67434 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

OFFICE OF PERSONNEL

MANAGEMENT

Personnel Demonstration Project;

Alternative Personnel Management

System for the U.S. Department of

Commerce

AGENCY: Office of Personnel

Management.

ACTION: Notice of approval of a

demonstration project final plan.

SUMMARY: Title VI of the Civil Service

Reform Act, now codified in 5 U.S.C.

4703, authorizes the Office of Personnel

Management (OPM) to conduct

demonstration projects that experiment

with new and different human resources

management concepts to determine

whether changes in policies and

procedures result in improved Federal

human resources management. This

demonstration project is designed to

replicate many of the features of the

National Institute of Standards and

Technology (NIST) demonstration

project created by Congress pursuant to

the National Bureau of Standards

Authorization Act for Fiscal Year 1987

(Pub. L. 99–574). This project will cover

units of four Department of Commerce

(DoC) organizations:

(1) Technology Administration

—Office of the Under Secretary

—Office of Technology Policy

(2) Economics and Statistics

Administration

—Bureau of Economic Analysis

(3) National Telecommunications and

Information Administration

—Institute for Telecommunication

Sciences

(4) National Oceanic and Atmospheric

Administration

—Units of the Office of Oceanic and

Atmospheric Research

—Units of the National

Environmental Satellite, Data, and

Information Service

—Units of the National Marine

Fisheries Service

DATES: This demonstration project will

be implemented on March 24, 1998.

FOR FURTHER INFORMATION CONTACT: (1)

Department of Commerce: Darlene F.

Haywood, U.S. Department of

Commerce, 1400 Constitution Avenue,

N.W., Room 5004, Washington, DC

20230, 202–482–3620; (2) OPM: Judith

B. White, U.S. Office of Personnel

Management, 1900 E Street, N.W., Room

7460, Washington, DC 20415, 202–606–

1526.

SUPPLEMENTARY INFORMATION:

1. Background

The NIST Demonstration Project was

successful and was made permanent by

Congress in 1996 (Pub. L. 104–113).

Independent surveys have demonstrated

that a majority of NIST employees are

satisfied with the demonstration project.

The Federal Employees Pay

Comparability Act of 1990 included

many of the interventions tested

successfully at NIST. The DoC project is

designed to test whether the

interventions of the NIST project can be

successful in DoC environments with

different missions and different

organizational hierarchies. Like the

NIST project, the DoC Demonstration

Project involves simplified position

classification, pay for performance, and

simplified recruiting and examining

processes.

2. Overview

A total of 67 oral and written

comments were received in response to

the first Federal Register Notice of May

2, 1997. These comments were a

valuable source of input for the

Department of Commerce

Demonstration Project. All comments

have been considered, and changes to

the project plan have been made where

deemed appropriate. Changes to the

plan involve supervisory pay,

performance-based reduction-in-force

retention credit, and the extended

probationary period for employees in

the Scientific and Engineering Career

Path. In addition to these changes,

several sections of the plan have been

clarified and expanded. Some editorial

changes and corrections were also

made.

3. Summary of Comments

Nine speakers commented on the first

Federal Register Notice at the five

public hearings. A total of 58 letters

were received, with one letter bearing

20 signatures. A variety of issues and

concerns were raised; however,

recurring comments addressed five

major topics:

(1) accountability, (2) reduction-inforce (RIF) retention credit, (3) impact of

the project on equal employment

opportunity (EEO)/Diversity, (4) pay

administration, and

(5) performance appraisal. Other

issues raised include classification,

employee input, project evaluation, and

communication. The following

summarizes the written and oral

comments by topic and provides a

response to each.

(1) Accountability

Comments. A majority (about twothirds) of the comments from

individuals and organized groups

expressed a high level of concern that

the demonstration project gives more

authority and responsibility to

supervisors and managers. Believing

that many supervisors do not properly

and fairly execute supervisory

responsibilities or utilize the power and

tools provided under the current

management system, these employees

fear a new system that gives supervisors

additional authority over their career

and pay. Employees specifically

questioned whether proper controls

would be in place to prevent

management abuse in the

administration of the performance

appraisal and classification systems.

