64050 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

OFFICE OF PERSONNEL

MANAGEMENT

Science and Technology Reinvention

Laboratory Personnel Demonstration

Project at the Naval Sea Systems

Command Warfare Centers

AGENCY: Office of Personnel

Management.

ACTION: Notice of approval of

Demonstration Project final plan.

SUMMARY: The National Defense

Authorization Act of fiscal year 1995

(P.L. 103–337) authorizes the Secretary

of Defense, with Office of Personnel

Management (OPM) approval, to

conduct a Personnel Demonstration

Project at Department of Defense (DoD)

laboratories designated as Science and

Technology Reinvention Laboratories.

The legislation requires that most

requirements of Section 4703 of Title 5

shall apply to the Demonstration

Project. Section 4703 requires OPM to

publish the project plan in the Federal

Register.

DATES: This Demonstration Project may

be implemented by the Warfare Centers

beginning on March 3, 1998.

FOR FURTHER INFORMATION CONTACT:

Warfare Centers: Shirley Scott, Deputy

Demonstration Project Manager,

NSWCDD, HR Department, 17320

Dahlgren Road, Dahlgren, VA 22448,

540–653–4623.

OPM: Fidelma A. Donahue, U.S. Office

of Personnel Management, 1900 E.

Street, NW, Room 7460, Washington,

DC 20415, 202–606–1138.

SUPPLEMENTARY INFORMATION:

1. Background

Since 1966, at least 19 studies of

Department of Defense (DoD)

laboratories have been conducted on

laboratory quality and personnel.

Almost all of these studies have

recommended improvements in civilian

personnel policy, organization, and

management. The Warfare Centers’

Personnel Demonstration Project

involves a simplified classification

system for GS employees, performance

development and incentive pay systems,

a streamlined reduction-in-force system,

and a simplified examining and

appointment process.

2. Overview

Twenty-three letters were received

and one individual commented on the

Federal Register notice at the Public

Hearing. These comments brought

several new perspectives to the

attention of those responsible for

implementing, overseeing, and

evaluating the project. The comments

highlighted instances of

miscommunication and

misunderstanding with the present

system as well as the project

interventions. Further, they underscored

the importance of providing training to

employees and supervisors on the

Demonstration Project. The substance of

all comments received has been

conveyed to the Warfare Centers’

Executive Group and the Commanding

Officers and Executive Directors of the

seven Warfare Center Divisions in the

event that local policies, processes and

training sessions may benefit from such

perspectives. A summary of all

comments received, along with

accompanied responses, is provided

below.

(A). General Management Issues

Comments: Several comments

expressed concern over a Demonstration

Project which provides additional

flexibility to supervisors and suggested

that these flexibilities will allow for or

promote abuses and compromises of the

merit system. With the feeling that

many supervisors currently do not

properly execute supervisory

responsibilities or utilize the authority

and tools provided under the current

system, these employees fear a new

system that gives supervisors additional

flexibility over their career and pay.

Several comments mentioned that no

checks or oversight seem apparent and

that management accountability is

lacking under the Project.

Response: The Warfare Centers

acknowledge that the Personnel

Demonstration Project provides

increased authority and responsibility to

supervisors, particularly in those areas

impacting employees’ pay. The Office of

Personnel Management’s (OPM’s)

experience with other Personnel

Demonstration Projects, including the

‘‘China Lake’’ Project, does not support

the assumption that increased

supervisory discretion and authority

leads to merit system abuses. However,

the Warfare Centers are sensitive to the

concerns expressed by many of the

comments and are committed to holding

supervisors accountable for the proper

use of increased authorities and

flexibilities. To assist supervisors in

carrying out their new responsibilities,

the Demonstration Project currently

requires that supervisors be trained on

the new system and receive feedback

from a number of sources, including

employees, on their supervisory skills

and leadership behaviors. Aggregate

data from the feedback process will be

made available to the top management

of the Warfare Center Divisions and will

be used to monitor and identify further

supervisory development and training

needs. Additionally, extensive

independent evaluations of the

Personnel Demonstration Project will be

conducted by OPM’s Personnel

Resources and Development Center

(PRDC) over the first five years of the

project. The results of these evaluations

will provide the Warfare Centers with

information as to whether specific

provisions of the project need to be

modified, continued as is, or curtailed.

(B). Career Path and Broad Bands

Comments received on this aspect of

the Personnel Demonstration Project

were related to several subtopics.

(1) Assignment of Occupations to Career

Paths

Comments: Several comments were

submitted raising concern about the

identification of occupations to career

paths. These comments expressed a

belief that such segmentation of the

workforce is counterproductive to a

teaming environment and may lead to a

form of career path or series-based

discriminatory actions. For the most

part, these comments were specifically

related to the assignment of GS–346,

Logistician positions, to the

Administrative/Technical (NT) Career

Path.

Response: The Career Paths selected

for the Warfare Centers’ Personnel

Demonstration Project are substantially

similar to those used in the ‘‘China

Lake’’ Personnel Demonstration Project

with a few modifications made to

further streamline the classification and

compensation processes. The Warfare

Centers’ Personnel Demonstration

Project groups positions by occupations

under one of three Career Paths—

Scientific/Engineering (ND);

Administrative/Technical (NT); and

General Support (NG). Each career path

covers occupations similarly treated in

regard to type of work, typical career

progression, and qualification

requirements. Using these criteria,

positions designated as Logistician, GS–

346 series, are assigned to the

Administrative/Technical (NT) Career

Path.

(2) Band Levels and Salary Ranges

Comments: Two individuals

expressed concern that the proposed

broad banding structure reduces the

number of formal promotion events,

removes the social distinctions between

project leaders and workers, and results

in a loss of status currently associated

with the General Schedule grade level.

Another individual offered an opinion

that a system which includes seventeen
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64051

broad bands is contrary to the stated

objective of making ‘‘the distinctions

between levels easier to discern and

more meaningful.’’ Others perceive that

the proposed broad banding system

serves to unfairly discriminate against

women and minorities in that these

groups of employees are predominately

assigned to the Administrative and

Technical (NT) and General Support

(NG) Career Paths whose full

performance levels are lower than that

assigned to the Scientific and

Engineering (ND) Career Path.

Comments also questioned the use of a

salary overlap between the broad bands

and raised concern over the reallocation

of pay upon conversion for special

salary rate employees.

Response: The Warfare Centers

recognize there may be a concern over

the perceived loss of status and

frequency of promotions that result from

a broad banding system. Broad banding

systems, by their very nature, serve to

reduce the number of formal promotion

events and to remove some of the

distinctions among positions common

to the General Schedule classification

system. Results of the ‘‘China Lake’’

project did not indicate that this was a

continuing concern of the workforce

during the life of the project. The key

objectives of the Warfare Centers’ Broad

Banded Classification System are to

simplify the current classification

system, reduce distinctions between

levels of work, and provide managers

greater flexibility to make assignments

as work needs warrant.

The grouping of General Schedule

grades into broad bands under each of

the three career paths was based on the

typical career progressions and full

performance level of positions under the

current General Schedule system. In

addition, the salary progression of each

career path is reflective of typical salary

progression present in the non-Federal

sector. It was not based on non-merit

factors such as race, sex, gender, age, or

national origin. Experience of the

‘‘China Lake’’ Project, used as a model

for the Warfare Centers’ Personnel

Demonstration Project, did not support

the concerns. To assist the Warfare

Centers in monitoring this important

issue, data on band level, salary, and

workforce demographics, supplemented

by perceptual data, are included in the

planned evaluation strategy. Evaluation

results will alert the Warfare Centers of

any unintended outcomes of the broad

banded classification system and will

serve as the basis for decisions to

modify, continue as currently stated, or

to curtail the Demonstration Project.

The salary range of each broad band,

with the exception of Band I of each

career path and ND VI, has been

extended to cover the salary range of the

next lower General Schedule grade. The

extended salary range serves to replicate

the overlap found in the current General

Schedule system and was included to

facilitate assignment and pay setting

flexibilities and to control costs that

would otherwise occur upon

promotions. The pay special salary rate

employees receive under the current

system is in many cases encompassed

within the salary range of the broad

banding system. The special provisions

for reallocating the pay of special salary

rate employees were included in the

project to avoid payment of an

unintended windfall.

(3) Lack of Salary Progression for GS–13

Scientists and Engineers

Comment: Several comments were

received on the lack of salary

progression for those individuals who

will convert into the Personnel

Demonstration Project at the top end of

the recognized full performance level, in

particular Scientists and Engineers at

the GS–13 level. One individual

suggested a modification to the Project

to have a salary range extending beyond

step 10 of the GS–13 grade level.

Response: This issue results from high

grade controls that impact on all of the

Science and Technology Reinvention

Laboratory Personnel Demonstration

Projects. Any negative impact under the

Demonstration Project will be no greater

than that under the current General

Schedule system.

(C). Performance Appraisal and

Performance Development System

Comment: Concern was expressed

over the proposed change to a two level

(pass/fail) rating system stating that

such a system would de-motivate

employees. Others expressed concern

about the lack of specificity in the

requirements for setting and

communicating performance

expectations, i.e., timing, format,

documentation requirements.

Additionally, comments were made that

the non-adverse reduction to a lower

band level would be perceived by

employees as an adverse action.

Response: Since the initial

development of the Personnel

Demonstration Project, the Office of

Personnel Management has modified its

regulations governing Performance

Appraisal Systems granting agencies the

option of adopting a two level rating

system. The planned evaluation of this

Demonstration Project will assist in

providing data on the merits of a pass/

fail system.

The current performance appraisal

system prescribes documentation of

performance standards and elements,

includes a requirement for periodic

(mid-year) performance discussions,

and establishes the format for specified

documentation requirements. Yet, as

acknowledged by the comments, many

perceive the current system as not

working despite these requirements.

The Warfare Centers believe it is

essential that employees fully

understand performance expectations

and will focus significant training for

supervisors to that end. This training

will cover setting and communicating

performance expectations, providing

feedback, and communicating the

linkage between performance

expectations and the incentive pay

process. Furthermore, the Divisions will

determine documentation requirements

which meet their specific organizational

needs, values, and cultures.

The reduction in band level may be

taken only after an employee has been

placed on and failed a Performance

Plan. Safeguards have been provided in

the Demonstration Project to ensure the

decision to use the non-adverse

assignment to a lower band is well

documented, used appropriately, and

allow employees avenues of redress.

(D). Incentive Pay System

Comment: A number of comments

raised concern over the subjective

nature of the incentive pay criteria

leaving the employee’s salary

progression largely at the discretion of

the supervisor. Additionally, several

viewed the criteria as being outside the

control of the employee and bearing

little relationship to the employee’s

actual performance. Several raised

concern on management’s ability to

adjust the size of the incentive pay fund

in an attempt to maintain or lower labor

rates or delay the need for a reductionin-force. Also one comment expressed

concern that the incentive payout would

be limited to granting bonus pay in lieu

of salary increases, thus negatively

impacting the employee’s retirement

pay.

Response: The Warfare Centers

recognize that employee perceptions of

the success of the overall Personnel

Demonstration Project will largely be

governed by their perceptions of the

how well the Warfare Centers manage

the incentive pay system. A key

flexibility to the Demonstration Project

is to provide the Divisions the authority

to manage an incentive pay system

which best meets their needs in terms

of culture, values, and financial

situations. The specific criteria and

process for incentive pay decisions as
64052 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

well as the size of the incentive pay

fund are some of the many aspects of

the Project which have been delegated

to the Warfare Centers Division and will

not be defined at the Warfare Center

level. The project provides for

supervisory training which will stress

the importance of establishing,

interpreting, and communicating

incentive pay criteria to help employees

understand what is expected in order to

receive incentive pay. Additionally, in

exercising these authorities, each

Warfare Center Division will be

prepared to communicate the criteria,

process, and decisions on the use of the

incentive pay fund to its workforce.

(E). Reduction-in-Force

Comment: Two comments included a

concern that the revised Reduction-InForce system would provide

management the ability to target

individuals and stated a belief that this

targeting would be in violation of

veterans’ preference rights or laws

precluding discrimination based on age.

Additional comments raised concern

about the impact of the revised

competitive area definition. This is seen

as limiting placement considerations

and as a major threat to job security.

Response: In developing the

Personnel Demonstration Project, the

Warfare Centers adopted as one of the

guiding principles the preservation of

veterans’ preference laws. Extensive

review of the project interventions was

conducted to ensure that no aspect of

veterans’ preference entitlement has

been adversely impacted. Additionally,

simulated reduction-in-force scenarios

were conducted to ensure that at a

minimum the proposed changes did not

adversely impact on veterans, women,

minorities and other protected groups

when compared with the current

reduction-in-force system. The

Personnel Demonstration Project,

including the revised reduction-in-force

changes, may be implemented within

local bargaining units only through the

collective bargaining process. In the

event that full agreement is not reached

prior to the need to conduct a reductionin-force, the competitive area was

redefined to ensure that Demonstration

Project participants and nonDemonstration Project participants do

not compete unfairly for placement

considerations.

(F). Miscellaneous Comments

Additional comments received on the

Project Proposal requested that the

project remove the ceiling on overtime

rates. One comment perceived an

inconsistency in the assignment of

‘‘non-professional technicians’’ to the

Administrative/Technical (NT) career

path and the exemption from overtime

provisions based on professional

criteria. Another comment

communicated refusal to waive any

portion of rights conveyed to citizens by

the U.S. Constitution.

Response: The Personnel

Demonstration Project covers those

interventions which the Warfare Centers

believe to be fundamentally critical to

successful mission execution and

organizational excellence and was not

intended to address all problems

associated with the current General

Schedule system. Together the

interventions proposed provide the

Warfare Centers with the ability to

obtain, develop, incentivize, and retain

high performers while being responsive

to business considerations and overall

workforce costs. The project does not

modify the overtime provisions and the

definitions of exemption criteria under

the Fair Labor Standards Act covered by

Title 5, CFR Part 551. This

Demonstration Project has been

developed under the authority granted

to agencies in Section 4703 of Title 5.

