some of our agencies is that some of our 

brightest younger employees are avoiding NSPS because of the 

press it has been getting, okay, because they are looking to stay in 

the General Schedule system versus go to an NSPS system, because right now if you look at the scope of the NSPS system, they 
26 

are mostly managerial, non-bargaining unit-type employees, and 

they are saying, why should I go to that system? So I think if we 

clear up the image that is out there, and in some cases a false 

image, I think it is a good tool to use to bring our younger people 

on board. 

Mr. BISHOP. I guess what I am hearing from all of you is some 

of the goals we still have are valid. The devil is obviously in the 

details of how can we structure it in some particular way. 

Let me ask one last, hopefully a little bit more specific question, 

once again of anyone who is here. Since 2003, when we started this 

program, there have been some significant changes with regard to 

the appeals rights of employees in dismissal and disciplinary matters. Are you satisfied that that is a more appropriate—the modifications have been more appropriate in making it satisfactory to 

employees in the way they have changed over the years? Are we 

in a better—you know what I am trying to ask. Are we in a better 

position now than we started in 2003 with regard to dismissals and 

discipline appeals? Maybe that wasn’t the right question to ask. I 

am sorry. Go ahead. 

Mr. BUNN. Well, the original statutory language did provide 

flexibility to rewrite how we do employee disciplinary appeals, if 

that is what you are referring to, sir. And we wrote regulations to 

essentially streamline the appeals process and how employees who 

are subject to adverse action, how they interact with the Merit Systems Protection Board. But in the fiscal year 2008 National Defense Authorization Act, that portion of the statute was repealed. 

So we haven’t actually implemented any changes to how we do employee disciplinary appeals. We are operating under governmentwide rules with respect to those kinds of appeals, if that is what 

you were referring to, sir. 

Mr. BISHOP. Okay. You gave me a better answer than what I 

should have phrased as my question in the first place. Thank you. 

I realize my time is up. Thank you, Mr. Chairman. 

Mr. ORTIZ. Thank you. 

Mr. Kissell. 

Mr. KISSELL. Thank you, Mr. Chairman. 

Thank you, panel, for being here. 

Maybe a couple of overview questions. 

Was there a model—and, Mr. Bunn, you maybe can answer this. 

Was there a model when we set this up? Did somebody have this 

system in place where it worked, and we said, hey, we want to do 

that; or did we go to the drawing board and kind of put it together 

from there? 

Mr. BUNN. Back in 2004 and 2005, we conducted a fairly extensive design process, but where we started was looking within our 

own experience in the Department of Defense starting with our 

demonstration projects that were in place at our Science and Technology (S&T) laboratories, as well as one of the early demonstration projects for alternative personnel systems out at China Lake. 

And the way we designed the system was we took pieces of those— 

we didn’t take any one single system in whole and implement that 

as NSPS. We took portions of those, essentially following very similar design principles with respect to performance and pay and the 

importance of rewarding excellent performance and contributions, 
27 

and we structured the system based loosely on our experience of 

the demonstration project. So our pay bands are based loosely on 

what we did in our demonstration process. 

The pay-for-performance system is very similar to the pay-forperformance systems in our lab demos, but, again, there are some 

minor differences, but it is essentially modeled after what we did 

with those organizations. 

Mr. KISSELL. Has the model that you started out with stayed basically the same, or has it been added to, added to, added to as we 

have gone? 

Mr. BUNN. In terms of the performance management and classification in pay and the pay-for-performance system, the core of it 

has been the same since the implementation. We did make changes 

to our—the governing regulations to conform to changes that Congress made in the NDAA for 2008, namely the changes in repealing 

the labor relations provisions, adverse actions, those kinds of 

things, but also changes to the pay system that require us to provide at least 60 percent of the General Schedule-based pay increase. That is now part of the system. But fundamentally the design of the pay-for-performance system has been the same throughout. 

Mr. KISSELL. Ms. Farrell, either you or Mr. Bunn, I can’t remember, mentioned 205,000 employees. Are all of these on NSPS, or is 

the total number of civilian employees that we have? 

Mr. BUNN. Sir, I mentioned that we have about 205,000 in right 

now. There are another 2- or 3,000 that are eligible to come under 

the system, meaning they are currently white-collar, GS, non-bargaining unit employees that we could, and those are the conversions that we actually delayed in order to do this review. Once 

those—if they come in, that will complete our implementation, and 

that represents the former GS non-bargaining workforce in the Department. 

Ms. FARRELL. May I answer that? The initial plan was to bring 

all DOD employees under, and that is roughly around 700,000. So 

the roughly 205-, 207- where DOD will end up is significantly less, 

and that is due to collective bargaining and agreements with the 

union, populations that at this time have been excluded. So it is 

significantly less than the 700,000 original plan. 

Mr. KISSELL. It would seem to me that consistency across the 

board when you are talking about the broad range where the services are performed and the broad number of people that have to 

make these judgments, it would seem that consistency would be 

one of the most formidable tasks that this system would face. Have 

you found in your reviews that in one area of the country it might 

be performance showing certain things, and another area showing 

certain things, and if you compare it, then maybe it was the perception rather than a difference in actual performance? 

Mr. BUNN. One of the things that we are looking at now and that 

this review will eventually look at is how much variability there is 

within the system depending on what organization you are a part 

of. Overall the rules are fairly standard. 

The way that we conduct performance management, the performance management system itself is standard across the board, but 

we do give flexibility to organizations to operate differently within 
28 

that common framework, and there can be and there have been differences in the outcomes based on organization, the organization 

you are a part of. 

I am not familiar with differences based on geography, but some 

of it is driven by organizational differences in how they have actually implemented the system, how they have funded pay pools and 

those sorts of things. And I think what we are going to be looking 

at is how much inconsistency is tolerable. 

Mr. KISSELL. And that is what I am thinking. Manager A might 

give out certain bonuses, and manager B might say, I am a little 

harder, I don’t want to give money out as quick. 

And my last question, and please forgive my ignorance here, but 

I have heard it said in both ways: Are we talking about pay in 

terms of salary, or are we talking about pay in bonuses on top of 

set salary scales? 

Mr. BUNN. We are talking about both. The NSPS pay-for-performance system, the performance evaluation drives both a performance-based salary increase as well as a bonus on top of that. 

So generally the pay for performance—the payouts are a combination of a salary increase and a bonus, and that is on top of the general increases that we also provide based on the annual increase 

that Congress appropriates for the civilian workforce. 

Mr. KISSELL. I came from a background in 27 years in production 

management. I know the advantages of incentives, but those advantages have to be clear-cut, easily defined, where everybody can 

see what everybody else is doing and what everybody else is getting. I am anxiously awaiting your report, because it seems like 

there is a lot of gray zones of decisionmaking by individuals that 

become very hard to do and be consistent. So thank you for your 

testimony. 

Mr. Chairman, I yield back my time. 

Mr. ORTIZ. Thank you. 

Dr. Crum, I have a question for you. The Federal Government 

must compete with the private sector for talented candidates or 

employees. Why does the Federal Government hiring process take 

longer than hiring processes found in the private sector, and what 

can the government do to attract qualified candidates at all levels, 

those fresh out of the university or college, those leaving the military and seeking a new career, those midlevel-career private-sector 

individuals who might want a chance to work for the Federal Government? It seems to me that the Federal Government takes a long 

time. Maybe you or anybody else that would like to answer. 

Dr. CRUM. I would be happy to try. 

The process takes longer for a variety of reasons. Partially we 

are held to different standards. We have a standard of transparency. We have a standard of inclusion, a standard of making 

sure that everyone gets due process, if you will, so that we can— 

for instance, if we are trying to make a decision on hiring someone, 

we are going to consider everyone who might apply for that job. 

Compared to the private sector, they might, in fact, identify someone early on in the process that they want and cut off the process. 

We have to, in fact, not do that, but consider everyone and apply 

the standards equally. 
29 

So the process itself may take longer than if we compared it directly to the private sector; however, it also takes longer for inappropriate reasons. We overlay many times other steps in the process that are unnecessary. We do not do our selection process necessarily very efficiently. There are many things that we could do 

to, in fact, improve the speed at which we process applications. 

So part of it is systemic, but part of it also is self-imposed many 

times just by the agencies in terms of their own structures, their 

own ways of doing business which have evolved over time and have 

not really been looked at in ways to try to say, what would be the 

best way to do this; rather, it is the way we have learned how to 

do it. So part of it is sort of reinventing or looking again at those 

processes to see what we can do better. 

To the second part of your question, what can we do to attract 

people, we do have a lot of, I think, valuable aspects of Federal employment that we find are very attractive to people. Part of that is 

making a difference. People want to contribute to society. We can 

advertise that. We can advertise also our benefits, which exceed 

those of the private sector in many cases. Also the job security that 

we have. In many cases we find that when people understand what 

we have to offer, they would like to come to us. 

The problem is in reaching those people. That is another thing 

we do not necessarily do a very good job of is reaching out to people, showing them what we have to offer and how they can both 

make a difference and get something out of it. So I think that in 

many ways our processes are not attuned to really efficient both recruiting or selection. 

Mr. ORTIZ. Anybody else? If not, I just have one more question, 

and I will yield to my good friend from Virginia. 

The performance management system for NSPS consists of five 

grading categories of which the lowest rating is a 1 for unacceptable performance, and the highest rating is a 5 for role model performance. The majority of the employees in 2008 and 2009 were 

rated a 3 or valued performer. The GAO reported in 2008 that during discussion groups with civilian employees under NSPS, a prevailing theme was that it was impossible to receive a rating higher 

or lower than a 3. 

Is the Department aware of employees’ concerns about the distinction in performance being made, or that there is a perception 

among employees that everyone gets a 3, or a valued performer, no 

matter how well or poorly they perform? If so, what should be done 

to address these concerns? And we have heard a lot of these among 

some of the employees, and maybe you all can address that if you 

are hearing the same thing I am hearing. 

Mr. BUNN. Mr. Chairman, from the Department’s perspective we 

have heard those concerns, and that is one of the reasons we have 

been open about publishing results of the performance-rating process in the aggregate. 

And the statistics that you mentioned, you are correct that the 

majority of employees were rated at the level 3. Last year in January of 2008, the number was about 57 percent at the 3 level, and 

about 36 or 37 percent at the 4 level, and roughly 5 percent at the 

5 level. This year statistics were about the same, about 55 percent 
30 

at the 3 level, 38 percent at the 4 level, and about 5 percent or a 

little less than 5 percent at the 5 level. 

And I think that distribution does demonstrate that it is certainly possible to get above a 3 when we have over 40 percent of 

the workforce receiving 4s or 5s. Part of it is an understanding or 

getting a better understanding of the performance criteria. The system was designed to be a rigorous evaluation system, and the way 

that we designed the level 3 and the ratings above was to be—essentially set a high bar of performance. The level 3—and the reason we called it ‘‘valued performer’’ was to make it clear that that 

is a good performance rating, and that most of our employees will 

operate at that level, and that the higher levels are reserved for exceptional performance. 

We have heard the concern that 3 is all you can get, so why try 

to, you know, write anything any higher? But the statistics don’t 

bear that out, given that we have got just a little less than half 

the workforce getting higher ratings. 

Mr. ORTIZ. Do we know—when you look at the percentages that 

you just mentioned, 50-some-odd, 45, and 5 percent now, are these 

the employees who have been there—who gets the highest rating, 

those who have been there for a long time, or those that have been 

recently hired, 2 or 3 years? How do we get to those numbers? 

Mr. BUNN. I don’t know those statistics off the top of my head, 

and we can certainly work with you to provide that. But some of 

the things that we look at when we analyze those results, we look 

at it across pay band levels. We look at it across various demographic categories, and there are some differences in what we see. 

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

page 129.] 

Mr. BUNN. In some cases we are seeing that the folks that are 

in the higher pay bands, who also tend to be more senior employees, are getting higher ratings, and we are also seeing that supervisors tend to get higher ratings than nonsupervisors. And that is 

another area that we are looking hard at as we—and that this review will look at is the perception of the fairness of the system, and 

are we ensuring that there is consistent application of the criteria 

across. 