Comments focused on the potential for

favoritism and unfair treatment of

employees in the distribution of ratings

and awards. Employees also questioned

whether pay pool managers would have

the requisite knowledge to make fair

decisions about the work of all

employees in the pay pool.

Response. The Department will

implement a number of measures to

ensure management accountability.

These will include: (1) employee focus

groups, (2) supervisory training, and (3)

oversight.

Employee focus groups: Annual

project evaluations will utilize

employee focus groups as an important

source of data in measuring the degree

to which project interventions are

accomplishing desired objectives.

Training: Supervisors and managers

will receive detailed training in the new

authorities they are to exercise.

Classification training will emphasize

the underlying principles of project

classification and will instruct

supervisors on the application of these

principles to classification decisions.

Training on the performance appraisal

system will cover performance

planning, monitoring, feedback, and

appraisal. In addition, supervisors will

receive training on the automated

performance pay increase system and

will be required to conduct a simulation

of the performance evaluation and

rewards system prior to the actual endof-year performance appraisal. The

training will also cover the pay pool

manager’s responsibilities for reviewing

and reconciling ratings and ensuring

equity and consistency in performance

plans and ratings.

Oversight: The authorities delegated

to supervisors under this demonstration

project will be subject to three levels of

oversight. The Office of Personnel

Management will oversee the project

under the authority of 5 U.S.C. 4703.

The DoC Departmental Personnel

Management Board (DPMB) will manage

and oversee authority delegated to the

Operating Personnel Management

Boards (OPMBs) in participating
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67435

organizations, and OPMBs will monitor

authorities delegated to supervisors,

withdrawing them when warranted.

(a) Classification: Under authority

delegated by the OPMBs, servicing

human resources management staff will

monitor and review classification

decisions made by managers to ensure

consistent and uniform application of

classification policies and guidelines.

When classification actions are found to

be inconsistent with established

policies, the servicing human resources

management specialist will attempt to

resolve the inconsistency with the

responsible supervisor. If agreement

cannot be reached, the issue will be

referred to a Classification Review Panel

(CRP). The CRP is an ad hoc advisory

panel established by authority of the

OPMB to review proposed classification

actions referred to it by the servicing

Human Resources Manager.

(b) Performance Evaluation: OPMBs

will oversee the operating unit annual

performance appraisal process, from

development of plans to individual pay

increases and bonuses. OPMBs will also

establish operating unit guidelines on

performance elements.

(2) Reduction-in-Force (RIF) Retention

Credit

About half of all comments received

addressed two related concerns with

respect to RIF retention credit: loss of

current performance-based credit and

the percentage of employees eligible for

credit under the project.

(a) Loss of current credit

Comments. Employees thought it

unfair that conversion to the

demonstration project would result in

the loss of performance-based RIF credit

acquired under the current system.

Response. The demonstration project

will introduce a new ‘‘pay-forperformance’’ personnel system, and it

is intended that all employees enter the

system on an equal basis, i.e, on a ‘‘level

playing field.’’ Allowing some

employees to bring forward

performance-based RIF credit gained

under the current system would give

those employees an unfair advantage.

(b) Percentage of Employees Eligible for

Credit

Comments. A number of employees

objected to the provision that would

award performance-based credit for only

those employees who rank in the top ten

percent of their career paths.

Response. The objective of this feature

is to reward performance that is truly

outstanding. Consequently, the group of

employees receiving this credit must, by

definition, be limited. However, in order

to more closely parallel agency

historical experience, the project plan

has been revised to grant performancebased RIF retention credit to employees

who rank in the top 20 percent of their

career path within a pay pool, rather

than the top 10 percent.