Individual permission is not needed to

implement the Project. There is no

authority nor intent to waive individual

constitutional rights.

3. Demonstration Project Clarifications

To clarify how classification appeals

are to be processed under the personnel

demonstration project, additional

language was incorporated into section

III.B.1. In addition, minor editorial and

technical clarifications were made to

improve the final version of the

personnel demonstration project.

Office of Personnel Management.

Janice R. Lachance,

Director.

Table of Contents

I. Executive Summary

II. Introduction

A. Purpose

B. Problems With Present System

C. Changes Required/Expected Benefits

D. Participating Organizations/Mission

E. Participating Employees

F. Employee/Labor Participation

III. Methodology

A. Project Design

B. Personnel System Changes

1. Classification/Pay

2. Performance Development System

3. Incentive Pay System

4. Reduction-In-Force (RIF)

5. Competitive Examining/Distinguished

Scholastic Appointments

C. Project Implementation

D. Entry Into/Exit From The Project

E. Project Duration

IV. Evaluation Plan

V. Waivers of Law/Regulation

VI. Cost

VII. Project Oversight/Management

I. Executive Summary

The Naval Surface Warfare Center and

the Naval Undersea Warfare Center,

designated as Science and Technology

Reinvention Laboratories, wish to

conduct a Personnel Demonstration

Project similar in nature to that of the

1980 Demonstration Project approved

for the Naval Weapons Center, China

Lake, and Naval Ocean Systems Center,

San Diego. The Warfare Centers’ project

includes the following key project

components: A Broad Banding

Classification and Pay System for

‘‘white collar’’ employees; a

Performance Development System; an

Incentive Pay System; a new Reductionin-Force (RIF) system; and a

Competitive Examining and

Appointment System. The Warfare

Centers’ project addresses an

organization which is substantially

larger (over 23,000 employees), has

greater diversity of mission than

previous projects, and has extensive

union involvement at all major sites. In

addition, the project plan has been

developed with on-going involvement of

the various unions represented in the

Warfare Centers.

II. Introduction

A Purpose

The overall goal of the Demonstration

Project is to implement a Human

Resource Management System that

facilitates mission execution and

organization excellence and responds to

today’s dynamic environment of

downsizing, restructuring and closures

by obtaining, developing, utilizing,

incentivizing and retaining high

performing employees; and adjusting

workforce levels to meet program and

organizational needs. The system to be

demonstrated has the flexibilities to

accommodate and support wide-ranging

activity missions, strategies and

cultures. It is responsive to business

considerations and permits a high

degree of control over workforce costs.

Clearly, it is more streamlined and

understandable for those who will use

it as well as those affected by it. Most

importantly, it is focused not just on the

needs of the organization, but also on

the needs of the people who are the

organization.

These objectives reflect the Federal

and DoD goals of creating a government

that works better and costs less, and a

flexible system that can reduce,

restructure or renew to meet diverse

mission needs, expand or contract a

workforce quickly, respond to workload

exigencies, and contribute to quality
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64053

products, people and workplaces. The

objectives also align with the Federal

and DoD values and guiding principles

of empowering employees to get results,

maximum flexibility tempered with

accountability, innovation and

continuous improvement, caring for

people during downsizing, and vital

partnerships and teaming with all the

stakeholders in the process.

B. Problems With Present System

The Warfare Centers find the current

Federal Personnel System to be

cumbersome, confusing, and unable to

provide the flexibility necessary to

respond to the current mandates of

downsizing, restructuring, and possible

closure while trying to maintain a high

level of mission excellence. The present

system—a patchwork of laws,

regulations, and policies—often inhibits

rather than supports the goals of

developing, recognizing, and retaining

the employees needed to realign the

organization with its changing fiscal and

production requirements.

The current Civil Service General

Schedule (GS) system has 15 grades

with 10 levels each and involves

lengthy, narrative, individual position

descriptions, which have to be classified

by complex, OPM-mandated position

classification standards. Because these

standards have to meet the needs of the

entire federal government, they are often

not relevant to the needs of the Warfare

Centers and are frequently obsolete.

Distinctions between levels are often not

meaningful. Currently, standards do not

provide for a clear progression beyond

the full performance level, especially for

science/engineering occupations where

career progression through technical as

well as managerial career paths is

important.

In addition, there are limited

mechanisms for dealing with an

employee who has been promoted out of

his/her level of expertise or who, after

a successful career, has been unable to

gain the skills required of a new work

environment. In most cases, the only

possible action may be a reduction in

grade. Under the current system a

demotion to a lower grade is considered

an adverse action even if there is no loss

in pay. Under the proposal, a reduction

in band level without a loss in pay will

not be considered an adverse action.

Performance Management systems

require additional emphasis on

continuous, career-long development in

a work environment characterized by an

ever increasing rate of change. Since

past performance and/or longevity are

the factors on which pay raises are

currently assessed, there is often no

positive correlation between

compensation and performance

contributions nor value to the

organization. These limited criteria do

not take into account the future needs

of the organization nor other culturally

relevant criteria which an organization

may wish to use as incentives.

The present Reduction in Force (RIF)

process is highly complicated and

relatively unresponsive to requirements

for rapid work force restructuring and

retention of employees with mission

appropriate skills. RIF is confused by an

augmented service credit for

performance that is based in a

performance appraisal system fraught

with contention. Round I adds

complexity, confusion, and uncertainty.

Cost savings expected from RIF are

drastically reduced by the inordinate

administrative costs of the process and

the likelihood that the employee

ultimately separated will be at a lower

grade than the originally targeted

position. Additionally there is the

expense of retained grade and retained

pay. Current RIF procedures impact

negatively on morale because of the

high number of people affected and

frequent misunderstandings of a

complicated system that leaves affected

employees wondering why they have

been ‘‘targeted.’’

And finally, the complexity of the

current examining system creates delays

in hiring. Line managers find the

complexity limiting as they attempt to

accomplish timely recruitment of

needed skills. To compete with the

private sector for the best talent

available, they need a process which is

streamlined, easy to administer, and

allows for timely job offers.

C. Changes Required/Expected Benefits

The proposed Demonstration Project

responds to problems in the

classification system with a Broad

Banding Classification system for GS

employees; to problems in the current

performance management system with a

Performance Development and

Incentive Pay System; to the problems

of the existing RIF procedures with a

streamlined RIF system; and to

problems of complicated hiring and

examining procedures with a simplified

examining and appointment process.

D. Participating Organizations/Mission

Both the Naval Surface Warfare

Center and the Naval Undersea Warfare

Center will participate in the project.

The Warfare Centers are comprised of a

total of seven Divisions with 14 major

sites nationwide. The sites are diverse

in employment profiles and size and

have bargaining unit populations

ranging from a small percentage to more

than half of the workforce. These

organizations operate throughout the

full spectrum of research, development,

test and evaluation, engineering and

fleet support.

The Warfare Centers are Defense

Business Operations Fund (DBOF)

activities. Under DBOF, the cost of

operating is paid by billing customers

for work performed. The Warfare

Centers seek to maximize management

flexibility to control expenditures since

the continued economic viability of a

DBOF activity depends in large measure

on remaining cost competitive with

other organizations.

E. Participating Employees

This Demonstration Project will

involve civilian personnel at all Warfare

Center sites. There are 14 major sites

(over 200 civilian personnel) and many

smaller sites. Currently 23,697 civilians

are employed as shown in Figure 1. The

intent of the plan is to cover all civilian

appropriated fund employees at all sites

with the exception of the members of

the Senior Executive Service. While the

Demonstration Project, and its five

components, cover all General Schedule

(GS) employees, the Federal Wage

System (FWS) employees are included

only for purposes of changes in the

Performance Development, ReductionIn-Force and Competitive Examining

systems. Likewise, Senior Level (SL)

and Scientific and Technical (ST)

employees are covered only under the

Incentive Pay, Performance

Development and Reduction-In-Force

systems. The Demonstration Project may

be implemented incrementally

throughout the Warfare Centers. The

Demonstration Project will be

implemented in bargaining units when

those units so request and a negotiated

agreement is reached. Approximately

fifty percent of the workforce is

represented by unions.

BILLING CODE 6325–01–M
64054 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

BILLING CODE 6325–01–C

F. Employee/Labor Participation

One of the keys to developing a

project plan sensitive to the multiplicity

of management and employee needs has

been the involvement of a Steering

Committee composed of representatives

from the Warfare Center Divisions and

six national unions having bargaining

units at the Warfare Center sites. The

American Federation of Government

Employees (AFGE), Metal Trades

Council (MTC), International

Association of Machinists (IAM),

National Association of Government

Employees (NAGE), the National

Federation of Federal Employees (NFFE)

and Fraternal Order of Police (FOP)

represent more than half of the more

than 25,000 employees in a variety of

occupational groups at Warfare Center

sites across the United States. Appendix

A further describes the employee/union

participation in this effort. The Steering

Committee developed a project plan

capable of meeting the seemingly

differing, sometimes conflicting, goals of

management and the unions. The

Steering Committee substantially altered

the original concept to address those

needs in order to provide a viable

implementation framework capable of

meeting the wide variety of cultures and

needs across the Warfare Center

spectrum. The Steering Committee is

also working to foster the establishment

of partnerships within the Warfare

Centers.

The Steering Committee agreed to the

following language with respect to the

implementation of the Demonstration

Project in the Warfare Center bargaining

units. ‘‘Essential to the success of the

Demonstration Project within a

collective bargaining unit is the explicit

choice of the parties to freely enter into

the project with mutual agreement on

all provisions associated with the

project. To that end, either party will

have the option NOT to enter the project

up to the point where both parties sign

a collective bargaining agreement

covering the Demonstration Project and,

if required, that agreement is ratified

and approved. Further the parties may

include in the contract provisions for

evaluating, modifying and leaving the

project during the life of the contract.’’

Any disputes or impasses that arise in

connection with the negotiation on the

implementation of the Demonstration

Project will be subject to mediation but

not binding impasse procedures. For

any bargaining subsequent to adoption

of the Demonstration Project, the parties

shall use impasse procedures defined in

5 U.S.C. 7119 unless alternative impasse

procedures have been negotiated. In the

event Executive Order 12871 is no

longer in effect, the parties within the

Demonstration Project will continue to

negotiate issues covered by 5 U.S.C.

7106(b)(1) to the extent those issues

impact on the provisions of the

Demonstration Project. Within

bargaining units, violations of

provisions of the Demonstration Project

may be covered by the negotiated

grievance procedure.

This Demonstration Project was

developed with management and union

input through a collaborative process;

however, it was agreed that union

participation did not necessarily

constitute full and complete

endorsement of all details of the project.

The Project will be implemented in

bargaining units only after there is full

agreement through the collective

bargaining process.

While understanding that each

bargaining unit will make its own

choice about participating in the

Demonstration Project, the Steering

Committee has endeavored to create a

project plan to fulfill the mutual

interests of management and employees

while supporting the long term objective

of vital, competitive Warfare Centers

capable of developing and delivering

the best possible technology to their

customers.

III. Methodology

A. Project Design

An overarching objective in the

project design has been the

development of a personnel system that

provides a maximum opportunity for

local ‘‘tailoring’’ to meet the variety of

requirements of organizations engaged

in missions ranging from theoretical

research into submarine vulnerability

and survivability to the storage of

torpedoes. While the Divisions seek to

recruit and retain world class engineers

and scientists in order to remain viable

as laboratories, they must also meet the

development and motivational needs of

an extraordinarily diverse workforce;

i.e., employees ranging from small arms

repairers in Crane, Indiana to program

analysts in Newport, Rhode Island. In

order to accomplish that end, the goal

is to begin the process of delegating

decision making to the people who

know the most about what they need

and how to get their work

accomplished: the Divisions and sites.

While much of the Demonstration

Project will be applied uniformly, there

are decisions which will be delegated to
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64055

the Divisions and activities so that the

needs and cultures of those

organizations may be taken into

account. Decisions at the local level will

be made through the collective

bargaining process.

B. Personnel System Changes

1. Classification/Pay

A fundamental element of the system

is a simplified white collar classification

and pay component. The proposed

broad banding scheme reduces the

fifteen GS grade levels and the Senior

Level (SL) and Scientific & Technical

(ST) pay levels, into five to six broad

pay bands. (See Figure 2) GS

occupations are further broken down

into three separate career paths:

Scientific and Engineering (ND),

Administrative and Technical (NT), and

General Support (NG).

The OPM-developed classification

standards are replaced by a small

number of one-page, generic benchmark

standards developed within the

Demonstration Project. These standards

also serve as the core of the position

description and replace lengthy

individually tailored position

descriptions. These generic level

descriptions encompass multiple series

and provide maximum flexibility for the

organization to assign individuals

consistent with the needs of the

organization, established level or rank

that the individual has achieved, and

the individual’s qualifications. Career

progression between levels will occur

by promotion, and pay progression

within levels will occur through

incentive pay.

BILLING CODE 6325–01–M

BILLING CODE 6325–01–C

The Warfare Centers’ long experience

with industrial funding will ensure their

ability to control costs, an essential

requirement in today’s environment.

a. Career Paths. The Warfare Centers

request exemption from the current GS

classification system and substitute

career paths and band levels. The

designated career paths are: Scientific

and Engineering (ND), Administrative

and Technical (NT), and General

support (NG). Like the China Lake

system, the GS classification series

would be retained. More detailed

descriptions of the career paths and the

classification series for each path are

provided below. The breakdown of

occupational series to career paths

reflects only those occupations which

currently exist within the two Warfare

Centers. Additional series may be added

as a result of changes in mission

requirements or OPM recognized

occupations. These additional series

will be placed in the appropriate career

path consistent with the established

career path definitions.