Mr. ORTIZ. Anybody else? 

Ms. Farrell. 

Ms. FARRELL. I believe what you are raising gets to the heart of 

the three safeguards that we reported on that DOD could take 

steps for improvement, and one being transparency of ratings at 

the command level so that employees could know where they fit, 

not just the aggregate, and DOD has taken steps to make sure that 

that happens. Another being the perception that no matter what I 

do, I am going to be rated a 3, a valued employee. And DOD partially concurred with our recommendation to clarify the guidance 

that employees are rated against how well they did for their objective, not against each other, and that is a partial concurrent. We 

are waiting to see that guidance clarifying it. 

There is also the third safeguard regarding predecisional analysis and the importance to look for anomalies and look for inconsistencies, because if a problem is identified that perhaps is blatant 

discrimination, then it can be corrected before that rating is final-
31 

ized. DOD took issue with that, and they rely upon their 

postdecisional analysis, of which we are looking forward to looking 

at during this second review of NSPS and if that in some way addresses it. But we still stand behind a predecisional analysis needs 

to take place to just investigate if there is an anomaly and take action before that rating is finalized. 

Mr. ORTIZ. Anybody else? 

If not, I yield to my good friend Mr. Forbes. 

Mr. FORBES. Thank you, Mr. Chairman. Our witnesses have been 

very patient, and I have a long list, as I mentioned earlier, of some 

written questions I would like to submit with your permission. 

Rather than hold them here any longer, I will do that in writing. 

But I want to just thank you all for your willingness to come out 

here and give us the benefit of your knowledge and your expertise, 

and thanks for your patience with us. 

Mr. Chairman, I yield back. 

Mr. ORTIZ. Mr. Bishop, do you have a question? No? 

I just have one more, and we have been here for some time, and 

I will tell you what. We have four good witnesses with maybe different ideas, but I think that by collectively bringing those ideas, 

we can make it better. 

A complaint of the GS system is that it rewarded tenure, but not 

performance; however, the Federal Employees Pay Comparability 

Act provided numerous pay flexibilities for GS employees, and I 

have several questions about the act. 

Were managers fully trained and knowledgeable about what 

flexibilities were available to them in the GS system? And many 

of the flexibilities provided under the act are similar to what is offered under NSPS, and why weren’t these flexibilities enough? 

And I have a bunch of questions, but maybe we can have some 

short answers. Why did the DOD believe it had to create its own 

unique personnel system, and what additional changes, if any, 

should be made to the GS system? And if you can answer some of 

them; if not, maybe you can respond for the record. 

Mr. BUNN. I would be happy to respond for the record. In general, though, the basis for pursuing NSPS, the Department felt 

that given the changing nature of the national security environment, it was important to recognize the unique role that civilians 

play in supporting national security, and that to move to a culture 

of results and performance as well as the flexibility that pay banding and those kinds of things have to offer so that we can be competitive in the market to attract and retain talent, we needed to 

break from the GS and break from the previous title five systems. 

Mr. ORTIZ. Ms. Farrell. 

Ms. FARRELL. I would just say that GAO has reported, even after 

NSPS was introduced, that there are a number of human capital 

flexibilities available to agencies, and you are exactly right in 

terms that managers weren’t aware of them and how to use them. 

And I would—NSPS again was a way to reenergize and refocus, 

and we would hope that some of these flexibilities now within 

NSPS aren’t lost in the shuffle, as we saw with the GS system. 

Mr. ORTIZ. We do value the tremendous work that our civilian 

employees perform, especially in a time of crisis. We are involved 

in two wars and hot spots all over the world, and I think morale 
32 

is a big factor. We want to have, as some of you have stated, transparency and to be fair to them. And I know you all want that, and 

I know you care for the employees. And we have different approaches, but I hope that we could make it better. 

We will have some questions by Members who couldn’t be with 

us today because tomorrow is the big day, tomorrow we vote for the 

budget; so everybody is having little meetings all over the place. 

But I really appreciate your testimony today. It was outstanding, 

and I want to thank you. 

This hearing stands adjourned, and thank you so much for joining today. Thank you. 

[Whereupon, at 4:30 p.m., the subcommittee was adjourned.] 
A P P E N D I X 

APRIL 1, 2009 

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WITNESS RESPONSES TO QUESTIONS ASKED DURING 

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APRIL 1, 2009 

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RESPONSE TO QUESTIONS SUBMITTED BY MR. ORTIZ 

Mr. BUNN. We have that information. 

For the current rating period, 4.7% of the NSPS employees received the highest 

rating, level 5. 

The following table shows a breakdown of the Level 5 ratings by years of service. 

Years of Service 0–3 >3–10 >10–20 >20–30 >30 

Level 5 Rating 14.2% 29.5% 20.9% 26.8% 8.6% 

The following table shows a breakdown of all five rating levels by years of service. 

Years of Service 0–3 >3–10 >10–20 >20–30 >30 

Level 1 0.1% 0.3% 0.3% 0.3% 0.3% 

Level 2 0.9% 1.0% 1.4% 1.3% 1.5% 

Level 3 60.0% 52.3% 54.7% 55.2% 56.2% 

Level 4 34.8% 41.1% 38.9% 38.8% 37.3% 

Level 5 4.2% 5.4% 4.6% 4.4% 4.7% 

This table shows the distribution of ratings by years of service. 

Years of Service Level 1 Level 2 Level 3 Level 4 Level 5 

0–3 0.1% 0.9% 60.0% 34.8% 4.2% 

>3–10 0.3% 1.0% 52.3% 41.1% 5.4% 

>10–20 0.3% 1.4% 54.7% 38.9% 4.6% 

>20–30 0.3% 1.3% 55.2% 38.8% 4.4% 

>30 0.3% 1.5% 56.2% 37.3% 4.7% 

[See page 31.] 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

APRIL 1, 2009 

(133) 

QUESTIONS SUBMITTED BY MR. ORTIZ 

Mr. ORTIZ. The number one complaint of managers in the federal government is 

the hiring process. NSPS was designed not only to transform DOD’s performance 

management system for employees, but to also provide the department with greater 

flexibility in hiring employees. How has the department used the hiring authorities 

under NSPS and what, if any, impact has it had on the department’s operations? 

What are the major challenges that the Department has encountered? 

Mr. BUNN. The Department does not collect statistics to be able to respond definitively to your questions about the use of the staffing flexibilities, but we do know 

that some, such as the competitive examining authority, the authority to temporarily promote non-competitively up to 180 days, and the authorities associated with 

non-permanent appointments, are being used. Others have not been fully utilized, 

as the Department has placed greater emphasis up to now on the rigorous performance management process under the National Security Personnel System (NSPS). 

Notwithstanding, we do know that the broad NSPS pay band architecture provides 

greater flexibility to offer more competitive salaries based on national and local market conditions. Anecdotally, in discussions with senior leaders in NSPS organizations, we learned that NSPS has given them the ability to be more competitive in 

setting and adjusting salaries based on labor market forces, performance, and 

changes in duties. For example, the NSPS regulations instruct that management 

can set starting pay based on the availability of candidates and labor market rates; 

specialized skills, knowledge, and/or education possessed by the candidate in relation to the requirements of the position; critical mission or business requirements; 

salaries of other employees in the organization performing similar work; and the 

current salary of the candidate. In contrast, pay setting under the General Schedule 

(GS) system is generally more rigid and restrictive. For example, under the GS system, starting salaries are generally restricted to the first step of the grade of the 

position the candidate is recruited for, which may not be in line with actual market 

conditions. 

What empirical data we have comes from the 2008 Status of Forces Survey of Department of Defense (DoD) civilian employees. Participants were asked to respond 

to the following: 

• My work unit is able to recruit people with the right skills. 

Agree: 47 percent NSPS employees 44 percent non-NSPS 

• How likely is it you will leave at the next available opportunity to take another 

job in the Federal government outside DoD? 

Likely: 34 percent NSPS employees 36 percent non-NSPS 

• Pay raises depend on how well employees perform their job. 

Agree: 42 percent NSPS employee 25 percent non-NSPS 

• Considering everything, how satisfied are you with your pay? 

Satisfied: 65 percent NSPS 62 percent non-NSPS 

Through the on-going evaluation processes we have in place, we will gather information about NSPS hiring authorities to evaluate the extent of their use and whether they are having the intended impact on the Department’s operations. Our greatest challenge is in training and educating the NSPS workforce concerning the NSPS 

flexibilities—what we can do, how we can do it, and why/when we should do it. 

Mr. ORTIZ. The average salary increase was about 5.9 percent in 2008 and the 

total average salary plus bonus payout was about 7.6 percent. What concerns, if 

any, does the department have about the sustainability of compensation under 

NSPS? 

Mr. BUNN. Congress has provided in the National Security Personnel System 

(NSPS) statute that, to the maximum extent practicable, the aggregate amount allocated for compensation of Department of Defense civilian employees under NSPS 

will not be less than if employees had not been converted to NSPS. NSPS redirects 

compensation dollars from forms of General Schedule (GS) system compensation 

that no longer exist under NSPS (i.e., within-grade increases, quality step increases, 

and promotions to higher grades) as well as a percentage of the annual general sal-
134 

ary increase to the NSPS-unique forms of performance-based and market-sensitive 

pay. In general, NSPS annual pay increases consist of: 

- Performance-based payouts in the form of base salary increases, bonuses, or a 

combination of both; 

- A NSPS general salary increase for employees receiving a rating of record of 2 

or higher; and 

- An increase to local market supplements equal to the increases to GS locality 

pay rates as described above. 

Because the NSPS compensation architecture is so different from that of the GS 

system, making direct comparisons between average pay increases is misleading, as 

it is not an ‘‘apples to apples’’ comparison. However, the Department continues to 

monitor the overall cost of compensation under NSPS and ensure annual certification in support of section 9902(e)(4) of title 5, United States Code. Further, now 

that the Department has several years of operating under NSPS, a more comprehensive review of NSPS funding is planned to ensure that percentages used to 

determine performance payout funding reflect valid and accurate assumptions. 

Mr. ORTIZ. The GAO, in its 2008 report, highlighted a number of negative perceptions that employees had with NSPS. Interestingly, the negative feelings towards 

NSPS increased, rather than decreased, the longer an employee was in the system. 

According to GAO, without a plan to address employees’ negative perceptions of 

NSPS, DOD could miss opportunities to make changes that could lead to greater 

employee acceptance and, ultimately, successful implementation of NSPS’s performance management system. Why, for a system that has been in place for over three 

years, have you not developed and implemented an action plan to guide your efforts 

to address the results of employee surveys? What is the Department doing to improve employee acceptance of NSPS? 

Mr. BUNN. Employee attitudes and perceptions regarding the National Security 

Personnel System (NSPS) are best described as ‘‘mixed.’’ The Office of Personnel 

Management (OPM) recently reported that NSPS employees are generally positive 

about certain important aspects of NSPS, including how their work and performance 

objectives relate to the mission; that they are held accountable for results; and that 

pay increases and rewards are based on performance. We have seen a decline in attitudes in certain areas (as cited by Government Accountability Office (GAO) in its 

2008 report), including whether employees believe their rating is a fair reflection of 

their performance; satisfaction with management; and their perception that NSPS 

will have a positive effect on personnel practices in the Department of Defense 

(DoD). More recent survey data indicate that attitudes among employees with the 

most experience in NSPS are becoming more positive, an encouraging and not unexpected sign. 

Both GAO and OPM noted in their 2008 reports that a decline in workforce attitudes is typical of major change initiatives, and it generally takes three to five years 

for employees to fully understand and accept new personnel systems. More recently, 

GAO testified that it can take 5-7 years for acceptance of a new personnel system. 

We continue to learn from employee and management feedback in many forms, 

share lessons, and make operational improvements in NSPS, which should contribute to greater acceptance of the system. 