(3) Impact of the Project on EEO and

Diversity

Comments. Several employees

expressed concern that the

demonstration project would not

support existing EEO and Diversity

goals. Specific questions were raised

about the impact of the project on the

hiring of women and minorities and

whether these groups would receive an

equitable share of promotions, pay

increases, and bonuses.

Response. EEO and Diversity goals of

the Department will not change under

the demonstration project. On an annual

basis, the Department will continue to

submit an annual report and update of

affirmative employment to the Equal

Employment Opportunity Commission.

In addition, Diversity Plans and

Diversity Councils now in place will

continue to be required for

organizations participating in the

demonstration project. Also, Senior

Executive Service managers will

continue to be rated on a Diversity

critical element. The Project Evaluation

Model will include criteria that will

track hiring, award, promotion, and

retention data in order to closely

monitor the impact of the project on

workforce diversity. A variety of data

sources will be used. These include

records in servicing human resources

management offices (including records

of recruitment sources) and records of

EEO complaints.

(4) Pay Administration

Two major compensation issues were

raised. Several employees objected to

the manner in which they would be

compensated for time credited toward

their next within-grade increase. In

addition, some employees questioned

the appropriateness of the supervisory

pay differential.

(a) Within-Grade Increase (WIGI) Payout

Comments. Employees objected to the

one-time lump sum payment for time

credited toward the next within-grade

increase on the grounds that it would

result in a negative impact on their

salary and retirement contributions and

earnings. In lieu of the lump sum, some

suggested that the WIGI payout be

processed as a base pay increase. Others

felt that they should be given a choice

between a one-time payment and a

permanent salary increase.

Response. Organizations participating

in the demonstration project will be

required to maintain compensation

costs at the levels they would have

reached under the current system. A

decision to grant permanent salary

increases for time credited toward

within-grade increases would result in

immediate cost escalation prior to

implementation that would distort base

cost calculations. Such a decision

would be counter to Departmental cost

containment goals. Moreover, under the

demonstration project, the salaries of

good performers will soon overtake

salaries they would have reached with

WIGIs through the following provisions

of the project plan:

(1) Annual Performance Pay

Increases: The new pay system provides

an opportunity for a performance pay

increase each year, regardless of an

employee’s position in the band. This is

in contrast to the waiting periods of one

to three years for a WIGI in the General

Schedule (GS) system. The potential

size of a performance pay increase in

the new system is significantly higher

than the size of a GS within-grade

increase.

(2) Removal of Grade Barriers: Broad

banding removes the pay barriers

between the GS grades that are placed

in the same band. For example, because

grades GS–7 and GS–8 will be placed in

the same band in the Support Career

Path, employees who previously

reached the top of the GS–7 grade will

now have access to the GS–8 pay range.

(3) Potential for Higher Pay Increases

Upon Promotion: When an employee is

promoted to a higher band, the

employee’s salary may be set at any

point in the range of the higher band as

long as the new salary represents an

increase of at least 6 percent.

(4) Supervisory Performance Pay:

Through pay for performance,

supervisors have salary potential 6

percent higher than the normal ceiling

of a band.

(b) Supervisory Performance Pay

Comments. Several employees

questioned the appropriateness of the

immediate salary increase that

supervisors would receive under the

demonstration project. Some stated that

supervisors would receive additional

compensation because they would

convert to a higher pay band on the

basis of their supervisory duties, and

therefore, an automatic pay increase

would result in double compensation

for supervision. Some asserted that this

policy conflicts with the basic ‘‘pay-forperformance’’ concept and suggested

that any pay incentive awarded

supervisors should be given after the
67436 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

first performance appraisal cycle, if

earned through performance.

Response. The proposed project plan

provided for an automatic pay

differential for supervisors in the

Scientific and Engineering (ZP) Career

Path only. The amount of this type of

differential was to be fixed at 3 percent

or 6 percent, for first-level and secondlevel (and higher) supervisors,

respectively. However, as a result of

comments received, this feature of the

system has been eliminated. ZP

supervisors will not be given an

immediate salary increase upon

conversion to the demonstration project.