SCIENTIFIC AND ENGINEERING:

Professional engineering positions and

scientific positions in the physical,

biological, mathematical, and computer

sciences; and student positions for

training in these disciplines. Series and

titles included in the path are: 0401,

General Biological Science Series; 0403,

Microbiology Series; 0408, Ecology

Series; 0440, Genetics Series; 0460,

Forestry Series; 0471, Agronomy Series;

0499, Biological Science Student

Trainee Series; 0801, General

Engineering Series; 0803, Safety

Engineering Series; 0804, Fire

Protection Engineering Series; 0806,

Materials Engineering Series; 0807,

Landscape Architecture Series; 0808,

Architecture Series; 0810, Civil

Engineering Series; 0819,

Environmental Engineering Series;

0830, Mechanical Engineering Series;

0840, Nuclear Engineering Series; 0850,

Electrical Engineering Series; 0854,

Computer Engineering Series; 0855,

Electronics Engineering Series; 0861,

Aerospace Engineering Series; 0871,

Naval Architecture Series; 0892,

Ceramic Engineering Series; 0893,

Chemical Engineering Series; 0894,

Welding Engineering Series; 0896,

Industrial Engineering Series; 0899,

Engineering and Architecture Student

Trainee Series; 1301, General Physical

Science Series; 1306, Health Physics

Series; 1310, Physics Series; 1313,

Geophysics Series; 1320, Chemistry

Series; 1321, Metallurgy Series; 1330,

Astronomy and Space Science Series;

1350, Geology Series; 1360,

Oceanography Series; 1372, Geodesy

Series; 1386, Photographic Technology

Series; 1399, Physical Science Student

Trainee Series; 1515, Operations

Research Series; 1520, Mathematics

Series; 1529, Mathematical Statistician

Series; 1530, Statistician Series; 1550,
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Computer Science Series; 1599,

Mathematics and Statistics Student

Trainee Series.

ADMINISTRATIVE AND

TECHNICAL: Professional or specialist

positions in such administrative,

technical and managerial fields as

finance, procurement, human resources,

computer, legal, librarianship, public

information, safety, social sciences, and

program management and analysis;

nonprofessional technician positions

that support scientific and engineering

activities through the application of

various skills and techniques in

electrical, mechanical, physical science,

biology, mathematics, and computer

fields; and student positions for training

in these disciplines. Series and titles

included in this path are: 0018, Safety

and Occupational Health Management

Series; 0020, Community Planning

Series; 0028, Environmental Protection

Specialist Series; 0080, Security

Administration Series; 0099, General

Student Trainee Series; 0101, Social

Science Series; 0110, Economist Series;

0132, Intelligence Series; 0170, History

Series; 0180, Psychology Series; 0185,

Social Work Series; 0187, Social

Services Series; 0188, Recreation

Specialist Series; 0201, Personnel

Management Series; 0205, Military

Personnel Management Series; 0212,

Personnel Staffing Series; 0221, Position

Classification Series; 0230, Employee

Relations Series; 0233, Labor Relations

Series; 0235, Employee Development

Series; 0260, Equal Employment

Opportunity Series; 0299, Personnel

Management Student Trainee Series;

0301, Miscellaneous Administration

and Program Series; 0334, Computer

Specialist Series; 0340, Program

Management Series; 0341,

Administrative Officer Series; 0342,

Support Services Administration Series;

0343, Management and Program

Analysis Series; 0346, Logistics

Management Series; 0391,

Telecommunications Series; 0399,

Administration and Office Support

Student Trainee Series; 0501, Financial

Administration and Program Series;

0505, Financial Management Series;

0510, Accounting Series; 0560, Budget

Analysis Series; 0599, Financial

Management Student Trainee Series;

0602, Medical Officer Series; 0610,

Nurse Series; 0690, Industrial Hygiene

Series; 0802, Engineering Technician

Series; 0809, Construction Control

Series; 0818, Engineering Drafting

Series; 0856, Electronics Technician

Series; 0895, Industrial Engineering

Technician Series; 0899, Engineering

and Architecture Student Trainee

Series; 0905, General Attorney Series;

0950, Paralegal Specialist Series; 0962,

Contact representative; 1001, General

Arts and Information Series; 1010,

Exhibits Specialist Series; 1015,

Museum Curator Series; 1016, Museum

Specialist and Technician Series; 1020,

Illustrating Series; 1035, Public Affairs

Series; 1060, Photography Series; 1071,

Audiovisual Production Series; 1082,

Writing and Editing Series; 1083,

Technical Writing and Editing Series;

1084, Visual Information Series; 1101,

General Business and Industry Series;

1102, Contracting Series; 1103,

Industrial Property Management Series;

1104, Property Disposal Series; 1150,

Industrial Specialist Series; 1152,

Production Control Series; 1173,

Housing Management Series; 1176,

Building Management Series; 1199,

Business and Industry Student Trainee

Series; 1222, Patent Attorney Series;

1311, Physical Science Technician

Series; 1410, Librarian Series; 1412,

Technical Information Services Series;

1420, Archivist Series; 1521,

Mathematics Technician Series; 1601,

General Facilities and Equipment

Series; 1640, Facility Management

Series; 1654, Printing Management

Series; 1670, Equipment Specialist

Series; 1701, General Education and

Training Series; 1710, Educational and

Vocational Training Series; 1712,

Training Instruction Series; 1810,

General Investigating Series; 1811,

Criminal Investigating Series; 1910,

Quality Assurance Series; 2001, General

Supply Series; 2003, Supply Program

Management Series; 2010, Inventory

Management Series; 2030, Distribution

Facilities and Storage Management

Series; 2032, Packaging Series; 2050,

Supply Cataloging Series; 2101,

Transportation Specialist Series; 2130,

Traffic Management Series; 2150,

Transportation Operations Series; 2181,

Aircraft Operations Series.

GENERAL SUPPORT: Assistant and

clerical positions providing support in

such fields as budget, finance, supply,

human resources; positions providing

support through application of typing,

clerical, or secretarial knowledge and

skills; positions providing specialized

facilities support such as guards, police

officers and firefighters; and student

positions for training in these

disciplines. This path includes the

following series and titles: 0019, Safety

Technician Series; 0029, Environmental

Protection Assistant Series; 0081, Fire

Protection and Prevention Series; 0083,

Police Series; 0085, Security guard

Series; 0086, Security Clerical and

Assistance Series; 0134, Intelligence Aid

and Clerk Series; 0186, Social Services

Aid and Assistant Series; 0189,

Recreation Aid and Assistant Series;

0203, Personnel Clerical and Assistance

Series; 0204, Military Personnel Clerical

and Technician Series; 0303,

Miscellaneous Clerk and Assistant

Series; 0304, Information Receptionist

Series; 0305, Mail and File Series; 0318,

Secretary Series; 0322, Clerk-Typist

Series; 0326, Office Automation Clerical

and Assistance Series; 0332, Computer

Operation Series; 0335, Computer Clerk

and Assistant Series; 0344, Management

Clerical and Assistance Series; 0350,

Equipment Operator Series; 0351,

Printing Clerical Series; 0356, Data

Transcriber Series; 0361, Equal

Opportunity Assistance Series; 0382,

Telephone Operating Series; 0390,

Telecommunications Processing Series;

0392, General Communications Series;

0394, Communications Clerical Series;

0399, Administration and Office

Support Student Trainee Series; 0462,

Forestry Technician Series; 0503,

Financial Clerical and Assistance Series;

0525, Accounting Technician Series;

0530, Cash Processing Series; 0540,

Voucher Examining Series; 0544,

Civilian Pay Series; 0561, Budget

Clerical and Assistance Series; 0640,

Health Technician; 0647, Diagnostic

Radiologic Technologist Series; 0675

Medical Records Technician Series;

0679, Medical Clerk Series; 0698,

Environmental Health Technician

Series; 0945, Clerk of Court Series; 0986,

Legal Clerical and Assistance Series;

1087, Editorial Assistance Series; 1105,

Purchasing Series; 1106, Procurement

Clerical and Technician Series; 1107,

Property Disposal Clerical and

Technician Series; 1411, Library

Technician Series; 1531, Statistical

Assistant; 1702, Education and Training

Technician Series; 2005, Supply

Clerical and Technician Series; 2091

Sales Store Clerical Series; 2102,

Transportation Clerk and Assistant

Series; 2131, Freight Rate Series; 2135,

Transportation Loss and Damage Claims

Examining Series; 2151, Dispatching

Series.

b. Broad Bands and Levels of

Responsibility. A fundamental purpose

of broad banding is to make the

distinctions between levels easier to

discern and more meaningful. In that

regard, the 15 GS grade levels are

reduced to no more than six band levels,

each representing a defined level of

work. Within each career path, bands

typically include the following

categories of positions: student trainee

and/or entry level, developmental, full

performance level, and expert and/or

supervisor/manager.

With fewer band levels than GS

grades, the level of responsibility

reflected in each band typically
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64057

encompasses the responsibilities of two

or more GS grade levels. For example,

the responsibilities of a band level

covering work at the full performance

level may represent a synthesis of GS–

11 and GS–12 responsibilities. For the

NT career path, the responsibilities

associated with the top two bands do

not precisely align with equivalent GS

levels. Some GS–14 level

responsibilities band best with GS–13

while others band best with GS–15.

Although Band VI of the ND career

path covers SL and ST positions, this

does not represent a requested change in

the basis for classification or allocation

of billets for these positions. The

authority to allocate new billets, classify

positions and set initial pay for

assignment to SL and ST positions

within the Warfare Centers will be

retained at the Assistant Secretary of the

Navy (Manpower and Reserve Affairs)

level. (Accordingly, classification

appeal procedures for such positions are

not affected by the provisions of this

demonstration project.) The intent of

including these positions in the ND

career path was two fold: (1) to

emphasize the dual career progression

for scientists and engineers in

nonsupervisory and nonmanagerial

career paths; and (2) to include SL and

ST employees in all other aspects of the

Demonstration Project, i.e., performance

development, incentive pay and

reduction-in-force systems. Consistent

with our goal of developing,

recognizing, and retaining employees

needed to meet our changing

organizational needs, the Demonstration

Project seeks the authority to manage its

SL and ST workforce under the same

performance development and incentive

system as other employees. This

includes the authority at the Division

level to adjust the pay of SL and ST

employees up to Level IV of the

Executive Schedule. Incentive pay

decisions will be made against criteria

relevant to the needs of the organization

including the criticality and difficulty of

the position, critical skills, and current

salary level of the employees.

c. Simplified Classification Process. A

limited number of Warfare Center onepage generic, level descriptors that also

serve as the core of preclassified

position descriptions will be created

within the Demonstration Project. Those

descriptions may be further tailored

with an addendum to provide

information on Fair Labor Standards Act

(FLSA) coverage, selective placement

factors, specialized knowledge/skills/

abilities, etc. Within the Demonstration

Project, the term ‘‘classification of a

position’’ for positions covered by broad

banding is defined as the placement of

a position in its appropriate career path,

occupational series, and band level

based on the application of standards

(referred to as level descriptions or

benchmark standards) established at the

Warfare Center level. Line managers

will be meaningfully involved in the

classification process to make it more

relevant to their organization’s needs.

d. Classification Appeals.

(Classification appeal procedures for SL

and ST employees placed in Band VI of

the ND career path remain as currently

provided for and are not affected by the

appeal procedures described in this

demonstration project.) An employee

may appeal the career path, series, or

broad band level of his or her position

at any time. When doing so, the

employee must formally raise the areas

of concern to the supervisor in the

immediate chain of command. If an

employee is not satisfied with the

supervisor response, he or she may then

appeal to the DOD appellate level via

the employee’s chain of command and

the Warfare Centers’ Demonstration

Project Office. Only after DOD has

rendered a decision under the

provisions of this demonstration project,

may an employee file an appeal with the

Office of Personnel Management.

Appellate decisions from OPM are final

and binding on all administrative,

certifying, payroll, disbursing, and

accounting officials of the Government.

Time periods for case processing under

Title 5 apply.

An employee may not appeal the

demonstration project classification

criteria, the accuracy of the level

descriptor, or the pay setting criteria;

the assignment of occupational series to

a career path; the title of a position; the

propriety of a salary schedule; or

matters grievable under an

administrative or negotiated grievance

procedure or an alternative dispute

resolution procedure. The evaluation of

a classification appeal under this

demonstration project is based upon the

demonstration project classification

criteria. Case files will be forwarded for

adjudication through the servicing

human resources organization and will

include copies of the employee’s level

descriptor, the addendum, and a copy of

the Warfare Centers’ classification

criteria along with other documents or

information required by the Office of

Personnel Management.

e. Simplified Assignment Process.

Today’s environment of downsizing and

workforce transition mandates that the

organization has maximum flexibility to

assign individuals. Broad banding can

be used to address these needs. As a

result of the assignment to a particular

level descriptor, the organization will

have maximum flexibility to assign an

employee within broad descriptors

consistent with the needs of the

organization, and the individual’s

qualifications and rank or level.

Subsequent assignments to projects,

tasks, or functions anywhere within the

organization requiring the same level

and area of expertise, and qualifications

would not constitute an assignment

outside the scope or coverage of the

currently level descriptor. Such

assignments within the coverage of the

generic descriptors are accomplished as

realignments and do not constitute a

position change. For instance, a

technical expert can be assigned to any

project, task, or function requiring

similar technical expertise. Likewise, a

manager could be assigned to manage

any similar function or organization

consistent with that individual’s

qualifications. This flexibility allows a

broader latitude in assignments and

further streamlines the administrative

process and system.

f. Broad Bands and Salary Ranges.