Since the initial Spiral 1.1 implementation, the Department has been actively involved in supporting and advising Components in developing comprehensive programs to assist NSPS employees in adapting to the new system. Components are 

responsible for implementing robust communications and training programs to address employee skepticism and concerns that the majority of employees face when 

faced with a major personnel system change. We encourage Components to continually assess employee attitudes and leverage information and data obtained through 

NSPS reviews and studies to ensure communications and training programs are 

properly aligned to meet employee needs. In turn, the Program Executive Office 

(PEO) NSPS continues to support these efforts thru sponsorship of broad-based programs, products, and initiatives. Examples include: 

The NSPS Website—the primary source for NSPS information. The website is 

routinely updated to reflect most recent events and activities. The site also includes 

a recurring feature ‘‘And the Answer Is’’ that poses a question and answer of particular interest. 

NSPS Fact Sheets—Short, concise 1-2 page memos that address key topics of interest or areas where additional focus or grounding is needed. The most recent fact 

sheet addressed the issue of forced distribution. All NSPS fact sheets are available 

on the NSPS website for downloading. 
135 

NSPS Communications Plans—Specific communications plans are provided to the 

Department’s leadership for their use in informing the workforce about key events 

and activities. The plans are developed to coincide with significant NSPS events 

such as the publication of the final regulations and the upcoming comprehensive review of NSPS. Plans include talking points and frequently asked questions to ensure 

employees are kept informed. 

NSPS Leadership Workshops—Designed for NSPS pay pool managers and panel 

members, workshops are held at least annually to provide the opportunity to share 

lessons learned, learn and reflect upon the organizational challenges and success 

stories that are a part of NSPS implementation. 

NSPS Human Resources Practitioner Sensing Sessions—Eleven sessions with 

DoD Component activities were held in January and February 2009 to obtain feedback on existing learning products and support, identify knowledge gaps or needs 

for additional products or support, and explore options for the next generation product line. These sessions confirmed the need for timely, up-to-date information and 

additional materials geared toward application. As a result of these sessions, the 

PEO is revising and updating learning products with an emphasis on use of the web 

for making information easy to access. 

Notwithstanding these efforts, we know from experience with the Department’s 

demonstration projects and from what GAO and OPM have observed about other 

alternative personnel systems that it will take several years for employees to accept 

NSPS, and the need for focused and deliberate programs to build the trust and confidence level of NSPS employees will continue. 

Mr. ORTIZ. One of the safeguards in the National Defense Authorization Act for 

2008 required DOD’s performance management system to ensure that meaningful 

distinctions were made in employee performance and, therefore, compensation. In 

GAO’s September 2008 report, it found that there was informal guidance that most 

employees should be rated as a ‘‘3,’’ and as a result GAO recommended that the department clarify its guidance to ensure meaningful distinctions are made and that 

employees will be less likely to perceive that everyone would receive a ‘‘3’’ no matter 

what their performance was. What steps has the department taken to clarify its 

guidance about ratings and making distinctions in employee performance? 

Mr. BUNN. The Department is aware that a perception of forced distribution in 

the rating process exists. However, the National Security Personnel System (NSPS) 

regulations specifically state that forced distribution is strictly prohibited. The 

NSPS performance management system is designed to make distinctions among employees based on a rigorous evaluation of individual performance against standard 

criteria. These criteria, by design, challenge employees, set a higher bar for higher 

performance ratings, and reserve the highest rating levels for those who deliver exceptional results. 

An analysis of the January 2009 rating distribution across the entire Department 

demonstrates success in making meaningful distinctions in performance and in linking individual pay to performance. While approximately 55 percent of NSPS employees received a level 3 performance rating in January 2009, 43 percent of NSPS employees received either a level 4 or level 5 performance rating. This is consistent 

with rating distributions for January 2007 and 2008. The range of rating distributions illustrates that meaningful distinctions in performance are being made. Additional distinctions are made through the assignment of shares within each rating 

level. 

Based on concerns and perceptions expressed by employees, rating officials, and 

other stakeholders, we felt it was important that all those who participate in the 

performance management process fully understand the concept of forced distribution, why it is prohibited under NSPS, and how to avoid it. For this reason, guidance was distributed to the Department of Defense Components and is available on 

the NSPS website to remind rating officials, higher level reviewers, pay pool panel 

members, pay pool managers, and performance review authorities that employee 

performance under NSPS is measured against rigorous and strict application of 

standard performance indicators and that forced distribution in the rating process 

is prohibited. 

Mr. ORTIZ. Military supervisors have complained about the amount of time they 

must spend with their NSPS employees and the civilian NSPS employees complain 

that their military supervisors do not understand the system and do not spend the 

appropriate amount of time to do the ratings, which negatively impacts on their performance ratings. Are these valid concerns? Should NSPS continue, what can be 

done to address these complaints? 

Mr. BUNN. We recognize that the design of the National Security Personnel 

(NSPS) and the safeguards built into the system result in increased time demands, 
136 

especially during the start-up years. However, the Department of Defense’s (DoD) 

experience with personnel demonstration projects indicates that the amount of time 

required for the same tasks levels off and even decreases as the organization gains 

experience with the performance management and pay pool processes. Additionally, 

as experience and efficiency increase, organizations tend to parlay the process of reviewing individual performance into an examination and driver of overall organizational performance, thus increasing the return on their investment of time. 

We also acknowledge that additional challenges are presented when military supervisors are faced with frequent rotational assignments. However, military supervisors have the same performance management responsibilities for their civilian employees as do civilian supervisors. The regulations clearly identify supervisory responsibilities and both civilian and military supervisors must meet their responsibilities for managing employee performance under NSPS. The NSPS regulations specify that supervisors and managers will be held accountable for effectively managing 

the performance of employees under their supervision and that the performance assessments of supervisors should reflect the quality of their efforts in managing the 

performance of the NSPS employees under their supervision. The Department is 

committed to training managers and supervisors, including military members, on 

how to establish and communicate performance expectations, assess employee performance, and appropriately translate that assessment into pay adjustments. Mandatory NSPS training is required of both civilian and military supervisors and managers prior to their performing the necessary NSPS performance management functions. 

We anticipate that the issue of increased administrative demands resulting from 

this more robust performance management process will be a topic of consideration 

during the DoD comprehensive review of NSPS. 

Mr. ORTIZ. What infrastructure does DOD have in place to provide a comprehensive picture of costs, expenses, and other financial information related to NSPS activities? 

Mr. BUNN. The Department put in place the infrastructure to capture the National Security Personnel System (NSPS) implementation costs. In 2005, the Program Executive Office, NSPS established a DoD-wide Financial Integrated Product 

Team (IPT) to establish requirements for the Components to track and report quarterly on implementation costs. Five key areas were identified: (1) Design and Implementation; (2) Training Development, Support, and Execution; (3) Human Resource 

(HR) Automated Systems; (4) Program Evaluation; and (5) Program Office Operations. The key areas were defined, and Components began submitting costs in fiscal year 2005. 

The Financial IPT reconvened in July 2007 to recommend revisions based on a 

Government Accountability Office report issued that same month. The Department 

continues to collect implementation costs based on these revisions. The Department 

does not have an infrastructure set up to collect financial information related to 

other NSPS costs and does not track, other than salary and benefits, other HR system (General Schedule, Federal Wage System, Personnel Demonstration Projects at 

Defense Laboratories) costs. 

Mr. ORTIZ. In response to a letter from Chairman Skelton and Readiness Subcommittee Chairman Ortiz urging the Department to discontinue converting employees to NSPS until the Administration and Congress can properly address the 

future of the Department’s personnel system, Secretary Gates stated that DOD has 

begun a comprehensive review of NSPS and stopped the conversion of GS employees 

to NSPS. However, new hires and positions that are being reclassified still will be 

brought under NSPS. The intent of the congressional letter was to halt all movement into NSPS until such time as the Administration and Congress could conduct 

a review. Continuing to place new hires and reclassified positions into NSPS appears to subvert the intent of Congress. As the Department continues to augment 

its workforce, more individuals will be hired into NSPS, potentially making it a tremendous challenge to transition these employees (and ones in reclassified positions) 

to a GS system or whatever new system will replace NSPS. Why is the Department 

continuing to use NSPS for new hires and reclassified positions even when congressional intent and earlier statements by the President have strongly indicated that 

no further action should take place with regard to NSPS until a review has been 

undertaken? Why shouldn’t Congress view the actions being taken by DOD with regard to new hires and reclassified positions as being a presumption by DOD that 

it has already decided to continue NSPS (with or without the results of the review)? 

If the results of the review point to a return to the GS schedule or some other system, how will DOD handle the transition for the potentially thousands of new hires 

it may be bringing on in the coming months? 
137 

1GAO, Human Capital: Improved Implementation of Safeguards and an Action Plan to Address Employee Concerns Could Increase Employee Acceptance of the National Security Personnel 

System, GAO-09-464T (Washington, D.C.: April 1, 2009). 2GAO, Defense Transformation: DOD’s Proposed Civilian Personnel System and Governmentwide Human Capital Reform, GAO-03-741T (Washington, D.C.: May 1, 2003). 

Mr. BUNN. In his March 16, 2009 letter to Chairman Skelton and Chairman Ortiz, 

Deputy Secretary Lynn stated that the Department is committed to operating fair, 

transparent, and effective personnel systems. This commitment has not changed. 

In response to their request for the Department to delay conversions to the National Security Personnel System (NSPS), the Deputy Secretary advised Chairmen 

Skelton and Ortiz that further conversions of organizations will be delayed pending 

the outcome of a comprehensive review of NSPS. He noted that this delay of conversions affects roughly 2,000 employees in organizations scheduled to convert to NSPS 

this spring. However, during the review, those organizations currently under NSPS 

will continue to operate under NSPS policies and processes. This means processing 

of normal personnel actions will continue for individual employees moving into existing, reclassified and new NSPS positions in organizations and functional units 

now under NSPS. 

Although existing NSPS organizations continue to follow NSPS policies, the Department of Defense (DoD) has not made any decision regarding the future of NSPS. 

The review will determine the future of NSPS. It would be premature and disruptive for the Department to stop using NSPS policies in NSPS organizations before 

the review is completed. 

Filling jobs and reclassification of positions are essential tools in helping ensure 

an organization is successful in meeting mission requirements. If NSPS jobs cannot 

be filled or properly classified while the review is pending, this may impact the organization’s—and the Department’s ability to meet mission requirements. 

As noted, DoD is committed to operating fair, transparent, and effective personnel 

systems. DoD and Office of Personnel Management leadership intend to fully assess 

NSPS before making any decisions regarding its future. The review will include a 

comprehensive and thorough examination of all NSPS policies, regulations, and 

practices, and will result in findings and recommendations aimed at assisting the 

leadership under the new administration to determine the future of the program. 

Finally, it is also important to emphasize that the Department is not bringing in 

any bargaining unit employees to NSPS. 

The Department is reviewing options, including existing conversion out procedures, should the review result in NSPS employees being moved to a different pay 

system, such as the General Schedule. A transition process has not yet been determined while the review of NSPS is pending. However, the Department’s goal of any 

process, should one become necessary, is to ensure that no harm comes to our employees as a result of being removed from NSPS. 

Mr. ORTIZ. GAO noted that NSPS was implemented too quickly. What steps could 

have been taken to roll out NSPS in a more orderly and fair fashion? 

Ms. FARRELL. It was a pleasure to appear before your subcommittee on April 1, 

2009, to discuss the Department of Defense’s (DOD) implementation of its new 

human capital system for managing civilian personnel—the National Security Personnel System (NSPS).1

As we have previously reported, we support the need to expand broad banding approaches and pay-for-performance-based systems in the federal government.2 However, moving too quickly or prematurely to implement such programs, whether at 

DOD or elsewhere, can significantly raise the risk of doing it incorrectly. Hasty implementation could also set back the legitimate need to move to a more 

performance- and results-based system for the federal government as a whole. Thus, 

while it is imperative that we take steps to better link employee pay to performance 

across the federal government, how it is done, when it is done, and the basis on 

which it is done can make all the difference in whether or not such efforts are successful. In our view, one key need is to modernize performance management systems in executive agencies so that they are capable of adequately supporting more 

performance-based pay and other personnel decisions. 