Supervisors in all career paths will be

eligible for salaries up to 6 percent

higher than the maximum rates of their

pay bands, and there will be no

differentiation in the amount of the

increase based on supervisory level.

Any employee who meets the

demonstration project definition of

‘‘supervisor’’ will be eligible for the 6

percent increase, which may be reached

through performance pay increases

granted through the regular performance

appraisal process (see Section III(D)(4)

Supervisory Performance Pay).

1. (5) Performance Appraisal

About half of all comments received

addressed the performance appraisal

process. Issues raised focused on three

major areas: ranking versus teamwork,

linking the annual comparability

increase to performance, and the

requirement for all performance

elements to be critical.

(a) Impact of Ranking on Teamwork

Comments. Several employees

commented that ranking employees by

performance score will pit employees

against each other, create a competitive

work environment, and destroy

teamwork.

Response. Under the demonstration

project, employees will be rated against

the criteria in their performance plans

and ranked accordingly. There will be

no direct comparison of employees’

performance. It is expected that more

competitive salaries that are directly

tied to performance will improve both

individual and organizational

performance. Furthermore, the

demonstration project performance

appraisal system is flexible enough to

reward those aspects of work that

require cooperation and teamwork. For

example, in units requiring high levels

of cooperation and teamwork to

accomplish organizational goals,

supervisors may include contributions

to the team’s accomplishments in

performance plans and rate employees

accordingly.

(b) Linking the Annual Comparability

Increase to Performance

Comments. Several employees

expressed concern about the proposal to

allow only those employees with a

current annual performance rating of

Eligible to receive the annual general

comparability increase. They consider

the annual increase a cost-of-living

increase, which should not be tied to

performance.

Response. The annual General

Schedule (GS) pay adjustment is

authorized under 5 U.S.C. 5303. It is

based on the cost of labor, not the cost

of living. GS pay adjustments are linked

to changes in the Employment Cost

Index (ECI), which measures the overall

rate of change in employers’

compensation costs in the private and

public sector, excluding the Federal

Government. The demonstration project

is based on the principle of pay for

performance; therefore, all pay

increases, including the annual

comparability increase, are tied to

performance.

(c) Use of All Critical Elements in

Performance Plans

Comments. Some employees

expressed concern about the

requirement for all elements in a

performance plan to be critical

elements. In their opinion, this will

make it easier for supervisors to

withhold pay increases or bonuses, or

even initiate removal, when one

element is rated Unsatisfactory.

Response. The requirement for all

elements in a performance plan to be

critical is not a departure from the

current performance appraisal system.

The demonstration project will not

require that noncritical elements used in

the current system be changed to critical

elements under the project. The project

simply eliminates noncritical elements.

Also, while noncritical elements may

now be included in an employee’s

performance plan, they have very little

weight. Under the current system,

unacceptable performance in one

critical element results in a mandatory

rating of Unacceptable. Likewise, under

the demonstration project, unsuccessful

performance on one element will result

in a rating of Unsatisfactory.

(6) Other Comments

Employees addressed a number of

other issues including classification,

employee input to the project, project

evaluation, and communication.

(a) Classification

Comments. One employee expressed

concern that problems with the current

GS classification standards would carry

over into the demonstration project.

Some questioned the basis for grouping

occupations into four career paths, and

a few employees questioned the career

path decisions for their occupations.

Others expressed dissatisfaction with

what they consider the ‘‘arbitrary’’

structure of the pay bands, believing

that employees who convert to the top

of their bands will have minimal

opportunity for pay increases.