The basis for the Demonstration Project

pay system is each band level having a

basic salary range that exactly

corresponds to salaries of three or more

GS grade levels. This continued linkage

with the GS system will result in

adjustments to the salary ranges through

future general and locality pay increases

under the General Schedule System. To

more closely replicate the salary overlap

found in the current GS system, there is

a one grade extended salary overlap

with each lower band for bands II and

above. (See Figure 3) The one exception

is the band for ST and SL positions (ND

VI). The pay range for these positions

will be 120% of the minimum rate of

basic pay for GS–15 up to Level IV of

the Executive Schedule. The purpose of

the salary overlap is twofold. First, it is

to provide pay setting flexibilities and

cost containment opportunities in

promotions. This reduces the instances

of nondiscretionary promotion pay

increases of greater than 6% that may

otherwise be required to advance pay to

the lower end of the next higher band

level. The second purpose is to facilitate

an assignment back to the next lower

level without loss in pay when

appropriate.

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BILLING CODE 6325–01–C

g. Locality Pay and Special Salary

Rates. For each band level., the basic

annual rate of pay will be adjusted to

reflect the appropriate locality pay

percentage. The maximum locality rate

for each band level will be referred to

as a ‘‘locality pay point.’’ When the

special salary rates authorized under the

GS system exceed the locality pay point,

the top of the applicable band will be

extended to the maximum special salary

rate authorized for that series and

geographic location. Placement within

this special rate extension will be

restricted to employees in an occupation

and location covered by that special

rate. An employee will be considered a

special rate employee only if his/her

basic pay falls within the extension, i.e.,

the basic pay exceeds the locality pay

point. Consistent with the intent of

locality pay, special salary rate

employees, as defined above, will not be

eligible for locality pay adjustments.

When the locality pay point overtakes

the employee’s rate of basic pay through

general or locality pay increases, the

employee will no longer be considered

a special salary rate employee. In this

instance, the employee’s total adjusted

basic pay will be increased to the new

locality pay point. The employee’s new

adjusted salary will then be reallocated

into a new basic pay and a locality pay

adjustment rate. Pay retention

provisions and adverse action

procedures will not apply to the

reallocation of the employee’s salary as

the employee’s total adjusted salary will

remain the same.

h. Pay Administration. The following

definitions and policies will apply to

the movement of employees within the

Demonstration Project from one career

path or band level to another, or

placement in a Demonstration Project

Career Path from the GS, FWS, or other

personnel systems:

ADVANCED IN-HIRE RATE: Upon

initial appointment, the individual’s

pay may be set anywhere within the

band level consistent with the special

qualifications of the individual and the

unique requirements of the position.

These special qualifications may be in

the form of education, training,

experience, or any combination thereof

that is pertinent to the position in which

the employee is being placed.

Geographic Movement Within the

Demonstration Project: An employee

covered by broad banding who moves to

a new duty station in a different

geographic area and continues to be an

employee covered by the Warfare Center

Demonstration Project will have his/her

pay in the new area computed as

explained below. In all cases, the

geographic movement is processed

before any other simultaneous pay

action (e.g., promotion, reassignment,

downgrade, change in series, etc.)

effective on the same day.

1. Regular Range Employees. An

employee paid at a rate below the

locality pay point for his or her band

level will receive no change in his or

her rate of basic pay upon geographic

movement. The employee’s locality pay

adjustment will be recomputed using

the newly applicable locality pay

percentage, which may result in a

higher or lower locality pay adjustment

and, thus, a higher or lower adjusted

rate (locality rate or special rate, as

applicable). Exception: For employees

who would be eligible for a special rate

under the GS system and who are in the

regular range of a band with a special

rate extension, the new adjusted salary

following a geographic move may not be

less than the old adjusted salary

multiplied by the factor derived by

dividing the new adjusted band

maximum by the old adjusted band

maximum.

2. Special Rate Extension Employees.

For an employee being paid at a rate in

a special rate extension, the new

adjusted salary following a geographic

move is equal to the old adjusted salary

multiplied by the factor derived by

dividing the new adjusted band

maximum by the old adjusted band

maximum; however the new adjusted

rate may not be less than the applicable

locality pay point in the new area.

3. Pay Protection Provision. A special

pay protection provision applies to

employees who (a) were entitled to a

special rate immediately before

conversion into the Demonstration

project, (b) continue to meet the GS

special rate eligibility conditions, and

(c) are paid at a rate that equals or

exceeds the dollar amount of the preconversion special rate. For these

employees, the new adjusted rate
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64059

following a geographic move may not be

less than the dollar amount of the

employee’s pre-conversion special rate.

Adverse action and pay retention

provisions of Title 5, United States

Code, will not apply to any reduction in

basic pay due solely to the operation of

the above rules.

PROMOTION: Within the

Demonstration Project Broad Banding

system a promotion will be defined as

the movement of an employee from a

lower to a higher band level in the same

career path, or from one career path to

another wherein the band in the new

career path has a higher maximum

salary than the band from which the

employee is moving.

After the implementation of the

Demonstration Project, for an employee

moving from the GS, a promotion will

be defined as placement in a band level

which incorporates a GS grade level

which is higher than the employee’s

current grade.

For an employee moving from the

FWS, a promotion will be defined as

placement in the Demonstration Project

in a band level where the representative

rate of the highest GS grade covered

(i.e., step 04 adjusted rate of the highest

GS grade) is higher than the

representative rate of the employee’s

current FWS grade (i.e., step 02).

Promotions will follow basic federal

merit promotion policy that provides for

competitive and non-competitive

promotions. Except for promotions from

the FWS to positions covered by the

Demonstration Project broad banding

system, an employee will normally

receive an increase of six percent upon

promotion unless a higher increase is

necessary to raise the employee’s salary

to the minimum salary of the new band.

The employee’s total adjusted pay (basic

pay and locality pay; if any) will be

used in determining the amount of the

promotion increase and in setting the

employee’s adjusted pay in the higher

band. Decisions not to increase pay or

for increases of other than six percent or

to the minimum level of the band must

be approved at the Division level, unless

otherwise delegated to lower levels. In

no situation may an employee’s salary

upon promotion be established lower

than the minimum salary range of the

new band.

Factors to be used to help determine

the amount of the increase may include,

but are not limited to, the employee’s

directly related experience which may

be of immediate use in the new

position; the employee’s current pay;

and the relationship to salaries of other

similarly qualified employees.

REASSIGNMENT: For movement

within the Demonstration Project Broad

Banding system, a reassignment will be

movement to a position covered by the

same band level, or from one career path

to another when the salary range of the

new band level and the employee’s

current band level remains the same.

For an employee moving from the GS,

a reassignment will be defined as

placement in the Demonstration Project

in a band level where the highest GS

grade covered is the same as the

employee’s current GS grade.

For an employee moving from the

FWS, a reassignment will be defined as

placement in the Demonstration Project

in a band level where the representative

rate of the highest GS grade covered

(i.e., step 04 adjusted rate of the highest

GS grade included in that broad band)

is the same as the representative rate of

the employee’s current FWS grade.

DEMOTION OR CHANGE TO LOWER

BAND LEVEL: For movement within the

Demonstration Project Broad Banding

system, a demotion will be defined as

the movement of an employee from a

higher band to a lower band within the

same career path, or from one career

path to another where the band in the

new career path has a lower maximum

salary than the band from which the

employee is moving.

For an employee moving from the GS,

a demotion will be defined as placement

in the Demonstration Project in a band

level where the highest GS grade

covered is lower than the employee’s

current GS grade.

For employees moving from the FWS,

a demotion will be defined as placement

in the Demonstration Project in a band

level where the representative rate of

the highest GS grade covered (i.e., step

04 adjusted rate of the highest grade

included in that pay band) is lower than

the representative rate of the employee’s

current FWS grade.

SALARY ADJUSTMENT: A salary

adjustment is defined as an increase in

an employee’s base pay (by other than

the incentive pay process) within the

employee’s current band level to an

amount which does not exceed the top

of the band. The salary adjustment may

be used to adjust the pay of individuals

who have acquired a level of education

that would otherwise make the

employee qualified for an appointment

at a higher level and would be used in

lieu of a new appointment. For example,

this authority may be used to adjust the

pay of graduate level Cooperative

Education (COOP) students or

employees who have obtained an

advanced degree, e.g., Ph.D.

OTHER: Current provisions for

Highest Previous Rate, Pay Retention

(except as otherwise noted), Special

Recruitment and Relocation Bonuses,

Retention Allowances and Accelerated

Promotions will continue. The use of

OPM’s Operating Manual for

‘‘Qualification Standards For General

Schedule Positions’’ will continue with

minor modifications; ‘‘Band’’ will be

substituted for ‘‘Grade’’ where

appropriate and the time in grade

requirement will be eliminated.

2. Performance Development System

The philosophical base of this

Demonstration Project is that employees

are valued and trusted and are the

organization’s most critical assets.

Accordingly, the primary objectives of

the Demonstration Project are to:

develop employees to meet the changing

needs of the organization; to help

employees achieve their career goals; to

improve performance in current

positions; to retain high performers, and

to improve communication with

customers, colleagues, managers and

employees. The system focuses on

continuous performance improvement

and minimizes administrative

requirements. On-going dialogue

between the employee and supervisor is

fundamental to this development focus,

and Performance Development

Resources are provided as part of the

system to facilitate this dialogue and

assist with diagnosis of performance

issues. The emphasis on continued

improvement is carried over into the

process for addressing performance

problems. The proposed system

substitutes an early intervention which

focuses immediately on a formal

performance plan designed to support

the employee’s success. A

determination of unacceptable

performance is made only if the

employee does not meet the

requirements for acceptable

performance detailed in that plan. The

following paragraphs describe the key

components of the Performance

Development System. Figure 4 depicts

the relationship of these components

and their linkage with the Incentive Pay

System.

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BILLING CODE 6325–01–C

a. Performance Development

Resources (PDR). At the heart of the

performance development system is the

concept of providing organizational

resources to support the development

process. While the design of these

resources will be delegated to each

Division, they will typically consist of a

pool of people, including union

representatives, who act as a support

system to identify or help provide for

the needs of employees and managers in

the development process. Current

limitations regarding union involvement

in discussions concerning assigning and

directing employees will not prevent the

parties within the Demonstration Project

from developing appropriate procedures

for the Performance Development

Resources.

The PDR will be available to facilitate

communications around expectations

and needs, and help supervisors and

employees seek agreement throughout

all aspects of the performance

development process. Should

performance problems arise, the PDR

will be particularly useful in diagnosing

issues impacting performance (e.g.,

employee skills, attitudes and

motivation, clarity of job expectations,

systemic issues, access to information

and resources, relationships with coworkers and supervisor, etc.) and

identifying options for addressing these

issues (e.g., development opportunities,

tools or equipment to support improved

performance, reassignment of the

employee to a position that better

matches his/her capabilities and

interests, etc.) They will also make

referrals to others who may be helpful,

and identify systemic or organization

wide issues which may be affecting

performance.

Supervisors are expected to utilize the

PDR for assistance in preventing and

alleviating performance problems.

Employees may also use the PDR to

assist them in correcting self-identified

performance problems, in development

planning to enhance their career

opportunities consistent with the needs

of the organization, and to facilitate

communication and feedback with their

supervisors, etc.

b. Two Level Rating System. The

system employs a two level rating

system: ‘‘acceptable’’ and

‘‘unacceptable’’ performance.

‘‘Acceptable’’ performance is defined as

‘‘performance that fulfills the

requirements for which the position

exists.’’ An employee’s performance

may not be determined ‘‘unacceptable’’

unless the employee has been placed on

and failed a performance plan.

Employee performance ratings will be

documented annually.

c. Establishing Performance

Expectations. Clear, mutually

understood performance expectations

that are linked to organizational goals,

strategies and values are fundamental to

successful individual and organizational

performance. The outcome of this

component of the Performance

Development System is clear

communication of the products and/or

services to be delivered by the

employee(s), and the success criteria

against which those outputs will be

assessed. Documentation of outputs and

success criteria is expected when

necessary to facilitate mutual

understanding of performance

expectations.

The most effective means of creating

a common understanding is through a

process in which the supervisor and

employee(s) discuss requirements and

establish performance goals and

expectations. Employees and

supervisors are expected to actively

participate in these discussions to seek

clarity regarding expectations and

identify potential obstacles to meeting

goals. In addition, employees should

explain (to the extent possible) what

they need from their supervisor to

support goal accomplishment. The

timing of these goal setting discussions

will vary based on the nature of work

performed, but will occur at least

annually. More frequent, task specific,

discussions of expectations may be

more appropriate in some organizations.

In cases where work is accomplished by

a team, team discussions regarding goals

and expectations may be appropriate,
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64061

however expectations for individual

contributions to the team goals should

always be clearly specified. Either the

supervisor, the employee, or the union

may enlist the assistance of the

Performance Development Resources to

facilitate effective dialogue with regard

to these issues.

Documentation of performance

expectations is a helpful mechanism for

ensuring clarity of understanding and

providing a focus for later discussions

on progress and developmental needs.

As a minimum, formal documentation

of expectations is required when an

employee begins a new or substantially

different job. Documentation in other

situations is based on the needs and

desires of the employee and supervisor,

and may rely on other existing

documentation (e.g., project plans,

process documentation, customer

requirements, etc.) No prescribed format

is required for such documentation; the

employee and supervisor are

encouraged to seek agreement on what

form of documentation will meet their

needs and who will be responsible for

producing it. The assistance of the

Performance Development Resources

may be enlisted by either party to

support their efforts to reach agreement.

In bargaining units, documentation

procedures will be subject to bargaining.