While our previous work does not prescribe a process and time frames for rolling 

out systems such as NSPS, we have stressed that agencies should have an institutional infrastructure in place that would include, at a minimum, (1) a human capital 

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

programs with its program goals and mission and desired outcomes; (2) the capabilities to effectively develop and implement a new human capital system; and (3) the 

existence of a modern, effective, and credible performance management system that 

includes adequate safeguards, including reasonable transparency and appropriate 
138 

3GAO, Human Capital: DOD Needs to Improve Implementation of and Address Employee Concerns about Its National Security Personnel System, GAO-08-773 (Washington, D.C.: Sept. 10, 

2008). 4GAO-08-773. 

5GAO-08-773. 

accountability mechanisms, to ensure the fair, effective, and nondiscriminatory implementation of a new system. Prior to NSPS implementation, we cautioned that, 

while the DOD leadership had the intent and the ability to implement the needed 

infrastructure, it did not have the necessary infrastructure in place across the department. 

Further, our work has continued to stress the importance of incorporating internal safeguards into the design and implementation of large-scale pay-for-performance programs. In 2008, we evaluated DOD’s efforts to implement nine safeguards 

and accountability mechanisms.3 We found that, while DOD had taken some steps 

to implement internal safeguards to ensure that NSPS is fair, effective, and credible, the implementation of some safeguards could be improved. First, DOD does not 

require a third party to analyze rating results for anomalies prior to finalizing employee ratings, and therefore it is unable to ensure that ratings are fair and nondiscriminatory before they are finalized. Second, the process has lacked transparency until recently because DOD did not require commands to publish final rating distributions, though doing so was recognized as a best practice by NSPS program officials at all four components. In 2008, the department revised its NSPS regulations and guidance to require commands to publish the final overall rating results. Third, NSPS guidance may discourage rating officials from making meaningful distinctions in employee ratings because it indicated that the majority of employees should be rated at the ‘‘3’’ level, on a scale of 1 to 5, resulting in a hesitancy 

to award ratings in other categories. We continue to believe that improved implementation of these safeguards will help bolster employee confidence in the system 

and ensure that the system is fair, effective, and credible. 

Mr. ORTIZ. If NSPS continues, what steps should now be taken to move forward? 

Ms. FARRELL. We have previously reported that converting to NSPS was a significant transition for the department.4 We have further reported that it will take time 

for employees to accept the system, based on the studies conducted by the Office 

of Personnel Management (OPM) on the federal government demonstration projects 

for performance management. First, and foremost, DOD needs to assess and address 

employee engagement in the system. DOD has collected survey data and conducted 

focus groups of employees under NSPS, but it is missing a key piece—an action 

plan. Our 2008 report recommended that DOD develop and implement a specific action plan to address employee perceptions of NSPS ascertained from feedback avenues such as, but not limited to, DOD’s survey and DOD’s and GAO’s employee 

focus groups. At a minimum, this plan should include actions to mitigate employee 

concerns about the potential influence that employees’ and supervisors’ writing 

skills have on the panels’ assessment of employee ratings and the lack of transparency and understanding of the pay pool panel process. Such a plan would demonstrate to employees that the department is listening to their concerns and making 

plans to address, as appropriate, the concerns that are identified. In short, DOD 

needs to tell the employees that they are going to take action on their concerns. In 

addition, the recently announced study by DOD and OPM is an opportunity to assess the status of the system. While the review intends to include a thorough examination of all NSPS policies, regulations, and practices, we would like to see DOD 

leverage this opportunity to assess for itself how the department is implementing 

internal safeguards. Specifically, we are interested in an update of how the safeguards have been incorporated into their policies and how the safeguards are working. 

Mr. ORTIZ. The Deputy Secretary of Defense, in cooperation with the Office of Personnel Management recently announced that the department would halt conversions 

of DOD civilian employees to NSPS, pending the outcome of a review by DOD and 

OPM. The proposed review will assess whether or not NSPS is meeting its objectives of being a fair, transparent, and effective personnel system. Finalizing the details of such a review’s overall framework, scope, timeline, and leadership will take 

time. 

As DOD and OPM leadership hold discussions to determine the overall framework, scope, and timeline of the review, what guidance or suggestions would you 

give to DOD and OPM to include in the methodology of this study? 

Ms. FARRELL. As we have previously reported, the extent to which DOD incorporates internal safeguards into the design and implementation of NSPS and how 

it addresses employee perceptions of NSPS are key to the success of the system.5
139 

Moving forward, as DOD and OPM embark on a study of NSPS and review how 

NSPS operates and its underlying policies, DOD has a unique opportunity to consider our previous recommendations, as well as all of the other internal safeguards 

key to ensuring that performance management systems in the government are fair, 

effective, and credible. In addition to a review of internal safeguards, this study provides DOD the opportunity to look at employee engagement in the process and develop an action plan to address employee concerns about NSPS. As we approached 

our work, we used a methodology that systematically took into account employee 

input from all levels. We used a combination of survey analysis, interviews, and employee discussion groups to obtain information on employee perceptions. In general, 

the combination of employee surveys with interviews or discussion groups is helpful 

because it yields useful information at the population level, as well as the individual 

employee experience level. 

Mr. ORTIZ. One concern expressed by employees who have converted from GS to 

NSPS is that there is no real career progression. Under the GS system, an employee 

steadily moves up through the various grades and can actually monitor actual career progression. There appears to be no such similar movement in NSPS; an employee, while receiving pay increases and bonuses, may remain in the same pay 

band for his/her entire career. 

If this is a valid concern, how can it be addressed, if NSPS continues? 

Ms. FARRELL. First, DOD needs to collect more information on what the issues 

are surrounding this employee perception on career progression, including the underlying causes and the extent of this concern, so that the department can determine if it is indeed a valid concern. For example, is there an issue with lack of career progression or are employees perceiving that there is an issue as a result of 

lack of communication or education on the new system? In our 2008 report, we recommended that the department develop and implement a specific action plan to address employee perceptions of NSPS ascertained from feedback avenues such as, but 

not limited to, DOD’s survey and DOD’s and GAO’s employee focus groups. We believe that this is another example of how the department could use such an action 

plan to guide its approach for addressing employee concerns. Specifically, the plan 

may incorporate various communication and education strategies to help employees 

understand how the shift from pay grades to pay bands still affords them opportunities for professional development, as well as movement through the pay band. While 

we acknowledge that change takes time to gain employee acceptance and that the 

implementation of NSPS is a large-scale organizational transformation, employee 

concerns, such as these, must be heard and addressed accordingly in order to ensure 

greater employee acceptance and, ultimately, successful implementation of the 

NSPS performance management system. 

Mr. ORTIZ. Has MSPB evaluated DoD’s National Security Personnel System? 

Dr. CRUM. No. However, as part of Merit Systems Protection Board’s (MSPB) 2005 

Government-wide Merit Principles Survey, we did collect baseline data from employees in DoD’s major components regarding their satisfaction with workforce management issues in the Department. This took place just as employees were beginning 

to be converted into NSPS. The data was collected to create a baseline for future 

comparisons that we plan to conduct once the system has been in place a sufficient 

amount of time to measure its true impact on agency results. 

Mr. ORTIZ. What should be MSPB’s role in overseeing and evaluating new personnel flexibilities granted to agencies, such as those under NSPS? 

Dr. CRUM. The MSPB’s role is critical in examining these new personnel systems. 

To carry out its statutory responsibility to protect the public interest through a 

merit-based civil service, the MSPB conducts government-wide research and studies. 

These studies gather the views and experiences of Federal employees, managers, 

and other stakeholders, such as agency officials, academicians, and union officials, 

to accurately gauge the ‘‘health’’ of the civil service and other Federal merit systems. 

The MSPB is also responsible for reviewing the effects of OPM’s policies, rules, 

and regulations on the merit principles. We provide an independent, bipartisan evaluation of merit systems and human resources management issues on a much broader scale. We also provide OPM with constructive commentary regarding the effects 

of its policies and activities on the civil service. Generally, MSPB Board members 

are appointed to fixed 7-year staggered terms and their tenure is not renewable. 

Thus the MSPB is uniquely positioned to conduct independent assessments of merit 

systems and render independent views about issues that affect the whole civil service. 

While the MSPB rarely performs studies evaluating the performance of a single 

agency, MSPB can play a valuable role in conducting independent, bipartisan reviews of the merit systems. The MSPB’s government-wide research and studies offer 

a means to compare the performance of different personnel systems, track the 
140 

progress of these individual systems, identify needed improvements, and share best 

practices government-wide. With regard to the specific flexibilities given to DoD, the 

MSPB has gathered baseline information that will help interpret the effects of the 

system on the efficiency and effectiveness of NSPS’s operations over time. 

Mr. ORTIZ. Agencies are increasingly turning to newly established appointing authorities and flexibilities to speed the hiring process. Do these new procedures result 

in faster hiring decisions? 

Dr. CRUM. There are a number of flexibilities available to agencies that have 

streamlined hiring processes, such as Direct Hire and the Federal Career Intern 

Program. These processes can differ from competitive service hiring in one or more 

of the following respects: 

• Recruitment—how agencies may publicize positions and accept applications; 

• Eligibility—who the agency may consider for appointment; 

• Assessment—how agencies evaluate applicant qualifications; 

• Consideration and selection—how agencies must sort or rank applicants, and 

how agencies may select among applicants; 

• Applicability of public policy requirements such as veteran’s preference and career transition assistance programs for displaced Federal employees; and 

• How the probationary or trial period is implemented. 

We have found through our research that using these flexibilities does not guarantee that the hiring process will be faster. For instance, our study of Federal entrylevel new hires found that 39 percent of the excepted service new hires (including 

Federal Career Interns) and 34 percent of competitive service new hires reported 

being offered a job within 2 months or less after applying; this is not a large difference. Furthermore, 27 percent of excepted service new hires indicated that it took 

over 6 months to be hired, while 17 percent of competitive new hires reported the 

same. Our research has found that excepted service hiring processes often mirror those 

of competitive service hiring. In fact, some excepted service hiring could be viewed 

as more thorough and competitive because they use recruitment, application, and 

assessment processes that reach a wider segment of society and do a better job of 

predicting success on the job. Often, these organizations do not use these flexibilities 

solely to make the process faster, but also to make use of provisions associated with 

these flexibilities such as the longer training and probationary periods offered by 

some of these authorities. 

Mr. ORTIZ. Agencies do a poor job of communicating with applicants. Applicants 

may apply for a job and never hear from the agency again. What can agencies do 

to improve their timely feedback to all applicants of their status in the process? 

Dr. CRUM. The MSPB has long recognized that communication with applicants 

has been a problem in the Federal hiring system. Our studies on Federal hiring 

practices have continuously shown that lack of communication has been an issue 

raised by applicants. New hires indicate that they often do not receive timely feedback (or any feedback) and that the service provided by the human resources (HR) 

office is often below their expectations. 

We have noted that agencies need to treat applicants like customers and build relationships with them. This relationship is important not only to influence that one 

applicant’s impression of the Government, but also because that one applicant will 

then have positive things to say about the experience to others. We have found that 

word-of-mouth is a key way many Federal new hires have learned of an employment 

opportunity with the Government. In addition, negative impressions of the Federal 

hiring process can generate negative word-of-mouth among potential applicants that 

could dissuade high-quality candidates from applying. 

There are several actions agencies can take to improve their communication with 

applicants. To start, the agency should have an understandable hiring process that 

is clearly explained in the job announcement. The instructions should include a 

timetable letting applicants know what steps are in the process, who takes these 

steps, and how long each step is likely to take. This will help to manage applicants’ 

expectations. As I mentioned in my testimony, the job announcement is an area that 

needs improvement. Currently, announcements are often unclear and contain jargon 

that non-Federal employees just do not understand. Also, the agency should have 

a point of contact listed in the job announcement for applicants who have questions. 