Response. (1) Classification

Standards: Under the demonstration

project, OPM classification standards

will not be used. They will be replaced

with more streamlined classification

standards that have been developed to

cover the work in the participating

organizations. Each pay band in a career

path will have a narrative standard that

uses two factors:

(1) Duties and Responsibilities and (2)

Knowledge, Skills, and Abilities (KSAs).

At each successively higher band, the

standards describe a higher level of

work and a higher level of KSAs

required to successfully perform the

work. These standards will simplify the

classification process, make it more

understandable to managers and

employees, and reduce the time

required to make classification

decisions.

(2) Career Paths: The four career paths

are intended to replace the GS method

of grouping occupations. Under the

current system, GS occupations are

placed in occupational groups according

to general subject matter. Each group

includes both two-grade and one-grade

interval occupations, with each type

receiving different treatment for

classification and other purposes. By

contrast, career paths group occupations

that have parallel career patterns and

can be similarly treated for staffing,

classification, pay, and other personnel

purposes.

(3) Pay Bands: Pay bands are designed

to parallel the typical career patterns for

occupations in a career path. For

example, in the Scientific and

Engineering (ZP) Career Path,

professional technical employees begin

their careers as trainees (Band I), move

through a developmental stage that

builds on professional knowledge

gained through undergraduate work

(Band II), proceed to independent, full

performance research or operational

work (Band III), acquire program

responsibility (Band IV), and achieve

broad recognition as an authority in the

field (Band V).

(4) Potential for Pay Increases: Within

each pay band, the maximum potential

for a performance pay increase is

highest for employees in interval one

and lowest for employees in interval
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67437

three. This arrangement is intended to

slow salary increases as employees

move through a band, duplicating the

effect of the longer waiting periods for

GS within-grade increases as GS

employees move through the steps of a

grade.

Comments. Some employees

questioned whether their occupations

were assigned to the appropriate career

paths.

Response. The four career paths used

in the Department of Commerce

Demonstration Project as well as

placement of occupations in those paths

replicate the NIST system. Career path

determinations for occupations not

covered by the NIST project are based

on the definitions of career paths.

However, after the first year of

operation, questions concerning changes

in career path may be considered.

(b) Employee Input

Comment. A few employees felt that

the project plan had not received any

input from employees and that this

could adversely impact relationships

between management and employees.

Response. Numerous briefings were

provided to employees and union

representatives prior to the public

hearings. Employees were given an

opportunity to provide oral comments at

five public hearings held between June

9 and June 26, 1997. These hearings

were held in locations across the

country that were accessible to most

employees. In addition, the first Federal

Register Notice, published on May 2,

1997, informed employees that written

comments would be accepted through

July 10, 1997. As a result of comments

received from employees during the

public comment period, several changes

have been made to the project plan.

(c) Project Evaluation

Comments. Several employees

commented on the design of the Project

Evaluation Model. Specifically, it was

suggested that employee morale be

measured since a direct link exists

between morale and organizational

performance, that employee opinions be

one of the data sources for evaluation of

the project, and that EEO complaints

and grievance patterns be incorporated

into the evaluations.

Response. The Project Evaluation

Model will include employee surveys as

a source of data. The surveys will

include criteria to measure

organizational climate and general

concerns. In addition, as part of the

evaluation process, data on EEO

complaints and grievances will be

monitored.

(d) Communication

Comment. One employee commented

that the level of communication to

employees about the project had been

inadequate.

Response. All employees were invited

to attend general briefings on the

proposed demonstration project in

March, April, and early May of this

year. At these briefings, employees

received handouts describing the key

features of the project. The publication

of the first Federal Register Notice was

announced in a general bulletin issued

to all employees during the week of May

5, 1997. In that announcement,

employees were informed that the

Federal Register Notice was

immediately available on the Office of

Personnel Management Internet Home

Page. Shortly thereafter, the publication

of the Federal Register Notice was

announced on the Department of

Commerce Internet Home Page, and

numerous copies were distributed to all

servicing human resources offices for

dissemination to employees. An article

on the demonstration project appeared

in the May/June 1997 issue of the

Department’s Commerce People

magazine. In addition, a video which

provides an overview of the project was

developed and made available to

employees, and several follow-up

briefings were conducted. To ensure

that employees are kept informed on the

project, the Department will issue a

Demonstration Project Newsletter

periodically.