Current limitations regarding union

involvement in decisions concerning

assigning and directing employees will

not prevent the parties within the

Demonstration Project from developing

appropriate procedures for documenting

performance discussions.

d. On-going Performance Dialogue. To

facilitate performance development,

employees and supervisors will engage

in on-going dialogue. Ideally this

dialogue will occur as part of normal

day-to-day interactions for the purpose

of ensuring a common understanding of

expectations, reviewing whether

expectations are being met, providing

support in identifying resources or

solving problems, providing coaching

on complex or sensitive issues,

providing information to increase the

understanding of the project context,

and keeping the supervisor informed of

progress. In addition to this on-going

interaction, however, it is expected that

periodically a more formal dialogue will

occur focused on reviewing progress,

discussing customer feedback, exploring

process improvements that could

remove obstacles to effective

performance, and identifying

developmental needs to support

continual improvement and career

growth. The employee and supervisor

should seek agreement on the frequency

and form for both the formal and

informal dialogues to ensure they will

meet their needs. Either the supervisor,

the employee or the union may call

upon the Performance Development

Resources to facilitate communications

or conflict resolution around these

issues. In cases where work is

accomplished by a team, team meetings

may be an appropriate forum for some

of this interaction, however team

discussions do not eliminate the need

for the supervisor to have some form of

individual dialogue with each

employee.

The expected outcomes from this ongoing dialogue component are plans to

support the continuous improvement of

individual and organizational

performance. Documentation of these

discussions and resulting plans is

encouraged to the extent that it

contributes to clarity of understanding

and facilitates later review of progress

on continuous improvement efforts. The

nature and content of such

documentation is based on the needs

and desires of the employee and

supervisor. No prescribed format is

required for such documentation; the

employee and supervisor are

encouraged to seek agreement on what

form of documentation will meet their

needs and who will be responsible for

producing it. The assistance of the

Performance Development Resources

may be enlisted by either party to

support their efforts to reach agreement.

In bargaining units, these procedures

are subject to bargaining. Current

limitations regarding union involvement

in decisions concerning assigning and

directing employees will not prevent the

parties within the Demonstration Project

from developing appropriate procedures

for ongoing performance dialogues and

for documenting performance

discussions.

e. Feedback from Multiple Sources.

The primary purpose of feedback in the

Performance Development System is to

provide employees with information

regarding how well their performance is

meeting customer requirements in order

to help the employees continually

improve their performance. The outputs

expected from this component are data

and customer feedback which enable

review of performance against success

criteria. These data provide input to the

review and continuous performance

improvement planning discussed as part

of the on-going dialogue component.

The responsibility for employee

development and continuous

improvement is jointly held between the

supervisor and employee. They are

expected to work together to identify

internal and external customers and to

define and implement a process by

which the employee can regularly

receive feedback. A variety of

mechanisms may be appropriate, such

as customer surveys, process measures

which track customer requirements, an

discussions with customers. Supervisors

are expected to facilitate this process

and work with employees to interpret

the feedback and establish improvement

goals. Performance Development

Resources may be helpful during this

process. Their assistance may be

requested by the supervisor, the

employee or the union. Current

limitations regarding union involvement

in decisions concerning assigning and

directing employees will not prevent the

parties within the Demonstration Project

from developing appropriate

mechanisms and procedures for

obtaining feedback from multiple

sources.

Managers and supervisors are also

expected to obtain feedback from their

customers, including their employees,

and to use that feedback as a basis for

establishing both personal and

organizational performance

development goals. The use of an

anonymous instrument is appropriate

for providing feedback to supervisors

and managers on the impact of their

behavior. The use of these instruments

will help focus attention on desired

leadership behaviors, structure the

feedback in a constructive manner, and

offset the power imbalance that often

prevents supervisors from getting useful

feedback from their employees. When

necessary, supervisors and managers

may choose to use the Performance

Development Resources to help support

their own developmental needs.

f. Performance Plan. When an

employee has continued performance

difficulties, the organization will

provide a formal Performance Plan to

support the supervisor and employee in

resolving Performance Plan to support

the supervisor and employee in

resolving the performance problems.

Use of the Performance Development

Resources will be an integral part of this

effort. Supervisors are expected to call

on the Resources for assistance in

preventing or alleviating performance

problems before the need for formal

action arises. When there is an

indication that performance is not

consistently meeting customer

requirements, supervisors are expected

to call on the Resources to analyze the

causes of the difficulty and develop an

approach for resolving it. Development

of a formal Performance Plan is

indicated if and when it is determined

that the employee’s performance (vs.

system performance) is a contributor to

the problem informal intervention has
64062 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

not been successful in correcting the

problem. Use of the Performance

Development Resources is expected

throughout the period of the

Performance Plan in an attempt to

facilitate a solution to the problem. The

Performance Plan must be written, and

will clearly document organizational

expectations for successful job

performance, specify accountability,

identify developmental resources to

correct any skill deficiencies, define the

time frame of the performance plan,

specify organizational support that will

be provided and how performance

results will be monitored. In addition,

the Plan will clearly specify the

potential consequences if performance

is not acceptable. Periodic discussions

between the supervisor and employee

must occur during the time frame of the

Performance Plan to review progress;

these discussions must be documented.

Current limitations regarding union

involvement in decisions concerning

assigning, directing, removing or

reducing in grade employees will not

prevent the parties within the

Demonstration Project from developing

appropriate procedures and

documentation in connection with

Performance Plans. (NOTE: Nothing in

this subsection will preclude action

under Title 5, United States Code,

Chapter 75, when appropriate.)

g. Accountability for Performance. An

employee will be given a rating of

‘‘unacceptable’’ only if and when the

employee is unable to successfully

complete the Performance Plan. When

an employee’s performance is rated as

‘‘unacceptable,’’ one of four actions will

be taken: (1) removal from the Federal

Service, (2) placement in a lower band

level with a corresponding reduction in

pay (demotion), (3) reduction in pay

while remaining in the same band level,

or (4) placement in a lower band level

with no reduction in pay (demotion).

For the third category of action, the

amount of reduction in pay will be up

to, but may not exceed, the maximum

amount of incentive pay (see below) that

the employee could be eligible to

receive during the current payout

period, i.e., up to the equivalent of 4

continuing pay points as of the most

recent payout cycle. Following the pay

reduction, the objection is to restore

performance and may commensurate

with it. A formal Development Plan will

be established to maximize the

opportunity for success in the

assignment by clearly identifying

performance expectations and defining

a plan to achieve them within an

appropriate time frame, not to exceed 12

months. The activity’s Performance

Development Resources will be utilized

throughout this process. If and when

performance improves during the period

in which the employee is otherwise

ineligible for incentive pay, some or all

of the reduced pay may be restored.

Such restoration is not retroactive and is

separate and apart from incentive pay.

For the fourth category of action, the

employee may be moved to the next

lower band level provided no loss in

pay results and the employee’s pay does

not exceed the top of the lower bank

level. Within the Demonstration Project,

this would not be considered an adverse

action and would not be appealable

through a statutory appeals process

except for preference eligible

employees. Employees will be provided

with a written notice of the decision and

preference eligibles will be notified of

their right to appeal the action to the

Merit Systems Protection Board. Current

limitations regarding union involvement

in decisions concerning reducing

employees in grade will not prevent the

parties within the Demonstration Project

from developing procedures for the nonadverse reduction in band level. The

decision to reduce an employee to a

lower band level with no reduction in

pay will be subject to review under

existing grievance or alternative dispute

resolution procedures.

3. Incentive Pay System

The Incentive Pay System provides a

mechanism for encouraging and

rewarding performance contributions

and other outcomes resulting from the

continuous improvement focus of the

performance development system.

INCENTIVE PAY FOR EMPLOYEES

COVERED BY BROAD BANDING:

Supervisors will conduct an annual

review of each employee’s salary and

decide how total compensation should

be adjusted to reflect the employee’s

performance contribution to the

organization. The adjustment may be

made as a continuing increase to base

pay and/or as a one-time cash bonus to

adjust total compensation. The

philosophical foundation for incentive

pay is described below:

Principles of Incentive Pay

Background: One of the outcomes of pay

banding is an expanded range of pay

progression opportunities for employees.

This is accomplished through ‘‘incentive

pay.’’ Incentive pay is awarded to people

based on the value of their performance

contributions to the organization. With this

comes the necessity to insure that pay

decisions are consistent with the needs and

values of the organization. At the same time,

they must be seen as fair and equitable.

While the Demonstration Project provides

discretion for Warfare Center Divisions to

substantially define the criteria and process

for managing incentive pay, it is appropriate

that there be general Project-wide principles

that provide a policy framework for division

decisions. The following are those principles.

PRINCIPLE: ‘‘The organization succeeds

through the collective contributions of

people in all occupations.’’

The Warfare Centers perform critical

missions for the Navy in support of national

defense. These missions require the

collective efforts of all their people. While

certain positions and occupations are highly

visible, it is the whole organization as a team

pulling in the same direction and towards the

same goals that enables the Centers to excel.

In that regard, no occupational groups are to

be effectively excluded from opportunities

for incentive pay and other forms of

recognition. Rather, there is an expectation

that incentive pay generally will be

distributed proportionally to the various

career paths. Further, all people who are

making positive performance contributions

as demonstrated by acceptable performance

will share in incentive pay. Amounts and

time intervals will be set by Divisions/sites.

PRINCIPLE: ‘‘Pay should be commensurate

with value of performance to the

organization.’’

In general, an individual’s total pay (base

pay, plus any incentive pay) should be

commensurate with the value of the

performance contributions to the

organization. Contributions may be based on

past and/or potential performance consistent

with criteria defined by the Warfare Center

Divisions. In that regard, there should be

relative pay equity between people whose

contributions to the organization are of equal

value. Consistent with this principle, as the

value of a person’s contribution increases,

compensation should likewise increase. It

follows that as an individual’s compensation

increases, there is a corresponding increase

in expected performance contributions.

Typically, when a person is hired, or

promoted to a higher band level, and pay is

at or near the lower end of that band, there

are expected successive increases in pay

toward the mid range of that band. This pay

growth is reflective of a learning curve upon

entering a new position, and the

corresponding increasing value to the

organization. Pay progression through the

mid range occurs with progressively higher

levels of performance contributions. Beyond

that, extraordinary contributions are

expected for pay to increase through the

upper levels of the band.

a. Eligibility. All employees who are

making positive performance

contributions as demonstrated by

acceptable performance will share in

incentive pay with the amounts and

time intervals set by the Divisions and

sites. Employees receiving an

unacceptable rating since the last

incentive payout are ineligible for the

next incentive pay consideration.

b. Incentive Pay Pool. Payments under

the Incentive Pay System are made from

the incentive pay pool. Within the

incentive pay pool, there are separate
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64063

funds for continuing pay increases and

bonus payments. The incentive pay pool

is not used to fund promotions between

pay bands. It is also not used to fund

general pay increases, special rate

increases, or locality pay increases;

rather, employees will continue to

receive any such increases (as

applicable under the Plan) consistent

with other employees outside the

demonstration project.

The incentive pay pool will be

operated within the parameters of the

overall finance system governing the

Warfare Centers. As a Defense Business

Operating Fund (DBOF) activity, the

Warfare Centers are 100 percent

industrially funded and operate as ‘‘notfor-profit’’ competitors within the

Department of Defense. Under DBOF,

the Centers are reimbursed for their

work by their customers through

billings based on stabilized rates. The

assistant Secretary of the Navy for

Financial Management and Comptroller

oversees the establishment of these

stabilized rates through reviews of

Biannual Financial Management Budget

submissions, which are highly visible at

all Command levels. This funding

process imposes a discipline in

controlling costs (including salary

expenditures for the Warfare Centers

that is not present under appropriated

funded organizations.

The size of the continuing pay fund

is based on appropriate factors,

including the following:

a. Historical spending for withingrade increases, quality step increases,

and in-level career promotions (with

dynamic adjustments to account for

changes in law or in staffing factors e.g.,

average starting salaries and the

distribution of employees among job

categories and band levels);

b. Labor market conditions and the

need to recruit and retain a skilled

workforce to meet the business needs of

the organization; and

c. The fiscal condition of the

organization.

Given the implications of base pay

increases on long-term pay and benefit

costs, the amount of the continuing pay

fund will be derived after a cost analysis

with documentation of the missiondriven rationale for the amount. Any

decision to substantially reduce the

amount of funds devoted to continuing

pay increases would typically occur

only in lieu of more drastic cost cutting

measures (e.g., RIF or furlough). As part

of the evaluation of the project, average

salary (base pay) will be tracked over

time using two comparison groups: (1)

The original two Navy Demonstration

labs in China Lake and San Diego, and

(2) a comparison group constructed

using OPM’s Central Personnel Data

File.

The size of the bonus pay fund will

be based on appropriate factors,

including the following:

a. Historical spending for performance

awards, special act awards, and awards

for beneficial suggestions;

b. The organization’s fiscal condition

and financial strategies; and

c. Employee retention rates.

The decision process for defining the

size of the incentive pay pool and the

two funds within that pool will be

established at the Division/site level.

The design of the decision process,

insofar as it affects bargaining unit

employees, will be subject to collective

bargaining.

d. Delegated Criteria Setting. The

criteria and process for incentive pay

will be substantially defined at the

Division/site level. The incentive pay

decision may be based on some

combination of past, present and future

performance. Examples of criteria may

include criticality of skills, difficulty of

position, criticality of position,

individual or team contributions,

suggestions for improving system or

organization processes, length and/or

quality of experience, current total

compensation, etc. The criteria and

process for incentive pay distribution

for bargaining unit employees are

subject to collective bargaining. Current

limitations regarding union involvement

in decisions concerning assigning and

directing employees will not prevent the

parties from developing the criteria and

process for incentive pay decisions.

(Note: The movement of an employee

within a band based on the execution of

an incentive pay decision is not a

‘‘classification’’ action.)

e. Pay Points. The payout process will

utilize a point system to distribute

incentive pay increases. A maximum of

four (4) points will be available, thus

each employee performing in an

acceptable manner will be eligible to

receive 0, 1, 2, 3 or 4 pay points in the

form of continuing pay, bonus pay or

some combination.

FOR FWS EMPLOYEES, cash awards

continue to be available under the

existing Incentive Awards system based

on performance and special acts.

f. Communication and

Documentation. It is important that

employees understand what is expected

in order to receive a pay increase.