Often, they do not, and applicants therefore do not know how to get their questions 

answered. 

Agencies should, at a minimum, notify applicants that their applications were received. This type of notification should be a standard part of most automated application systems. However, communication should not stop there. Because the Federal 
141 

hiring process is typically longer than that of the private sector—especially for jobs 

requiring security clearances—agencies should communicate both electronically and 

personally with applicants throughout the process. Applicants should be periodically 

notified of the status of their application, when they should expect the next step to 

occur, or to even explain why the process may be taking longer than expected. If 

applicants are kept well-informed, they will be more likely to stay with the process 

than if their application falls into a presumed ‘‘black hole.’’ 

Finally, agencies need to look at their hiring process to ensure that it is as timely 

as possible and does not contain unnecessary steps and bottlenecks. Because of their 

missions, some agencies may be able to keep applicants engaged in the process for 

a long period of time. However, a large segment of applicants, especially those with 

highly sought after skills, will not wait months for a job offer, regardless of communication efforts. Ultimately, having an efficient, effective process is important. As a 

result of evaluating the hiring process, many agencies may be surprised to see that 

many of the obstacles to timely hiring are self-imposed. Fortunately, this means 

they have the power to improve the process and minimize these delays. 

Mr. ORTIZ. What role should the Office of Personnel Management play in the hiring process? Should it reclaim its original role as the main hiring authority for the 

federal government? 

Dr. CRUM. In 1996, the Office of Personnel Management (OPM) delegated most 

competitive examining authorities to agencies. As a result, each agency is permitted 

to establish delegated examining units to carry out its hiring process. Prior to delegated examining, agencies had many complaints about the hiring process, including 

that it was too long, it did not address their individual mission needs, and they were 

not getting the best applicants. 

This decentralized management approach has both advantages and disadvantages. On the one hand, agency delegated examining units will generally be more 

knowledgeable of the agency’s mission and the skill requirements necessary to carry 

out that mission than a third party hiring organization would be. This knowledge 

gives them a better understanding of how to attract members of the targeted applicant pool and makes it easier to tailor recruitment and hiring strategies to better 

meet the agency’s mission. 

On the other hand, decentralization often results in the Government losing the 

ability to achieve economies of scale in terms of hiring tools and systematic approaches. Competition can increase among agencies and provide advantages to those 

with more resources and leadership support. Agencies often use different application 

and hiring procedures, and this creates confusion and burden among applicants who 

simply want a government job. All of these factors can affect the merit principles 

and the ability of individual agencies to hire high-quality applicants. 

Hiring reform is needed in the Federal Government, but going back to a centralized system is not the most likely answer. OPM is no longer resourced to implement 

a centralized hiring system again, and agencies’ needs are too diverse to recommend 

employing a single hiring authority. OPM’s role should be to provide leadership to 

agencies regarding how to hire within the parameters set by the merit system principles and in identifying areas where agencies need to come together to achieve 

economies of scale. 

OPM has already made progress in this regard. It works regularly with the Chief 

Human Capital Officers Council to identify human capital problems and pilot potential solutions. It has worked with agencies to improve USAJOBS and the way agencies market their jobs on the Web site. It established first the 45-day hiring model 

and most recently the End-to-End hiring process to streamline hiring and cut out 

unnecessary steps. 

There are still, however, areas that need work. The Government currently does 

not have a standard application or application process. This can create excessive 

burden for an applicant who wishes to apply for multiple positions. Additionally, 

many agencies do not have the means to develop and use the best tools to assess 

applicant qualifications. We have recommended that OPM receive appropriated 

funding for centralized development and validation of assessment tools, particularly 

for government-wide and ‘‘at-risk’’ occupations. We have also recommended that 

OPM lead the hiring reform process by working with agencies to develop a government-wide framework for Federal hiring reform that provides agencies the flexibility 

necessary to address mission needs while also preserving selection quality and employee and applicant protections. 

Mr. ORTIZ. Federal managers complain that the pay pool panel, which can overturn ratings recommended by managers, usurps the role of managers. If the majority of employees are going to be rated a ‘‘3’’ in the end, many managers wonder why 

they should spend the time in doing performance assessments. 
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If the majority of employees are rated a ‘‘3’’, and managers eventually give up trying to fairly assess their employees since the pay pool panel will overturn their recommendations, how does this ultimately differ from the complaints of the simple 

pass/fail performance rating systems under the GS system? 

Mr. PERKINSON. Thank you for the opportunity to address this important question, Mr. Chairman. The reality in the field is that the ratings have resulted in a 

bell curve distribution with most employees receiving ‘‘3’’ ratings. The underlying 

cause of this is the role of the pay pool panel. In my oral testimony, I sought to 

provide a brief synopsis of how the pay pool panels were stepping out of their intended role by readjusting supervisors’ ratings. This is directly tied to the resulting 

share value. The ratings distributed play a significant role in the share value, which 

concerns many of our members. The final payout results in large part on how a facility maximizes its share value. Our members take issue when those rated 3s at 

one location receive a significantly different payout than the 3s in another location. 

The ultimate difference between the GS and NSPS systems is that GS employees, 

in most cases, receive automatic pay increases, and in a properly run NSPS location, 

individuals have the ability to be rewarded for higher performance as the NSPS system personalizes the employee’s evaluation through its process. 

Under the system, most employees will likely receive 3s, due to both human nature and the pay pool influence. However, exceptional employees are rewarded better under NSPS than under the GS. Conversely, under-performing employees are 

not rewarded under NSPS, but still receive a pay raise under GS, negating any incentive to perform better. The biggest difference is that NSPS forces managers to 

make meaningful distinctions in performance. 

Mr. ORTIZ. Pay for performance is highly touted within the private sector. Yet, 

with human nature, it can be ripe for abuse. For example, there could be instances 

where a poor performer, because he or she happens to get along well with managers, 

is promoted. A high-performing individual who happens to have had a disagreement 

with management could be stymied in promotion or performance pay opportunities. 

And there are many other variations on these examples. The GS schedule, based 

on performance and tenure, is aimed at ensuring fair treatment and pay for federal 

employees. 

What internal safeguards should be implemented to ensure reasonable transparency and appropriate accountability in connection with the results of the performance management process? 

Mr. PERKINSON. If NSPS is going to continue to serve as the Pentagon’s personnel 

system, a couple of safeguards come to mind to improve transparency and accountability. The first is the ability of the rating official to share his/her rating with the 

employee prior to going to the pay pool panel for review. Presently, we encourage 

the supervisor and employee to openly set objectives and execute an interim review, 

followed by a written assessment. Despite this constant contact between the employee and manager, the rating official still cannot tell the employee his/her result. 

If the rating gets changed at the pay pool level there should be some form of communication to explain the changes—aka, transparency. If a rating or payout gets 

lowered, there should be safeguards in the system to explain what happened to 

cause the change. 

The second safeguard we suggest is that the pay pool panel limit its role to ensuring the rating official has stayed within the framework of the process and conducted 

the review as written. The Panels are too focused on the impact they have on the 

share value. The sole purpose of the Pay Pool Panel should be to ensure fairness, 

transparency and consistency exist in the system by overseeing managers, not 

changing ratings. 

An additional safeguard to address the employee who faces issues of disagreement 

or personality clashes is utilization of the reconsideration or appeal process. This option is under-utilized, despite what some claim. When I hear complaints about ratings and pay raises from FMA members, I always ask if they requested reconsideration. Most say no. These cases are isolated and it is extremely difficult to put rules 

in place to address all potential problems. We believe this will become easier over 

time, as more cases are heard. 

No system is going to operate perfectly one hundred percent of the time, in the 

public or private sector. It is our job as managers and your job as legislators to ensure the system is as fair and transparent as possible. 

Mr. ORTIZ. In a 2008 testimony before the Senate Homeland Security and Government Affairs Committee, FMA raised concerns about the ‘‘so-called bell curve distribution of ratings.’’ Specifically, managers and supervisors reported extreme pressure from higher-ups to maintain a specified distribution of funds or performance 

ratings within each pay pool. Managers were also told that there would not be 

enough money in the pool if all employees were rated 4s or 5s. Higher ratings mean 
143 

less money per share in the pool, while lower ratings mean bigger shares for the 

performing employees. There is severe danger of ratings being deflated or inflated 

to accommodate a small section of the population. 

What can be done to ensure that meaningful distinctions in employee performance 

are being made? 

Mr. PERKINSON. This issue directly deals with the topic of share value and the 

ability of each facility to devise business rules that impact that value. There is a 

distinct lack of concrete business rules, and even when rules are in place, they tend 

to differ among facilities. Part of the problem with share value centers on whether 

there has been any suggested or implied rules that could impact the ratings. If there 

is an abundance of high ratings the share value is deflated; a greater number of 

lower ratings inflate the share value. The result could be that a ‘‘3’’ in one location 

receives a higher payout than the same rated employee at another location. When 

examined across an agency like DOD, this simply does not make sense and provides 

the foundation for forced distribution and quotas. 

We need to make adjusts to NSPS so there will be a quick review of the results 

by the pay pool panel to ensure share values are consistent. One way of accomplishing this is to release a standard set of business rules that apply DOD-wide. We 

should also ensure that senior officials do not impact ratings by implying their desires or results during the assessment period. 

Mr. ORTIZ. The performance management system for NSPS consists of five rating 

categories, of which the lowest rating is a ‘‘1’’ (unacceptable performance) and the 

highest rating is a ‘‘5’’ (role model performance). The majority of employees in 2008 

and 2009 were rated a ‘‘3,’’ or valued performer. The GAO reported in 2008 that 

during its discussion groups with civilian employees under NSPS, a prevalent theme 

was that it was impossible to receive a rating higher or lower than a ‘‘3.’’ 

What should be done to address these employee concerns? 

Mr. PERKINSON. Leadership must come from the top if issues such as these are 

to be prevented. We are hearing reports of managers experiencing what you describe, which DOD NSPS officials contend should not be occurring. More needs to 

be done on the part of national leadership to ensure this does not happen and enforce penalties when it does. 

The baseline evaluation of a valued performer requires that the individual meets 

the criteria established for their job consistently throughout the year. For a rating 

to be above 3, additional expectations must be met to elevate the person to those 

levels. Again, part of the issue is that the system appears to be applied in a variety 

of ways that could be considered very subjective and inconsistent. Some facilities 

validated increases based on the written self-assessment, which led to complaints 

that the process was judged on writing ability. In the view of the employee, there 

is no clear cut way to know whether you are attaining higher levels of performance 

outside of the conversations with the rating official. 

Increasing transparency by informing the employee of their initial rating and providing explanations of adjustments made by the pay pool panel could alleviate many 

concerns. Again it comes back to the establishment and consistent application of 

core elements throughout the process in all activities. 

QUESTIONS SUBMITTED BY MR. FORBES 

Mr. FORBES. Why does the pay pool have the authority to change an employee’s 

rating given by the employee’s supervisor who is the one with the first-hand knowledge of the employee’s performance? 

Mr. BUNN. The National Security Personnel System (NSPS) pay pool panels ensure that all supervisors within a pay pool are applying rating criteria in the same 

manner for each employee across the pay pool. Without the authority to change a 

recommended rating given by the employee’s supervisor, the pay pool panel would 

be unable to mitigate differences in application of the criteria. This would result in 

‘‘high’’ and ‘‘low’’ raters and ultimately inequity in payouts. 

The NSPS pay pool process is an integral and integrated part of the performance 

management cycle and ensures that performance decisions are made in a careful, 

deliberative environment that uses a consistent approach to decisions regarding performance ratings and shares that drive employee performance payouts. Pay pool 

panels are comprised of senior leaders and management officials, normally in positions of line authority, who possess knowledge of the organization’s mission and the 

employees included in the pay pool membership. 