Supervisors will interpret organizational

criteria for their employees to clarify

how it applies to their work and have

periodic assessment discussions with

employees to prevent surprise decisions

at the time of payout. These assessment

discussions should normally be held

separately from performance

development dialogues. Supervisors and

employees are encouraged to seek

agreement on their documentation

needs. In addition, supervisors are

expected to document their payout

recommendation decisions and to

discuss their decision rationale with

employees. In bargaining units,

documentation procedures will be

subject to bargaining. Current

limitations regarding union involvement

in decisions concerning assigning and

directing employees will not prevent the

parties from developing documentation

procedures for the communication and

documentation of incentive pay

discussions and decisions.

g. Reconsideration of Incentive Pay

Decisions. Employees will have the

opportunity for a reconsideration of

incentive pay decisions. While the

specific purpose of the reconsideration

is to address employee concerns about

such decisions, the process is also

intended to facilitate communication

and understanding between employees

and supervisors/managers concerning

performance contributions and their

impact on pay decisions. In addition,

the process seeks to identify possible

systemic problems that need to be

addressed. In that regard,

reconsideration is considered a positive

and integral component of an effective

incentive pay system by providing a

mechanism to support continuous

improvement. Accordingly, employees

will not be discouraged from requesting

reconsideration. Neither will they be

subjected to reprisal or stigma. The

specific process for reconsideration will

be defined at the Division/site level.

Current limitations regarding union

involvement in decisions concerning

assigning and directing employees will

not prevent the parties from developing

procedures for the reconsideration of

incentive pay decisions. That process

will include, but will not necessarily be

limited to, the following characteristics:

It should be administratively

streamlined; provide expedited

resolution; maintain appropriate

confidentiality; be fair and impartial;

address assertions of harmful error

involving issues of process and

procedure; and ensure that management

payout decisions reflect reasonableness

in judgment in evaluating applicable

criteria.

h. Guidance on Managing Incentive

Pay. Each Division is expected to

develop policies and criteria to guide

the implementation of the incentive pay

system which are consistent with their

mission, strategies and organizational

values, and supportive of the Naval Sea
64064 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

Systems Command and Warfare Center

strategic plans. Some Divisions may rely

on individual management judgment

based on general guidance, while other

Divisions may define a more mechanical

process based on highly objective

criteria. Additional guidance may be

provided by major organizational

components (e.g., departments or

directorates) to tailor or interpret the

command-level criteria for their specific

mission and strategies. Each major

organizational component will have

authority to manage the incentive pay

allocation derived from the salaries of

employees in that component.

Departments/Directorates may further

delegate authority to mange a prorated

portion of the fund to the next lower

echelon. Supervisors and managers

within the unit will be assessing the

nature of each employee’s contribution,

consistent with the organization’s policy

and criteria as reflected in the written

guidance. They will then make

recommendations to a second level

reviewer regarding the number of pay

points to be awarded to each employee

(i.e., 0 to 4 points) and the nature of

incentive pay (i.e., continuing pay and/

or bonus pay). Decisions regarding

approval/disapproval of

recommendations will be made at the

organizational level to which authority

has been delegated to manage the pay

pool; typically this will be the second or

third level reviewer. In cases where

work is accomplished by a team, the

team members may be involved in

formulating the recommendation for

distribution of incentive pay.

4. Reduction-In-Force (RIF)

Flexible and responsive alternatives

are needed to restructure an

organization in a short period of time.

The current RIF system is complicated,

costly, and relatively unresponsive to

the needs of the organization.

The proposed RIF system will have a

single round of competition to replace

the current ‘‘two round’’ process. Once

the position to be abolished has been

identified, the incumbent of that

position may ‘‘displace’’ another

employee when the incumbent has a

higher retention standing and is fully

qualified for the position occupied by

the employee with a lower standing.

Retention standing is based on tenure,

veterans’ preference, length of service,

and performance. However, there will

be no augmented service credit based on

performance ratings. An employee rated

as unacceptable during the 12 month

period preceding the effective date of a

RIF may only displace an employee

rated unacceptable during that same

period. The same ‘‘undue disruption’’

standard currently utilized will serve as

the criteria to determine if an employee

is fully qualified. The displaced

individual may similarly displace other

employees. If/when there is no position

in which an employee can be placed by

this process or assigned to a vacant

position, that employee will be

separated.

Displacement is limited to one broad

band level below the employee’s present

level. A preference eligible employee

with a compensable service connected

disability of 30 percent or mre may

displace up to two broad band levels (or

the equivalent of five General Schedule

grades) below the employee’s present

level. Employees not covered by broad

banding (FWS), may ‘‘displace’’ up to

three grades/intervals (five grades/

intervals for preference eligibles with a

service connected disability of 30

percent or more).

The new system will eliminate

retained grade but will preserve retained

pay.

All positions included in the

Demonstration Project within an activity

at a specific geographic location will be

considered a separate competitive area.

5. Competitive Examining and

Distinguished Scholastic Appointments

The Warfare Center needs a process

which will allow for the rapid filling of

vacancies, is less labor intensive, and is

responsive to our needs. Restructuring

the examining process and providing an

authority to appoint candidates meeting

distinguished scholastic achievements

will help achieve these goals. When a

Division implements the Demonstration

Project for some portion of their

workforce, this component may be

available for all occupations. This will

eliminate the imposition of multiple

examining and appointment systems on

the public and will strengthen

efficiencies gained under the

Demonstration Project. To further

minimize resource requirements and the

complexities inherent in administering

two different sets of examining and

hiring processes, this component may

also be applied to GS and FWS

positions in activities for which the

Warfare Center Divisions provide

human resource services.

a. Delegated Examining Authority.

The Warfare Centers propose to

demonstrate a streamlined examining

process for both permanent and nonpermanent positions. This authority will

be further delegated to the Division

level. This authority will apply to all

positions with exception of positions in

the Senior Executive Service, to Senior

Level (ST/SL) positions, to the

Executive Assignment System or

positions of Administrative Law Judge.

This authority will include the

coordination of recruitment and public

notices, the administration of the

examining process, the administration

of veterans’ preference, the certification

of candidates, and selection and

appointment consistent with merit

principles.

b. Description of Examining Process:

The primary change in the examining

process to be demonstrated is the

grouping of eligible candidates into

three Quality Groups using numerical

scores and the elimination of

consideration according to the ‘‘rule of

three’’.

For each candidate, minimum

qualifications will be determined using

OPM’s Operating Manual for

‘‘Qualification Standards For General

Schedule Positions’’/‘‘Job Qualification

Systems For Trades and Labor

Occupations (Handbook X–118C)’’

including any selective placement

factors identified for the position.

Candidates who meet basic (minimum)

qualifications will be further evaluated

based on knowledge, skills and abilities

which are directly linked to the

position(s) to be filled. Based on this

assessment, candidates will receive a

numerical score of 70, 80, or 90. No

intermediate scores will be granted

except for those eligibles who are

entitled to veterans’ preference.

Preference eligibles meeting basic

(minimum) qualifications will receive

an additional 5 or 10 points (depending

on their preference eligibility) which is

added to the minimum scores identified

above. Candidates will be placed in one

of three quality groups based on their

numerical score, including any veterans’

preference points: Basically Qualified

(score of 70 and above), Highly

Qualified (score of 80 and above), or

Superior (score of 90 and above). The

names of preference eligibles shall be

entered ahead of others having the same

numerical rating.

For scientific/engineering and

professional positions at the equivalent

of GS–9 and above, candidates will be

referred by quality groups in the order

of the numerical ratings, including any

veterans’ preference points. For all other

positions, i.e., other than scientific/

engineering and professional positions

at the equivalent of GS–9 and above,

preference eligibles with a compensable

service-connected disability of 10

percent or more who meet basic

(minimum) eligibility will be listed at

the top of the highest group certified.

In selecting the top candidate,

selecting officials should be provided

with a reasonable number of qualified

candidates from which to choose. All
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64065

candidates in the highest group will be

certified. If there is an insufficient

number of candidates in the highest

group, candidates in the next lower

group may be certified in rank order.

When two or more groups are certified,

candidates will be identified by quality

group (i.e., Superior, Highly Qualified,

Basically Qualified) in the order of their

numerical scores. In making selections,

to pass over any preference eligible(s) to

select a nonpreference eligible requires

approval under current pass over or

objection procedures.

c. Distinguished Scholastic

Achievement Appointment: The Warfare

Centers further propose to establish a

Distinguished Scholastic Achievement

Appointment using an alternative

examining process which provides the

authority to appoint undergraduates and

graduates through the doctoral level to

professional positions at the equivalent

of GS–7 through GS–11, and GS–12

positions involved in research.

At the undergraduate level,

candidates may be appointed to

positions at a pay level no greater than

the equivalent of GS–7 step 10 provided

they meet the minimum standards for

the position as published in OPM’s

operating manual, Qualification

Standards for General Schedule

Positions, plus any selective factors

stated in the vacancy announcement;

the occupation has a positive education

requirement; and, the candidate has a

cumulative grade point average of 3.5 or

better (on a 4.0 scale) in those courses

in those fields of study that are specified

in the Qualifications Standards for the

occupational series. Appointments may

also be made at the equivalent of GS–

9 through GS–12 on the basis of

graduate education and/or experience

for those candidates with a grade point

average of 3.5 or better (on a 4.0 scale)

for graduate level courses in the field of

study required for the occupation.

Veterans’ preference procedures will

apply when selecting candidates under

this authority. Preference eligibles who

meet the above criteria will be

considered ahead of nonpreference

eligibles. In making selections, to pass

over any preference eligible(s) to select

a nonpreference eligible requires

approval under current objection

procedures. Priority must also be given

to displaced employees as may be

specified in OPM and Department of

Defense regulations.

Distinguished Scholastic

Achievement Appointments will enable

the Warfare Centers to respond quickly

to hiring needs with eminently qualified

candidates possessing distinguished

scholastic achievements.

C. Project Implementation

While many of the basic elements of

each component of the project will be

implemented uniformly at all sites

through policies established at the

Warfare Center level, a number of

policies, procedures, or processes will

be delegated to the Division and/or site

levels. This permits the system to be

operationally defined, within a Warfare

Center directed framework, to fit the

culture and needs of the local

organizations. In bargaining units, the

project will be implemented only after

there is full agreement through the

collective bargaining process.

D. Entry Into/Exit From the Project

1. Initial Conversion of Current

Workforce

For the most part, current GS/GM

employees will be converted

automatically from their current grades

to the appropriate career paths and band

levels. However, the Warfare Centers

consider it essential to the success of the

project that employees, upon entering

the project, feel that they are not losing

a pay entitlement accrued under the GS

system. Accordingly, the current

employees of the Warfare Centers will

be ‘‘made whole’’ through a one year

‘‘buy-in’’ period. On the day of

conversion, employees typically will

receive base pay increases for prorated

step increase equivalents. Employees at

the 10th step or receiving a retained rate

are not eligible for the increase. Further,

during the first 12 months following

conversion, employees will receive pay

increases for non-competitive

promotion equivalents when the grade

level of the promotion is encompassed

within the same band, the employee’s

performance warrants the promotion

and promotions would have otherwise

occurred during that period. Employees

who receive an in-level promotion at the

time of conversion will not receive a

prorated step increase equivalent.

Additionally, in many cases,

employees who are today covered by a

local or national special salary rate will

no longer be considered a special rate

employee under the Demonstration

Project and will thus gain eligibility for

full locality pay. To control conversion

costs and to avoid a salary increase

windfall for these employees, the

adjusted salaries of these employees

will not change. Rather, the employees

will receive a new basic pay rate

computed by dividing their adjusted

basic pay by the locality pay factor for

their area. A full locality adjustment

will then be added to the new basic pay

rate. Adverse action and pay retention

provisions will not apply to the

conversion process as there will be no

change in total salary.

2. New and Transfer Employees

New hires, including employees

transferring from other Federal

activities, will be converted into the

Demonstration Project in the career path

and at the level and pay consistent with

the duties and responsibilities of the

position and individual qualifications.

3. Exit From the Demonstration Project

Employees who leave the

Demonstration Project broad banding

system to accept federal employment in

the traditional Civil Service system will

have their pay set by the gaining

activity. To assist activities in setting

pay and in determining whether such

placement constitutes a promotion,

reassignment, or change to lower grade,

the employee’s band and salary level

will be converted to a General Schedule

equivalent grade prior to leaving the

Demonstration Project in the following

manner:

Employees who exit the

Demonstration Project will be

tentatively converted to a GS grade most

comparable to the employee’s current

Demonstration Project level and salary.

In instances where the current salary is

in the area between two overlapping GS

grades within the same level, the

converted grade is either (1) the higher

of the two overlapping GS grades if the

current salary meets or exceeds Step 4

of the higher GS grade, or (2) the lower

of the overlapping grades if the current

salary is less than Step 4 of the higher

GS grade. In those instances where the

current salary falls below the

established GS salary range for the

lowest GS grade covered by the

Demonstration Project band level, the

converted grade is the lowest GS grade

level in that band. In those situations

where an employee has not been

promoted or placed in a lower pay band

while covered by the Demonstration

Project, the employee will be converted

at a level which is no lower than the GS

grade held immediately prior to entering

the Demo project. This converted GS

grade is the GS equivalent grade and is

not necessarily the grade the employee

will have upon transfer or reassignment

outside the Demonstration Project. If the

employee is receiving a retained rate

under the Demonstration Project, the

employee’s GS-equivalent grade is the

highest grade encompassed in his or her

bank level. The Warfare Center will

coordinate with OPM to describe a

procedure for determining the GSequivalency pay rate for an employee

retaining a rate under the Demonstration

Project.
64066 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

An employee’s pay within the

converted GS grade is set by converting

the Demonstration project adjusted rate

of pay to a rate on the highest applicable

adjusted rate range for the converted GS

grade (including locality rates and

special rates, as applicable). For

example, if the highest applicable

adjusted rate range under the GS pay

system for a particular employee is a

special rate range, the adjusted project

rate (locality rate or special rate) is

converted to the lowest special rate in

that range that equals or exceeds the

project rate; from this converted special

rate, the employee’s unadjusted GS rate

and locality rate would be derived. This

pay conversion is done before

processing any geographic movement or

other pay-related action coinciding with

the employee’s conversion out of the

Demonstration project.

When an employee transfers to

another activity, the employee’s rating

of record will be transferred. When the

gaining activity uses other than a two

level performance system, the employee

may be provided a supplementary

performance assessment using the

gaining organizations appraisal criteria.

If the employee requests such an

appraisal, the employee will be

responsible for providing the criteria to

the supervisor for completion. Gaining

organizations are not bound to use this

supplementary performance appraisal in

any formal actions.

Service under the Demonstration

Project is creditable for within-grade

increase purposes upon conversion back

to the GS system. Incentive Pay

increases (including a zero increase)

under the Demonstration Project are

equivalent increases for the purpose of

determining the commencement of a

within-grade increase waiting period

under 5 CFR 531.405(b).

E. Project Duration

The initial implementation period for

the Project will be five years. At that

time, the entire Demonstration project

will be reexamined to determine

whether to continue, modify or

terminate the Project.

IV. Evaluation Plan

Chapter 47 (Title 5 U.S.C.) requires

that an evaluation system be

implemented to measure the

effectiveness of the proposed personnel

management interventions. An

evaluation plan for the entire laboratory

Demonstration program covering 24

DOD labs was developed by a joint

OPM/DOD Evaluation Committee. A

Comprehensive evaluation plan was

submitted to the Office of Defense

Research & Engineering in 1995 and

subsequently approved. (Proposed Plan

for Evaluation of the Department of

Defense S&T Laboratory Demonstration

Program, Office of Merit Systems

Oversight & Effectiveness, June 1995).

The overall evaluation effort will be

coordinated and conducted by OPM’s

Personnel Resources and Development

Center (PRDC). The primary focus of the

evaluation is to determine whether the

waivers granted result in a more

effective personnel system than the

current as well as an assessment of the

costs associated with the new system.

The present personnel system with its

many rigid rules and regulations is

generally perceived as an impediment to

mission accomplishment. The

Demonstration Project is intended to

remove some of those barriers and

therefore, is expected to contribute to

improved organizational performance.

While it is not possible to prove a direct

causal link between intermediate and

ultimate outcomes (improved personnel

system performance and improved

organizational effectiveness), such a

linkage is hypothesized and data will be

collected and tracked for both types of

outcome variables.

An intervention impact model

(Appendix B) will be used to measure

the effectiveness of the various

personnel system changes or

interventions. Additional measures will

be developed as new interventions are

introduced or existing interventions

modified consistent with expected

effects. Measures may also be deleted

when appropriate. Activity specific

measures may also be developed to

accommodate specific needs or interests

which are locally unique.

The evaluation model for the

Demonstration Project identifies

elements critical to an evaluation of the

effectiveness of the interventions. The

overall evaluation approach will also

include consideration of contact

variables that are likely to have an

impact on project outcomes: e.g., HRM

regionalization, downsizing, crossservice integration, and the general state

of the economy. However, the main

focus of the evaluation will be on

intermediate outcomes, i.e., the results

of specific personnel system changes

which are expected to improve human

resources management. The ultimate

outcomes are defined as improved

organizational effectiveness, mission

accomplishment and customer

satisfaction.

Data from a variety of different

sources will be used in the evaluation.

Information from existing management

information systems supplemented with

perceptual data will be used to assess

variables related to effectiveness.

Multiple methods provide more than

one perspective on how the

Demonstration project is working.

Information gathered through one

method will be used to validate

information gathered through another.

Confidence in the findings will increase

as they are substantiated by the different

collection methods. The following types

of data will be collected as part of the

evaluation: (1) workforce data; (2)

personnel office data; (3) employee

attitudes and feedback using surveys,

structured interviews and focus groups;

(4) local activity histories; and, (5) core

measures of laboratory effectiveness.

V. Waivers of Law and Regulation

A. Waivers to Title 5, United States

Code

Chapter 33, Section 3317(a):

Competitive service, certification from

register (in so far as ‘‘rule of three’’ is

eliminated under the Demonstration

project).

Chapter 33, Section 3318(a): In so far

as ‘‘rule of three’’ is eliminated under

the Demonstration Project. Veterans

preference provisions remain

unchanged.

Chapter 43, Section 4301: Definitions.

Chapter 43, Section 4302:

Establishment of performance appraisal

systems.

Chapter 43, Section 4303: Modified to

the extent that an employee may be

removed, reduced in band level with a

reduction in pay, reduced in pay

without a reduction in band level or

reduced in band level without a

reduction in pay based on unacceptable

performance. For employees who are

reduced in band level without a

reduction in pay, Sections 4303(b) and

4303(e) (2) and (3) do not apply.

Chapter 43, Section 4303(b)(1)(A)(ii):

Requirement for critical elements.

Chapter 51, Section 5101–5111:

Purpose, definitions, basis,

classification of positions, review,

authority—To the extent that white

collar employees will be covered by

broad banding. Pay category

determination criteria for Federal Wage

System positions remain unchanged.

Chapter 53, Section 5303; 5302 (1),

(8), and (9); Section 5303; and Section

5304: Pay Comparability System. (To

the extent necessary to allow

Demonstration project employees

covered by broad banding to be treated

as General Schedule employees and to

allow basic rates of pay under the

Demonstration project to be treated as

scheduled rates of basic pay.) (This

waiver does not apply to Federal Wage

System (FWS) employees. This waiver

does not apply to SL/ST employees who
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64067

continue to be covered by these

provisions, as appropriate.)

Section 404 of the Federal Employees

Pay Comparability Act of 1990 (P.L.

101–509): Special Pay Adjustments for

Law Enforcement Officers in Selected

Cities. (To the extent necessary to allow

law enforcement officers under the

Demonstration project to be treated as

law enforcement officers under the

General Schedule.)

Chapter 53, Section 5305: Special Pay

Authority.

Chapter 53, Section 5331–5336:

General Schedule Pay Rates.

Chapter 53, Section 5362: Grade

Retention.

Chapter 53, Section 5363: Pay

Retention. (Only to the extent necessary

to (1) replace ‘‘grade’’ with ‘‘band

level’’; (2) allow Demonstration Project

employees to be treated as General

Schedule employees; (3) provide that

pay retention does not apply to

conversions from General Schedule

special rates to Demonstration project

pay and reallocations of Demonstration

project pay rates within special rate

extensions to locality adjusted pay rates

due to promotions or general or locality

pay increases, as long as the employee’s

total rate of pay is not reduced; and (4)

provide that pay retention does not

apply to reductions in basic pay due

solely to the operation of the pay setting

rules for geographic movement within

the Demonstration Project.) (This waiver

does not apply to FWS employees who

continue to be covered by these

provisions, as appropriate. This waiver

does not apply to SL/ST employees

unless they move to a GS equivalent

position under conditions that trigger

entitlement to pay retention.)

Chapter 53, Section 5371: Health Care

Positions. (Only to the extent necessary

to allow Demonstration project

employees to hold positions subject to

chapter 51 of title 5. (This waiver does

not apply to FWS employees.)

Chapter 55, Section 5545(d):

Hazardous Duty Differential. (Only to

the extent necessary to allow

Demonstration project employees

covered by broad banding to be treated

as General Schedule employees.) (This

waiver does not apply to FWS and SL/

ST employees.)

Cgapter 57, Sections 5753, 5754, and

5755: Recruitment; Relocation Bonuses;

Retention Allowances; Supervisory

Differentials: (Only to the extent

necessary to allow employees and

positions under the Demonstration

project covered by broad banding to be

treated as employees and positions

under the General Schedule.) (This

waiver does not apply to FWS

employees. This waiver does not apply

to SL/ST employees who continue to be

covered by these provisions, as

appropriate.)

Chapter 59, Section 5941: Allowances

based on living costs and conditions of

environment; employees stationed

outside continental United States or

Alaska (Only to the extent necessary to

provide that COLA’s paid to employees

under the Demonstration project are

paid in accordance with regulations

prescribed by the President (as

delegated to OPM).

Chapter 71, Section 7106(a)(2): In so

far as provision on assigning and

directing, documenting performance

discussions, Performance Development

Resources, Performance Plans, criteria

and process for incentive pay, and

communication and documentation

requirements for incentive pay and

reconsideration of incentive pay

decisions; and, in so far as provision on

reducing employees in grade may

prevent the parties from negotiating

procedures for non-adverse assignment

of employees to a lower pay band.

Chapter 71, Section 7119(b)(1): In so

far as provision for either party to

request impasse proceedings would be

contrary to provisions of the

Demonstration project.

Chapter 75, Section 7512(3); To the

extent necessary to (1) replace ‘‘grade’’

with ‘‘band level’’; and, (2) exclude

reductions in band level not

accompanied by a reduction in pay

taken under Chapter 43.

Chapter 75, Section 7512(4): Adverse

Action. (Only to the extent necessary to

provide that adverse action provisions

do not apply to—(1) conversions from

General Schedule special rates to

Demonstration project pay and

reallocations of Demonstration project

pay rates within special rate extensions

to locality adjusted pay rates due to

promotions of general or locality pay

increases, as long as the employee’s

total rate of pay is not reduced; and (2)

reductions in basic pay due solely to the

operations of the pay setting rules for

geographic movement within the

Demonstration project.)

B. Waivers to Title 5, Code of Federal

Regulations

Part 300, Sections 300.601 through

.605: Time in grade restrictions are

eliminated in the Demonstration project.

Part 332, Section 332.401(b): Only to

the extent that for non-professional or

non-scientific positions equivalent to

GS–9 and above, preference eligibles

with a compensable service-connected

disability of 10 percent or more who

meet basic (minimum) qualification

requirements will be entered at the top

of the highest group certified without

the need for further assessment.

Part 332, Section 332.402: ‘‘Rule of

three’’ will not be used in the

Demonstration project.

Part 332, Section 332.404: Order of

selection is not limited to highest three

eligibles.

Part 351, Section 351.402(b):

Competitive area to the extent that the

Demonstration project will be a separate

competitive area within the activity.

Part 351, Sections 351.403 (a) and (b):

Competitive levels to the extent that

there is no requirement for the

establishment of competitive levels in

the Demonstration project.

Part 351, Section 351.404 (a) and (b):

Retention register to the extent that the

requirement to establish separate

retention registers by competitive level

is eliminated.

Part 351, Section 351.501(a)(3): For

order of retention, delete ‘‘as augmented

by credit for performance’’ under

Section 351.504.

Part 351, Section 351.504: Credit for

performance to the extent that the

Demonstration project eliminates

service credit for performance.

Part 351, Section 351.601 through

.608: References to competitive levels

are eliminated.

Part 351, Section 351.701 (b) and (c)

Assignment rights (bump and retreat):

To the extent that the distinction

between bump and retreat is eliminated

and the placement of ‘‘white collar’’

Demonstration Project employees is

restricted to no more than one broad

band level below the employee’s current

level, except that for a preference

eligible with a compensable service

connected disability of 30 percent or

more, the limit is two broad band levels

(or the equivalent of five General

Schedule grades) below the employee’s

present level.

Part 430, Subpart B: Performance

appraisal for General Schedule,

Prevailing Rate and certain other

employees: Employees under the

Demonstration project will not be

subject to the requirements of this

subpart.

Part 432: Modified to the extent that

an employee may be removed, reduced

in band level with a reduction in pay,

reduced in pay without a reduction in

band level and reduced in band level

without a reduction in pay based on

unacceptable performance. Also

modified to delete referenced to critical

element. For employees who are

reduced in band level without a

reduction in pay, Sections 432.105 and

432.106(a) do not apply, except that

such sections continue to apply to

preference eligible employees.
64068 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

Part 432, Section 432.104 and .105:

Proposing and Taking Action Based on

Unacceptable Performance: In so far as

references to ‘‘critical elements’’ are

deleted and adding that the employee

may be ‘‘reduced in grade or pay or

removed’’ if performance does not

improve to acceptable levels after a

reasonable opportunity. In addition,

requirements waived to the extent that

a reduction in band level is taken based

on skill utilization criteria when there is

no reduction in pay.

Part 511, Section 511.201: Coverage of

and exclusions from the General

Schedule (To the extent that White

Collar positions are covered by broad

banding. Pay category determination

criteria for Federal Wage System

positions remain unchanged)

Part 511, Section 511.601:

Classification appeals—modified to the

extent that white collar positions

established under this demonstration

project, although specifically excluded

from Title 5, are covered by the

classification appeal process outlined in

this section, as amended below.

Part 511, Section 511.603(a): Right to

appeal—substitute ‘‘band’’ for grade.

Part 511, Section 511.607(b): Non

Appealable Issues—add to the list of

issues which are neither appealable nor

reviewable, ‘‘the assignment of series

under this demonstration project to

appropriate career paths.’’

Part 530, Subpart C: Special Salary

Rates.

Part 531, Subparts B, D, and E:

Determining The Rate of Basic Pay,

Within-Grade Increases, and Quality

Step Increases. (Except that the

provisions relating to highest previous

rate under Parts 531.202 and 531.203

are waived only to the extent necessary

to work in a broad banding system.)

Part 531, Subpart C and F: Special

Pay Adjustments for Law Enforcement

Officers and Locality-Based

Comparability Payments. (Only to the

extent necessary to allow Demonstration

Project employees covered by broad

banding to be treated as General

Schedule employees and to allow basic

rates of pay under the Demonstration

project to be treated as scheduled

annual rates of pay.) (This waiver does

not apply to FWS employees. This

waiver does not apply to SL/ST

employees who continue to be covered

by these provisions, as appropriate.)