The performance rating process begins with the employee’s opportunity to provide 

a self-assessment. The rating official then provides a recommended rating that is 

reviewed by a higher level reviewer. The recommended rating includes the rating 
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official’s recommendation as to ratings, share assignments, and distribution of performance payout. The recommended ratings are reviewed by higher level reviewers 

and by the pay pool panel to ensure consistency and fairness across the pay pool. 

Larger pay pools may also have recommended ratings reviewed by sub-pay pool panels. Ratings are reviewed by higher level reviewers and pay pool panels against performance indicators and benchmark standards. The performance indicators and 

benchmark standards are published in the Department of Defense (DoD) implementing issuance, DoD Manual 1400.25, Subchapter 1940, and are included in performance management training given to employees and supervisors. In instances 

where the panel does not agree with the rating official’s recommendation, the rating 

official is given an opportunity to present additional information to the panel that 

the rating official believes clarifies or justifies his or her recommendation(s). The 

pay pool manager is given final authority to approve ratings of records as a means 

of reinforcing equity across and within pay pools and as a necessary safeguard when 

applying standard benchmark criteria for all employees. All decisions of the pay pool 

manager are accomplished in accordance with merit system principles. Ultimately, 

the employee’s rating is based on his or her performance against standard benchmark criteria. 

Mr. FORBES. The Pay Pool managers most often know nothing about the employee’s actual performance. Since Pay Pools are funded based on a percentage of the 

total base salaries of employees in the pay pool, doesn’t that put some employees 

at a disadvantage? 

Mr. BUNN. The National Security Personnel System (NSPS) has many safeguards 

built into the system specifically designed to ensure fairness and equity as well as 

to mitigate any consequences, which may arise as a result of unfamiliarity of the 

pay pool panel or manager with the work of an individual employee. Among the 

safeguards is the opportunity for the employee to provide a written self-assessment 

and the mandatory requirement for the rating official to provide a written assessment explaining how an employee met a particular job objective. In addition, the 

rating official provides a recommended rating of record based on application of 

standard performance measurement criteria. To ensure that the measurement tools 

are interpreted consistently across the organization and in a manner free from favoritism, cronyism, or other inappropriate consideration, multiple-level reviews of 

recommended ratings, share assignments, and payout distribution determinations 

are embedded in the performance management process. These include review by a 

higher level official and the pay pool panel. In instances where the pay pool panel 

finds that the rating official’s recommendation does not reflect the same interpretation of the performance measurement criteria as applied by other rating officials 

and that the common interpretation would result in a different rating, share assignment, or payout distribution, the rating official is given an opportunity to present 

additional information to the panel that the rating official believes clarifies or justifies his or her recommendation(s). In this way, the pay pool panel is able to ascertain whether an adjustment proposed to ensure consistent application of performance criteria throughout the pay pool is justified or if the adjustment is based on 

a misunderstanding of the record. This process is designed to ensure equity in application of performance criteria across a pay pool as well as to incorporate the knowledge of rating officials who often have the closest view of the employee’s performance. 

Pay pool managers add to the process an umbrella view of the organization and 

familiarity of the organization’s mission and/or the functional specialty of the employees. This knowledge, paired with the interaction with the rating official, enables 

the pay pool manager and pay pool panel, who are typically senior line managers 

in the organization, to effectively accomplish their role of managing the pay pool, 

resolving discrepancies, ensuring consistency and equity within the pay pool, and 

approving the employee’s rating of record, share assignment, and payout distribution based on recommendations from the rating official. 

Mr. FORBES. How fair is a Request for Reconsideration Process of a Performance 

Rating that does not allow an employee to challenge a performance payout, number 

of performance shares assigned, value of performance shares, or distribution of payout between increase to base salary and bonus? 

Mr. BUNN. The National Security Personnel System (NSPS) was designed to ensure fairness and equity in evaluating and rewarding performance. Appropriately, 

in the event that an employee requests a reconsideration of their overall rating of 

record or of an individual job objective rating, only performance-related criteria are 

considered in making decisions on reconsideration requests. From its inception, 

NSPS was designed to emphasize both performance pay as well as compensating 

employees based on market factors. Factors considered in the determination of assignment of shares and payout distributions include a combination of factors other 
145 

than performance, such as labor market conditions and compensation/pay progression management. Pay decisions based on these factors are not usually subject to 

review. However, any reconsideration request that results in a change to an individual job objective rating or the rating of record may result in a change in share 

assignment. For example, if an employee’s overall rating of record is raised to the 

next level, the corresponding (and higher) share range must be used resulting in a 

higher performance payout for the employee. The pay pool manager will recalculate 

the employee’s performance payout amount and distribution, and salary adjustments will be based on the share range appropriate for the adjusted rating of 

record. The payouts of other employees in the pay pool are not affected or recalculated. 

Mr. FORBES. How many employees under NSPS actually took part in writing their 

Job Objectives? 

Mr. BUNN. The Department does not have statistics to verify the number of employees who participated in the development of their job objectives. However, the 

National Security Personnel System (NSPS) is designed to ensure that performance 

expectations (job objectives) support and align with the organization’s mission and 

goals, and has implemented safeguards to ensure against the imposition of impossible performance expectations. Such safeguards include requiring supervisors to involve employees, where feasible, in the development of their job objectives to ensure 

a clear understanding of performance expectations, subjecting job objectives to higher level review to ensure consistency and fairness within and across the organization, and communicating job objectives to employees in writing prior to holding them 

accountable for performance of the objectives. Participation of employees in development of job objectives is not mandatory as it is recognized that in cases where a 

large number of employees perform the same type of work, the use of standard job 

objectives may diminish the involvement of employees in the development of job objectives and situations such as newness of an employee to a position may not enable 

meaningful participation by the employee. 

To facilitate the development of job objectives by both employees and supervisors, 

NSPS provides classroom instruction, web-based training, and a 2-hour workshop to 

assist employees in preparing well-written job objectives and assessments. Our 

learning materials feature exercises and activities to gain insight into how to develop effective job objectives that align with the organization’s goals. Employees 

gain practice writing objectives and understanding the importance of tracking and 

monitoring their performance throughout the performance cycle. The performance 

management system’s emphasis on communication also encourages an employee’s 

active involvement and input throughout all phases of the performance management 

cycle. Through writing their job objectives, monitoring their performance, and providing their self-assessment, employees are encouraged to share their insights and 

perspectives about what they do and how it supports the mission. 

Mr. FORBES. Why are the ratings of the employees; specifically names, not made 

public if the idea of NSPS is to motivate all employees to be model employees? 

Mr. BUNN. The Privacy Act governs the dissemination of certain employee personal information. Government-wide regulations at title 5, Code of Federal Regulations (CFR) implement the Privacy Act as it relates to employees’ performance information in the Official Personnel Folders. Performance ratings are not made available to the public, which would include an employee’s coworkers in accordance with 

5 CFR 293.311(a)(6). 

The National Security Personnel System (NSPS) employees are given information 

that allows them to understand how they are rated. Performance criteria are made 

public and are shared with employees. The standards by which employees’ job performance is assessed (the performance indicators and the benchmark standards) are 

published in Department of Defense (DoD) Manual 1400.25, Subchapter 1940 (DoD 

1400.25M, SC 1940). The performance indicators are established at level 3 and level 

5 performance by pay schedule and pay band. In addition, the benchmark standards 

for evaluating the contributing factors that relate to how the job is performed are 

also listed in DoD 1400.25M, SC1940. Employees are trained on how to use the performance indicators and benchmark standards in completing their self-assessments. 

While individual employee ratings are not and cannot be provided to other employees, aggregate pay pool results are required to be communicated to employees. 

This enables employees to compare their results with the overall results within their 

workforce. At a minimum, employees are informed of the average rating, ratings 

distribution, share value (or average share value), and average payout expressed as 

a percentage of base salary at the completion of the performance payout process. 

Providing information and training concerning the use of the performance indicators and benchmark standards, and the overall pay pool results should provide any 

needed additional motivation employees need to perform at their highest level. 
146 

Mr. FORBES. Why are NSPS employees not given the full amount of the Cost of 

Living Allowance (COLA) or Government-wide Pay Increase (GPI)? 

Mr. BUNN. While it is commonly believed that the General Schedule (GS) GPI is 

a COLA, the GS GPI actually reflects the cost of labor rather than a cost of living 

adjustment. The Federal Employees Pay Comparability Act of 1990 provided two 

types of annual salary adjustments: an across-the-board increase to the entire GS 

based on the Employment Cost Index (ECI); and, a locality pay increase to the entire GS, in a particular locality area, based on the salaries of non-Federal employees 

working in that area. The ECI portion is based on an annual comparison of ECI 

changes as measured by the Bureau of Labor Statistics (BLS). However the BLS 

comparison measures the ‘‘cost of labor or wages’’ as opposed to the ‘‘cost of living.’’ 

Ultimately, the purpose of the GS increase is to ensure competitiveness with the 

private sector, versus offsetting increases in the cost of living. 

The National Security Personnel System (NSPS) regulations require the maximum rate of the pay band to be raised by 100 percent of the NSPS general salary 

increase. There is no requirement to raise the minimum of the band. However, the 

regulations also provide that if the adjustment of the minimum rate of the pay band 

causes the base salary of an employee with a rating of record above unacceptable 

to fall below the minimum rate, the employee’s salary will be set at the pay band 

minimum rate. Consistent with title 5, United States Code (U.S.C.), Section 

9902(e)(7), the regulations require that NSPS employees who have a current rating 

above unacceptable will receive a base salary increase of no less than 60 percent 

of the general salary increase and a local market supplement increase equal to GS 

locality-based payments under title 5, U.S.C., Sections 5304 and 5304a. Section 

9902(e)(7) of title 5 and the regulations also require that the remaining portion of 

the GS salary increase will be included in pay pool funding for the purpose of increasing rates of pay based on employee performance and contributions during the 

rating cycle. Under the current regulations, employees with a final rating of Valued 

Performer (Level 3) or higher for the current appraisal period are also eligible to receive a performance-based payout for that cycle. 

NSPS is a pay-for-performance system, and progression through the pay band is 

based on duties, responsibilities, and performance; whereas, progression through the 

grades under the GS is based primarily on longevity. Notwithstanding, there are 

links between compensation under NSPS and the GS. By law, the overall amount 

allocated for compensation of civilian employees in NSPS can be no less than if the 

employees had remained covered by the GS, and that amount is available only for 

such compensation. 

Mr. FORBES. The purpose of a COLA and/or GPI is to keep up with inflation, not 

a reward for superior performance. If NSPS is truly a ‘‘Pay for Performance’’ system, 

why did DOD and Navy implement a top pay range in the pay band which cannot 

be exceeded? Once you reach that top range, no matter how good of an employee 

or how hard you work, you only get 60% every year. 

Mr. BUNN. As explained in the answer to the previous question, the annual government-wide General Schedule (GS) Government-wide Pay Increase (GPI) represents a cost of labor calculation, not a cost of living adjustment. The maximum 

of all the National Security Personnel System (NSPS) pay ranges are increased by 

100 percent of the General Schedule Base Salary Increase (GSI) to ensure employees are eligible to receive the full NSPS general salary increase based on performance. While employees must receive at least 60 percent of the GSI as an across-theboard pay increase if they have above unacceptable performance, the balance must 

be paid out as a base salary increase based on employee performance. This enables 

the Department of Defense to pay the most competitive salaries to its highest performing employees. 

While pay-for-performance is an integral part of NSPS, it is not the only factor 

in the compensation system. NSPS is also a system that is sensitive to market factors in determining an appropriate pay level for positions. The GS establishes somewhat narrow pay ranges (grade levels) according to the type and complexity of the 

work being performed. NSPS has several pay schedules and pay bands within these 

schedules. Some of the pay bands are pretty broad. Not every type of job in certain 

pay schedules should have salary progression to the top of the band. Control points 

allow for managers to set pay in accordance with the value of the work performed. 

Employees will continue to receive appropriate compensation based on their individual performance, if not in base salary increases then in performance bonuses or 

a combination of both. 