Part 536: All provisions pertaining to

grade retention.

Part 536, Section 536.104: Pay

Retention. (Only to the extent necessary

to (1) Replace ‘‘grade’’ with ‘‘band

level’’; (2) allow Demonstration Project

employees to be treated as General

Schedule employees; (3) provide that

pay retention does not apply to—

conversions from General Schedule

special rates to Demonstration project

pay and reallocations of Demonstration

project pay rates within special rate

extensions to locality adjusted pay rates

due to promotions or general or locality

pay increases, as long as the employee’s

total rate of pay is not reduced; and (4)

provide that pay retention does not

apply to reductions in basic pay due

solely to the operation of the pay setting

rules for geographic movement within

the Demonstration Project.) (This waiver

does not apply to FWS employees who

continue to be covered by these

provisions, as appropriate. This waiver

does not apply to SL/ST employees

unless they move to a GS equivalent

position under conditions that trigger

entitlement to pay retention.)

Part 550, Section 550.703: Severance

Pay. (Modify the definition of

‘‘reasonable offer’’ by replacing ‘‘two

grade or pay levels’’ with ‘‘one band

level’’ and ‘‘grade or pay level’’ with

‘‘band level.’’). (This waiver does not

apply to FWS employees.)

Part 550, Section 550.902, definition

of ‘‘employee’’: Hazardous Duty Pay.

(Only to the extent necessary to treat

Demonstration project employees

covered by broad banding as General

Schedule employees.) (This waiver does

not apply to FWS and SL/ST

employees.)

Part 575, Subparts A, B, C, and D:

Recruitment Bonuses, Relocation

Bonuses, Retention Allowances, and

Supervisory Differentials. (Only to the

extent necessary to allow employees

and positions under the Demonstration

project covered by broad banding to be

treated as employees and positions

under the General Schedule.) (This

waiver does not apply to FWS

employees. This waiver does not apply

to SL/ST employees who continue to be

covered by these provisions, as

appropriate.)

Part 591, Subpart B: Cost-of-Living

Allowances and Post DifferentialNonforeign Areas. (To the extent

necessary to allow Demonstration

project employees covered by broad

banding to be treated as employees

under the General Schedule.) (This

waiver does not apply to FWS

employees. This waiver does not apply

to SL/ST employees who continue to be

covered by these provisions, as

appropriate.)

Part 752: Section 752.401(a)(3): To the

extent necessary to (1) Replace ‘‘grade’’

with ‘‘band level’’; and (2) exclude

reductions in band level not

accompanied by a reduction in pay

taken under Chapter 43.

Part 752: Section 752.401(a)(4):

Adverse Action. (Only to the extent

necessary to provide that adverse action

provisions do not apply to—(1)

conversions from General Schedule

special rates to Demonstration project

pay and reallocations of Demonstration

project pay rates within special rate

extensions to locality adjusted pay rates

due to promotions or general or locality

pay increases, as long as the employee’s

total rate of pay is not reduced; and (2)

reductions in basic pay due solely to the

operation of the pay setting rules for

geographic movement within the

Demonstration Project.

VI. Cost

The goal of this Demonstration Project

is the implementation of a system in

which payroll costs and resource

utilization can be controlled consistent

with the organization’s larger fiscal

strategies. This is especially critical in

our industrially funded (DBOF)

environment. The continued economic

viability of the DBOF activities depends

in large measure on controlling

expenditures and remaining cost

competitive with other organizations.

This Demonstration Project proposes a

system of pay incentives and processes

that are flexible and can operate in

harmony with the organization’s

operational needs and the financial

needs of the larger organization. The

costs of project implementation will be

borne by the Divisions/sites.

Costs associated with the

development of the Demonstration

Project include software automation,

training and project evaluation. All

funding will be provided through the

Warfare Centers budget. Training costs

will be approximately $192K per

thousand employees. The timing of the

expenditure will be site specific and

dependent upon the implementation

schedules. Because automation

requirements will be minimized as a

result of system similarities to existing

Navy Demonstration Projects, costs are

estimated at $100K for the first two

years of project implementation.

Evaluation costs are estimated at

approximately $60K per year.

VII. Project Oversight and Management

Project oversight and management

will be carried out by the Warfare

Centers’ Executive Group, composed of

the Commanders and Technical

Directors of the two Warfare Centers.

They will be assisted by the

Demonstration Project Management

Office and the Steering Committee. (See

Figure 5)

The Steering Committee, chaired by a

senior executive or senior Navy officer
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64069

appointed by the Executive Group, is

comprised of a senior member of each

Division of the Warfare Centers, and a

member from the American Federation

of Government Employees, Metal Trades

Council, International Association of

Machinists, National Association of

Government Employees, National

Federation of Federal Employees, and

Fraternal Order of Police. This group

serves as an advisory body to the

Executive Group which makes final

decisions on the Demonstration Project

proposal and implementation. The role

of the Steering Committee is to aggregate

and analyze incoming data from formal

and informal evaluations and make

recommendations. It may also include

facilitating information sharing,

mediating impasses, and promotion of

partnership roles.

BILLING CODE 6325–01–M

BILLING CODE 6325–01–C

Appendix A—Employee/Union

Involvement Methodology

From the inception of the Naval Sea

Systems Command Warfare Centers’

Personnel Demonstration Project,

employee involvement in crafting the

Project Proposal was viewed as essential

to producing a plan that considered the

needs of all parties. National union

representatives participated as members

of the steering Committee which

developed the Personnel Demonstration

Project Proposal and will be overseeing

its implementation. While the process

that produced the Project Proposal was

a collaborative one, union participation

did not necessarily constitute full and

complete endorsement of all details of

the Proposal.

At the Warfare Centers’ various

Divisions and sites, employees and

unions are involved through a variety of

communications strategies. Within the

Divisions, communications teams

composed of a cross section of the

workforce have been formed for the

purpose of disseminating information

about the project as well as a focal point

for employee questions. Further,

Divisions are establishing groups or

committees to help guide the

implementation of the Project

throughout the organization. This model

of broad participation is envisioned to

continue throughout the life of the

Demonstration Project.

Unions Represented

Dahlgren, VA: American Federation of

Government Employees

White Oak, MD: American Federation of

Government Employees; Metal Trades

Council

Panama City, FL: National Federation of

Federal Employees

Crane, IN: American Federation of

Government Employees; Fraternal

Order of Police

Louisville, KY: International

Association of Machinists &

Aerospace Workers

Carderock, MD: Metal Trades Council;

Federal Firefighters Association

Pattern Maker Association

Annapolis, MD: National Federation of

Federal Employees

Philadelphia, PA: Metal Trades Council;

Fraternal Order of Police,

International Association of

Firefighters

Ft. Lauderdale, FL: American

Federation of Government Employees
64070 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices

Port Hueneme, CA: National

Association of Government

Employees; Federal Union of

Scientists and Engineers

Indian Head, MD: American Federation

of Government Employees;

International Association of

Firefighters; International Association

of Machinists and Aerospace Workers

McAlester, OK: American Federation of

Government Employees

Keyport, WA: Metal Trades Council

Newport, RI: National Association of

Government Employees; Federal

Union of Scientists and Engineers

New London, CT: National Association

of Government Employees

Appendix B—Project Evaluation and Oversight

Intervention Impact Model—DOD Lab Demonstration Program

Intervention and expected effects Measures Data sources

1. COMPENSATION

a. Broad banding:

Increased organizational flexibility ............................ Perceived flexibility .......................................................... Attitude survey.

Reduced administrative workload, paperwork reduction.Actual perceived time savings ......................................... Personnel office data, PME

results, attitude survey.

Advanced in-hire rates .............................................. Starting salaries of banded v. non-banded employees ... Workforce data.

Slower pay progression at entry levels—increased

pay potential.

Progression of new hires over time by band, career

path—mean salaries by band, career path, demographics.

Workforce data.

Increased satisfaction with advancement ................. Employee perceptions of advancement .......................... Attitude survey.

Increased pay satisfaction ......................................... Pay satisfaction, internal/external equity ......................... Attitude survey.

Improved recruitment ................................................ Offer/acceptance ratios ....................................................

Percent declinations ........................................................

Personnel office data.

No change in high grade (GS–14) distribution ......... Number/percentage of high grade salaries pre/post

banding.

Workforce data.

b. Conversion buy-in: Employee acceptance ................... Employee perceptions of equity, fairness ....................... Attitude survey.

Cost as a percent of payroll ............................................ Workforce data.

2. PERFORMANCE MANAGEMENT

a. Cash awards/bonuses:

Reward/motivate performance .................................. Perceived motivational power .......................................... Attitude survey.

To support fair and appropriate distribution of

awards.

Amount and number of awards by career path, demographics.Workforce data.

Perceived fairness of awards .......................................... Attitude survey.

Satisfaction with monetary awards .................................. Attitude survey.

b. Performance/contribution based pay progresson:

Increased pay-performance link ................................ Perceived pay-performance link ......................................

Perceived fairness of ratings

Attitude survey.

Attitude survey.

Improved performance feedback .............................. Satisfaction with ratings ................................................... Attitude survey.

Employee trust in supervisors ......................................... Attitude survey

Adequacy of performance feedback ................................ Attitude survey.

Decreased turnover of high performers .................... Turnover by performance rating category ....................... Workforce data.

Increased turnover of low performers:

Differential pay progression of high/low performers.Pay progression by performance rating category, career

path.

Workforce data.

Alignment of organizational and individual performance expectations and results.Linkage of performance expectations to strategic plans/

goals.

Performance expectations

Perceived involvement

Performance expectations,

strategic plans.

Attitude survey/focus

groups.

Increased employee involvement in performance planning and assessment.Performance management procedures ........................... Attitude survey/focus

groups.

Personnel regulations.

c. New appraisal process:

Reduced administrative burden ................................ Employee and supervisor perception of revised procedures.Attitude survey.

Improved communication .......................................... Perceived fairness of process ......................................... Focus group.

d. Performance development:

Better communication of performance expectations Feedback and coaching procedures used ......................

Time, funds spent on training by demographics

Focus groups.

Personnel office data.

Improved satisfaction and quality of workforce ......... Organizational commitment .............................................

Perceived workforce quality

Training records.

Attitude surveys.

Attitude survey.

3. ‘‘WHITE COLLAR’’ CLASSIFICATION

a. Improved classification systems with generic standards:

Reduction in amount of time and paperwork spent

on classification.

Time savings ....................................................................

Reduction of paperwork/number of personnel actions

(classification/promotion)

Personnel office data.

Ease of use ............................................................... Managers’ perceptions of time savings, ease of use, improved ability to recruit.Attitude survey.

Improved recruitment of employee with appropriate

skills.

Perceived quality of recruits ............................................

GPA’s of new hires, education levels

Focus groups/interviews.

Personnel office date.
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Notices 64071

Intervention and expected effects Measures Data sources

b. Classification authority delegated to managers:

Increased supervisory authority/accountability ......... Perceived authority .......................................................... Attitude survey.

Decreased conflict between management and personnel staff.Number of classification disputes/appeals pre/post ........ Personnel records.

Management satisfaction with service provided by personnel office.Attitude survey.

No negative impact on internal pay equity ............... Internal pay equity ........................................................... Attitude survey.

c. Dual career ladder:

Increased flexibility to assign employees .................. Assignment flexibility .......................................................

Sup/non-sup ratios ...........................................................

Focus groups, surveys.

Workforce data.

Improved internal mobility ......................................... Perceived internal mobility ............................................... Attitude survey.

Increased pay equity ................................................. Perceived pay equity ....................................................... Attitude survey.

Flatter organization .................................................... Supervisory/non-supervisory ratios ................................. Workforce data.

Improved quality of supervisory staff ........................ Employee perceptions of quality of supervisors .............. Attitude survey.

4. STAFFING/RECRUITMENT

Competitive examining and categorical grouping:

Improved hiring process ............................................ Management satisfaction with hiring process, time to

hire, perceived quality of new hires.

Attitude survey.

Increased quality of hires .......................................... GPA’s of new hires, education levels .............................. Personnel office data (from

issue of Form 52 to referral of candidates).

Increased timeliness .................................................. Time to fill positions ......................................................... Attitude survey.

No negative impact on fairness of process, openness to competition.Candidate/employee satisfaction.

5. RIF

Modified RIF:

Prevent loss of high performing employees with

needed skills.

Separated employees by demographics, performance ... Workforce data.

Attitude survey/focus

groups.

Contain cost and disruption ...................................... Satisfaction with RIF process .......................................... Attitude survey/focus

groups.

Cost comparisons of traditional v. modified RIF .............

Time to conduct RIF

Number of appeals/reinstatements

Rightsizing and documenting systems/personnel office/budget data.

6. COMBINATION OF ALL INTERVENTIONS

All:

Improved organizational effectiveness ...................... Combination of personnel measures ............................... All data sources.

Improved management of R&D workforce ................ Employee/Management satisfaction ................................ Attitude survey.

Improved planning ..................................................... Planning procedures ........................................................ Strategic planning documents.

Improved cross functional coordination .................... Perceived effectiveness of planning procedures ............. Attitude survey.

Organizational charts.

Actual/perceived coordination .......................................... Attitude survey.

Increased product success ....................................... Customer satisfaction ...................................................... Customer satisfaction surveys.

Cost of innovation ..................................................... Project training/development costs (staff salaries, contract cost).

Training hours per employee)

Demo project office

records.

Contract documents.

7. CONTEXT

a. Regionalization:

Reduced servicing ratios/cost ................................... HR servicing ratios ..........................................................

average cost per employee served

Attitude survey.

No negative impact on service quality ...................... Service quality, timeliness ............................................... Workforce data.

Attitude survey/focus

groups.

b. GPRA: Improved organizational performance ............. Other measures to be developed .................................... As established.

[FR Doc. 97–31625 Filed 12–2–97; 8:45 am]

BILLING CODE 6325–01–M