Mr. FORBES. The purpose of NSPS was to allow employees that exceeded work expectations to have greater earning potential, but now the government has put caps 

within each pay band. Why does the DOD not show the breakdown of the payouts 
147 

by race, sex, age, disability, and then by grade level? Isn’t NSPS supposed to be a 

transparent system? 

Mr. BUNN. Control points may be established within a pay band to manage compensation by considering and balancing a variety of factors, in addition to performance, in the determination of rates of pay and salary progression through a pay 

band. Factors include mission requirements, labor market conditions, and benchmarks against duties, responsibilities, competencies, qualifications, and performance. Control points represent one tool that can be used to manage employees’ progression through the bands and help ensure that only the highest performers move 

to the upper range of a pay band. Control points also allow management to account 

for variances in position responsibilities within a pay band. This allows the Department to set pay more consistently with the labor market and to be more effective 

in attracting and retaining top performers. 

Control points also provide management with the latitude needed to positively impact a variety of pay decisions, such as starting rates, rate ranges, and the mix of 

performance payouts between bonus and salary increase. Control points manage pay 

progression to reflect duties and responsibilities, labor markets, and/or performance. 

The Department of Defense (DoD) requires that control points be applied consistently to similar positions in the same pay band and career group within a pay pool. 

Unlike the General Schedule (GS) employee who reaches the step 10 of his or her 

GS grade, a National Security Personnel System (NSPS) employee who reaches a 

control point is guaranteed a share of the pay pool and any amount in excess of the 

control point (or the top of the pay band, if applicable) is paid as a bonus provided 

the employee has a level 3 or higher rating of record. 

Overall performance payout results are published on the NSPS website after completion of the pay pool process. However, the data available at the DoD level do not 

provide the granularity to make meaningful distinctions or provide the capability to 

draw conclusions from these high level data. DoD Components are required to conduct an annual analysis of the NSPS performance rating and payout results for 

their subordinate activities to identify, examine, and remove barriers to similar rating and payout potential for demographic and other groups in the workforce, apart 

from differences based on individual performance or material job difference. 

In addition, to promote transparency of the pay pool process, DoD Components 

are required to share with NSPS employees at the completion of the performance 

payout process the average rating, ratings distribution, share value (or average 

share value), and average payout expressed as a percentage of base salary. 

Mr. FORBES. Why didn’t DOD concur with the GAO recommendation regarding 

the third party reviews of pre-decisional pay pool recommendations? 

Mr. BUNN. The National Security Personnel System (NSPS) pay pool process provides essential safeguards to ensure that the system adheres to merit principles, 

and that ratings and management of the system are fair, equitable, and based on 

employee performance. Individual ratings recommended by a supervisor are reviewed by a higher level official and by at least one panel of management officials 

from across the organization to ensure consistency and fairness across the pay pool. 

Rating officials, reviewers, and panel members apply standard, NSPS-wide performance indicators and benchmarks when they consider employees’ performance assessments. Employees are encouraged to provide written self-assessments about their 

performance accomplishments, which help ensure panels have a complete picture; 

and an employee who disagrees with his or her rating has several avenues of redress. 

While we have no objection to demographic and other analyses for pay pools, we 

do not believe integrating such analyses as part of the pre-decisional pay pool deliberation process is warranted; and, in fact, they may have detrimental effects on the 

credibility of the system. 

We agree that such analyses can be used to ensure that the process is fair and 

equitable, and to identify and address possible barriers that may affect some groups, 

but believe it should be done after the process is complete. Such analysis must not 

be used to manipulate results to achieve some type of parity among various groups. 

Post-decisional analysis of results is useful to identify barriers and corrective actions. If the information gleaned from demographic analysis demonstrates that the 

results were not fair or equitable, for whatever reason, this information could legitimately be employed to examine the process used to achieve those results, with a 

view to identifying barriers to equal employment opportunity, if any, and eliminating them in order to achieve a more fair and equitable outcome. And, if an analysis of pay pool results uncovers illegal discrimination, management always has the 

ability and obligation to take corrective action. 

Heads of the Department of Defense Components are accountable for the manner 

in which officials in their organizations carry out policy, procedures, and guidance. 
148 

The Department requires in its NSPS implementing issuances that Component 

Heads carry out an annual analysis of the NSPS performance rating and payout results for subordinate elements; and issue guidance to lower echelons and otherwise 

act to identify, examine, and remove barriers to similar rating and payout potential 

for demographic and other groups in the workforce, apart from differences based on 

individual performance or material job differences. 

Mr. FORBES. COLA’s and Housing Allowances could be lumped into a pay pool and 

the top performers could get the higher raises. It would eliminate the automatic 

time-in-grade raises, just like for civil service. Why hasn’t the DOD done a DODwide survey of all employees under NSPS to see what the people in the system 

think of it? They would probably find that the majority of the employees are not 

in favor and that it has only put more of a burden on those in supervisory positions. 

Mr. BUNN. By statute, the National Security Personnel System (NSPS) cannot 

modify Cost of Living Allowances and housing allowances, or lump them into a pay 

pool for any purpose. 

The Department surveys its civilian population in general on employment matters 

every year by means of the Status of Forces Survey of the Department of Defense 

(DoD) Civilian Employees (SOFS-C). The SOFS-C is administered not only to our 

NSPS population but also to the rest of the civilian workforce. Views from the NSPS 

workforce are mixed. The first year after converting, employees’ surveyed opinions 

on some aspects of NSPS are lower than their baseline opinions from their previous 

system; for example, whether they understand what it takes to be rated at the different levels and whether the performance management system improves organizational performance. At the same time, the NSPS workforce reports a more positive 

view that management deals with poor performers and that pay raises depend on 

how well employees perform their jobs. NSPS supervisors have become more positive that they can influence employees’ pay. While employees’ opinions that their 

ratings fairly reflected their performance compared to their pre-NSPS baselines, the 

majority still hold a positive view; and after a second rating cycle, the first spiral 

group opinions rose somewhat from the first year. Supervisors are somewhat ambivalent: in the 2008 survey, many were neutral about whether pay-for-performance at 

their organization was a fair reflection of their employees’ performance, but of the 

rest, there were many more positive views than negative. 

The decline and the ambivalence are common with most new systems, as the Office of Personnel Management has observed and the Government Accountability Office has acknowledged. NSPS is a fundamental change from their previous experience with those systems and with the predictable General Schedule step progression 

pay system and guaranteed annual increases regardless of performance. We are 

mindful that half of the NSPS workforce converted from pass-fail performance systems, and most of the rest came from multi-level rating systems where most people 

got the top rating. We therefore augment surveys with field visits and interviews 

with employee, supervisor, and management groups to find out what is working adequately and what is of concern and may require further action. Many do express 

concern about the time the NSPS performance system takes, especially for supervisors with large non-supervisory workloads of their own. We have improved automated tools to reduce their administrative burden, and they are no longer building 

performance plans from scratch but may copy and paste an applicable objective from 

the performance plan of one rating period to another. 

We expect this issue, along with many others, to be included in the scope of the 

comprehensive program review. 

Mr. FORBES. What evidence exists that can show NSPS has had a marked improvement in development of the employee/supervisor relationship through the 

coaching/feedback that is supposed to be such a big part of NSPS? This should be 

a question if a survey is conducted; Do you believe your communication with your 

supervisor has improved under NSPS? 

Mr. BUNN. The Department surveys the workforce to monitor relationships between employees and their supervisors, among other matters; but we do not expect 

quick, marked improvements. The National Security Personnel System (NSPS) is 

still in an early stage: the great majority of the workforce has either one or two 

years under the system. NSPS is fundamentally different from the prior systems. 

Change from familiar, predictable systems to performance-based pay progression in 

a less hierarchical pay band structure is daunting. The fact that NSPS uses a senior 

management pay pool panel process to ensure there is a level playing field across 

the organization in ratings and payouts alters the traditional rating relationship between an employee and his/her immediate supervisor. The Office of Personnel Management advises that it takes 3-5 years for people’s attitudes to recover from early 

declines and meet or exceed the baseline level. Representatives from the Government Accountability Office have testified it takes 5-7 years for such changes. 
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Our surveys indicate that the employee/supervisor relationship has held up during the first two years after NSPS implementation. Employees’ trust and confidence 

in their supervisors have held level, as has their feeling that their supervisors do 

a good job. Looking at a basic supervisory responsibility—communicating what it 

takes to be rated at different levels—we found that employees’ agreement that they 

understood this had declined somewhat from their pre-NSPS baseline, but the majority, 57 percent, of Spiral 1 were positive. Interestingly, the relationship between 

an employee and his/her supervisor—forged by many things apart from formalities 

of the personnel system—seems to go hand-in-hand with employees’ opinion of 

whether their appraisal is fair. Of the 67 percent of Spiral 1 employees who agreed 

in the 2008 survey that they had trust and confidence in their supervisors, 71 percent agreed that their performance appraisal was a fair reflection of their performance, compared with 25 percent agreement for the 16 percent of employees who did 

not have trust and confidence in their supervisors. 

Asked if discussions with their supervisor or team leader were worthwhile, NSPS 

employees gave similar positive views in the 2008 survey to those not in NSPS— 

despite a slight decrease from pre-NSPS baselines. Further, somewhat more NSPS 

employees than non-NSPS ones report they receive occasional or regular performance feedback; and those in NSPS for one or two years had similarly positive views 

about the usefulness of the counseling as those not in NSPS. 

Mr. FORBES. Does a pay pool have the authority to change the stated goals for 

a particular rating at the end of the year so fewer people exceed the Level 3 rating? 

Mr. BUNN. No. Performance expectations must be communicated in writing to an 

employee before the employee is held accountable for those objectives (title 5, Code 

of Federal Regulations, section 9901.406(b)), and employee performance is measured 

against standard criteria that are published. Job objectives for the National Security 

Personnel System employees may not be changed after the end of a rating cycle to 

limit the number of employees with ratings above level three. While supervisors 

may change employees’ job objectives during a rating cycle to reflect changes in duties, mission, and/or priorities, they cannot hold the employee accountable for the 

revised performance expectation/job objective until it has been communicated to the 

employee in writing. This requirement safeguards against an employee being held 

accountable retroactively for any job objective for any reason. 

Mr. FORBES. Where are the Merit System Principles in NSPS? 

Mr. BUNN. The National Security Personnel System (NSPS) statute at title 5, 

United States Code, section 9902(b)(3) addresses the merit system principles and 

prohibited personnel practices. In addition, the statute provides at § 9902(b)(7)(A) 

that the performance management system must incorporate adherence to merit system principles. The enabling regulations at title 5, Code of Federal Regulations 

(CFR), section 9901.101(b) state that the merit system principles are among the 

guiding principles for establishing the requirements for the implementation of the 

NSPS human resources system. The regulations also state at 5 CFR § 9901.342(b) 

and (f)(2) that oversight of pay pools must be established in such as way as to ensure employees are treated fairly and consistently and in accordance with merit system principles. At 5 CFR § 9901.412(g), the regulations state that ‘‘[c]onsistent with 

the merit system principles and this part, the Pay Pool Manager is the approving 

authority for Pay Pool Panel recommendations concerning ratings of record, share 

assignments and payout distributions.’’ The merit system principles, while not explicitly listed, are embedded in all aspects in the NSPS human resources system. 

The supplementary information for the regulations published on September 26, 2008 

(73 Federal Register (FR) 56344) makes numerous references to the merit system 

principles. For example, the adherence to merit system principles support the fairness of the pay pool process (73 FR 56350), that the system is evaluated to determine whether it complies with merit system principles (73 FR 56359), and that the 

classification system supports the merit system principles (73 FR 56359). 

The merit system principles are an integral part of NSPS training and communication. In virtually all NSPS briefings and training sessions, participants are advised that NSPS does not change or alter merit system principles. In all performance management training, the participants are reminded that performance evaluation must conform to the merit system principles, and participants are given a 

handout that lists the merit system principles. 

Mr. FORBES. How much has NSPS cost the taxpayers since its implementation? 

Mr. BUNN. To date, the National Security Personnel System (NSPS) implementation costs across the Department are approximately $230 million. This includes expenditures for the following: 
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Design and Implementation (efforts including those conducted by Component and local activities related to the planning, tailoring, and adapting of 

NSPS Implementing Issuances) 

• Regulation, implementing issuances, conforming policy, and technical reference 

material development 

• Continuing collaboration with unions 

• Working group activities for implementation planning, scheduling, and monitoring 

• Communications materials 

• Lessons learned meetings, conferences, and reports 

Training Development, Support, and Execution 

• Courseware design and development; and component and local adaptations 

• Course materials production 

• Course delivery 

Human Resource (HR) Automated Systems 

• Requirements definition of NSPS-driven modifications to Component HR systems 

• Design, development, coding, and testing of modifications 

• Local system modifications 

Program Evaluation (development of metrics, data collection, survey tools, 

analysis, and reporting to assess the effectiveness of NSPS regulations and 

implementation) 

• Survey design and administration 

• Data analysis and reporting 

Program Office Operations (efforts conducted by Program Executive Office 

(PEO), Component program offices, and locally established NSPS activities) 

• Rent and supplies, equipment, networks, and telecommunications (applies to 

PEO NSPS only) 

• Personnel appointed to coordinate NSPS implementation at local level 

Detailed employees will be included in Component reporting under this category. 

Mr. FORBES. What specifically is there in NSPS that was not available under the 

GS system as far as bonuses, raises, performance awards, etc.? 

Mr. BUNN. The National Security Personnel System (NSPS) is designed to promote a performance culture in which performance and contributions are more fully 

recognized and rewarded based on performance, innovation, and results. NSPS 

makes distinctions among employees based on a rigorous evaluation of individual 

performance against standard criteria to ensure that the highest rating levels, and 

associated performance payouts, are reserved for those who deliver exceptional results. This performance management system differs from the General Schedule (GS) 

process of longevity-based pay increases that are linked primarily to the passage of 

time. NSPS better links individual pay to performance using performance rather 

than time-on-the-job to determine pay increases. It also provides employees with 

greater opportunities for career growth and mobility within the Department. 

The NSPS pay and classification system provides a flexible pay-banding construct 

that helps attract skilled and talented workers, and retain and appropriately reward 

current employees. This pay-banding structure replaced the artificial limitations created by the GS pay and classification systems. Using broad pay bands, the Department is able to move employees more freely across a range of work opportunities 

without being bound by narrowly described work definitions. Unlike the GS system, 

NSPS employees may receive reassignment base salary increases of up to 5 percent. 

When NSPS employees are promoted to a higher-level pay band, the flexibility exists to set pay at a level that provides at least a 6 percent pay increase and a more 

significant base salary increase of up to 12 percent or more if management determines that a greater increase is appropriate. For example, a 10 percent increase 

may be justified when an employee is promoted from an entry or developmental 

band to a full performance band and the greater increase is necessary to pay the 

employee a rate that is competitive in the labor market, given the employee’s responsibilities, competencies, and anticipated performance. Under the GS system, 

management must follow standard pay setting procedures, which provide no flexibility or discretion when setting pay. 

There is considerably more room for pay progression within an NSPS band than 

within a GS grade. NSPS employees may move more easily within their assigned 

band, or other comparable bands. Additionally, unlike the GS employee who reaches 

step 10 of his or her GS grade, an employee with a level 3 or higher rating of record 

is guaranteed a share of the pay pool, and any amount of the performance-based 
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payout in excess of a control point within the band or the top of the pay band is 

paid out as a bonus. 

The NSPS pay structure is more responsive to market conditions than the GS. 

The Department is able to adjust rate ranges and local market supplements based 

on variations relating to specific occupations, rather than using a one-size-fits-all 

approach. Labor market conditions also are considered when making pay-setting decisions. 

Mr. FORBES. Based on the GAO testimony, one safeguard GAO believes needs to 

be implemented to increase employee confidence in the pay for performance system 

is for DOD to have a third party analyze the pay-pool recommendations for ‘‘anomalies’’ before any final decision is made to determine whether an employee’s rating 

accurately reflects the employee’s performance and whether any non-merit based 

factors contributed to the ‘‘anomaly.’’ 

1. Explain how you see this third party analysis working. 

Ms. FARRELL. Given that each agency has its own set of unique challenges and 

its own approach for handling those challenges, we believe that the department is 

in the best position to determine how to appropriately design and implement a 

predecisional analysis for NSPS. That said, we believe that the third-party analysis 

should be conducted by an independent reviewing office, such as a human capital 

office, that is able to conduct the analysis outside of the chain of command. Taking 

the analysis outside of the chain of command helps to ensure that the process remains as independent as possible. Seeing that DOD currently has over 200,000 civilian employees under NSPS, the department could consider phasing in the thirdparty analysis by starting with a representative sample of employees. A phased implementation approach recognizes that different components of agencies will often 

have different levels of readiness and different capabilities to implement new authorities. Moreover, a phased approach allows for learning so that appropriate adjustments and midcourse corrections can be made before new policies and procedures are fully implemented organizationwide. 

Mr. FORBES. 2. In your view, who would the third party be, a DOD entity or a 

non-DOD entity? 

Ms. FARRELL. As noted in our response to question 1, we would expect the third 

party to be a DOD entity that is removed from the chain of command—that is, the 

human capital office or an office of opportunity and inclusiveness. 

Mr. FORBES. 3. What criteria does GAO see as constituting an anomaly? 

Ms. FARRELL. Generally, an anomaly would be characterized as a set of ratings 

for which there is a statistically significant difference in comparison to the larger 

group. For example, if the data indicated that there was a statistically significant 

difference between the ratings of a particular subset of the larger workforce compared to the larger group at that same level, this could constitute an anomaly. The 

presence of an anomaly is not alone proof that there is a problem. Rather, identifying an anomaly in the data prior to finalizing the rating decisions would enable 

management to investigate the situation and determine whether the results are justified and merit-based. 

Mr. FORBES. 4. In investigating ‘‘blatant discrimination’’ or ‘‘egregious decisions’’ 

would the employee be contacted and interviewed? 

Ms. FARRELL. The predecisional reviews are to help achieve consistency in the 

performance management process and provide reasonable assurance that the performance decisions are merit-based and fair. Due to the nature of the investigation, 

the employee would not be contacted during an investigation. However, information 

provided by employees, such as the self-assessment, can be considered during the 

review process, as could information provided by responsible managers regarding 

underlying reasons for any anomalies. 

Mr. FORBES. 5. Would a single third party be evaluating all 1,600 pay pools across 

DOD to get a DOD wide view of anomalies, or would 1,600 third-party reviews be 

conducted at each pay pool without regard for a comprehensive DOD look? 

Ms. FARRELL. As noted in our response to question 1, each agency has its own 

set of unique challenges and its own approach for handling those challenges. As a 

result, we feel that the department is in the best position to determine how to appropriately design and implement a predecisional analysis for NSPS. One approach, 

as noted in our response to question 1, would be for DOD to phase in the third party 

analysis by starting with a representative sample of employees. Such an approach 

recognizes that different levels of readiness and different capabilities exist among 

agency components and allows for learning so that appropriate adjustments and 

midcourse corrections can be made before full implementation. 

Mr. FORBES. 6. What effect would the third-party analyses have on the timeliness 

of the pay-pool process? 
152 

Ms. FARRELL. It would likely add time to the existing process. However, we believe that it is important that DOD take steps to ensure that its employees’ ratings 

are perceived as fair reflections of their performance. Taking additional time to complete a predecisional analysis is one safeguard that DOD can implement to raise 

employee confidence in the fairness and credibility of the system. 

Mr. FORBES. 7. Would the pay pool decisions on all the other employees in the 

pay pool be held up until the ‘‘anomaly’’ was resolved? 

Ms. FARRELL. Given that the predecisional review is intended to take place prior 

to the ratings being finalized but before they are certified and released to employees, all other ratings would not be released until the predecisional review was completed and appropriate responses (which could include inaction) were determined for 

any anomalies identified. 

Mr. FORBES. 8. How would GAO see the anomaly being corrected—a directive to 

the rater to change the rating, or some disciplinary action against the rater, or some 

other form of corrective action? 

Ms. FARRELL. Where managers provide information that explains the merit-based 

factors and reasons for the anomalies, the managers would not change the ratings. 

On the other hand, managers could determine that some vital information was not 

considered that would provide a basis for changing the rating. In all cases, it is the 

unit manager, not the third party conducting the predecisional review, that would 

determine whether a change would be warranted. Further, the review is not intended to change the results to portray an ‘‘ideal’’ distribution, or to alter the outcome of the performance management process. The purpose of the predecisional review is to identify if anomalies exist and, if found, inform managers of the need for 

further review to provide reasonable assurance that the basis for each rating is fair, 

credible, and merit-based. 

Mr. FORBES. 9. Does GAO see any appeal rights for the manager or employee involved in the ‘‘anomaly’’? 

Ms. FARRELL. Although the third-party reviewer identifies the anomalies, it is the 

responsible manager that examines the basis underlying the ratings and is held accountable for ensuring the ratings are merit based. While it is unlikely, should a 

manager be disciplined, he or she might have appeal rights, depending on the nature of the discipline imposed. 

Any employee has a right to appeal his or her final rating. However, these appeal 

rights do not apply to the predecisional review process since it is intended to take 

place prior to the ratings being finalized but before they are certified and released 

to employees. 

Mr. FORBES. Would you comment on the GAO recommendation about having a 

third party pre-decisional review of pay-pool ratings? 

Mr. PERKINSON. Thank you for the opportunity to address your questions, Congressman Forbes. The addition of this process could alleviate some transparency 

concerns raised about NSPS, but it could just as likely further cloud the system. 

We must ask ourselves what happens if the decision of the third party is different 

from that of the pay pool panel. Is this third party the final say? If so, how involved 

is it in the process? We have said that one of the problems with the pay pool panel 

is that it is out of touch with the actual job functions of the employees it is reviewing. The third party should be held to the same standards. 

Mr. FORBES. Do support the recommendation? Why or Why not? 

Mr. PERKINSON. If the pay pool panels were to act in a manner consistent with 

the authorities laid out in their directive—primarily concerning itself with ensuring 

the system is applied fairly and transparently—a third party review would be unnecessary. However, if the panels continue to overstep their bounds, adjusting the 

ratings employees receive from their rating officials, then I believe a third-party review is justified. 

Mr. FORBES. In your testimony you indicated that, as a manager, if you had a 

choice, you would prefer going back to the General Schedule System. The answer 

seemed to be couched in the context of the difficulties managers have in dealing 

with three personnel systems: NSPS, GS and Wage Grade. Is your desire to go back 

to the GS system a statement that the GS system is superior to the NSPS system, 

or is your preference for the GS system an expression that as a manager you prefer 

to work with fewer personnel systems? 

Mr. PERKINSON. That was a very difficult question for me to answer. I remind you 

that in your question you asked what I would do today. In reality there are things 

I like about NSPS and things I like about GS. 

The NSPS process allows you to improve performance and pinpoint areas of improvement for your personnel in specific areas. It also allows us to award performance in a way that is unavailable under the GS system. Under the General Schedule, there are also tools to deal with extraordinary performance and poor perform-
153 

ance. The QSI (Quality Step Increase) is a valuable tool to reward performance, but 

budgets limit the extent we can distribute them. An unsatisfactory evaluation prevents a GS employee from getting an automatic step increase in pay. However, 

these options are rarely utilized. 

My particular answer to you was in response to the difficulties with managing 

three separate systems in one department. As personnel work side-by-side, it is difficult to explain why the NSPS folks averaged one pay increase, the GS received 

something different and the Wage Grade averaged another amount. Along with that, 

each system is governed by a different set of rules regarding workplace practices, 

such as overtime, and this is complicated for a manager and confusing for employees. They want to know why they are treated differently than their peers. 

Congress and the Administration should work with managerial and employee 

groups to establish one system that can uphold the principles of objectivity, fairness 

and transparency. 

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