4. Demonstration Project System

Changes

The following directs readers to the

substantive changes and clarifications to

the project plan. The page numbers

below refer to the pages of the proposed

plan, published in the Federal Register

on May 2, 1997.

(1) Page 24256, 24258, and 24260: The

Office of the Chief Financial Officer/

Assistant Secretary for Administration

and the Office of the General Counsel

have been deleted, as those

organizations will not participate in the

project.

(2) Page 24259: Two laboratories of

the Office of Oceanic and Atmospheric

Research (OAR) that were inadvertently

listed have been deleted since they will

not participate in the demonstration

project. These are the Geophysical Fluid

Dynamics Laboratory, in Princeton, New

Jersey, and the Pacific Marine

Environmental Laboratory, in Seattle,

Washington. In addition, all of the

locations for each of the participating

laboratories have been listed.

(3) Page 24262: Table 3 has been

changed to correct an error introduced

by the printing process. Specifically the

table has been corrected to show no GS–

15 positions in the GS–1340

Meteorology Series and a total of 235

positions in this occupation.

(4) Page 24262: Mountain

Administrative Support Center (MASC)

has been deleted from Table 4, since

MASC will not participate in the

demonstration project.

(5) Page 24263: The definitions of the

four career paths have been expanded

for clarification.

(6) Page 24265: Paragraph B2(a) has

been revised to restrict direct

examination and the associated

requirement for Applicant Supply Files

to occupations for which there is

documented evidence that skills are in

short supply.

(7) The requirement for all employees

in the Scientific and Engineering (ZP)

Career Path to serve a three-year

probationary period has been modified.

The three-year probationary period will

be applicable to only those ZP

employees who are assigned to research

and development positions as identified

by the functional code assigned in

conjunction with the classification

process. All other ZP employees will

serve a one-year probationary period.

(For further explanation, see Section

III(B)(10) Probationary Period.)

(8) Page 24266: The provisions for

awarding performance-based RIF

retention credit have been changed. An

employee with an overall performance

score in the top 20 percent (as opposed

to the top 10 percent) of scores within

a career path in a pay pool will be

credited with 10 additional years of

service for retention purposes.

(9) Page 24267: The demonstration

project definition of ‘‘supervisor’’ has

been clarified and expanded. Minimum

criteria for classification of a position as

‘‘supervisory’’ have been included.

(10) Page 24267: The section ‘‘Locality

Pay’’ has been clarified. Specifically, the

sentence dealing with special rates and

locality rates has been rewritten to

indicate that for bands affected by

special rates, the maximum rate will be

the higher of the special rate or the

locality rate, rather than the special rate

and the locality rate.

(11) Page 24267: The policy on

supervisory pay has been revised.

Supervisors in the Scientific and

Engineering (ZP) Career Path will not be

eligible for immediate salary increases

upon conversion to the demonstration

project. Supervisors in all career paths

will be eligible for salaries up to 6

percent higher than the maximum rates

of their pay bands, and there will be no

differentiation in the amount of the

increase based on supervisory level.
67438 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

Any employee who meets the

demonstration project definition of

‘‘supervisor’’ will be eligible for the

maximum increase of 6 percent, which

may be reached through performance

pay increases granted through the

regular performance appraisal process.

(12) Page 24268: In the section

entitled ‘‘Pay Setting Upon Movement

of an Employee to a Different Pay Area,’’

the formula for determining the pay rate

in the new area was printed incorrectly

and has been corrected.

(13) Page 24274: The Project

Evaluation Model has been revised to

include the objective of ‘‘Support for

EEO and Diversity goals.’’

(14) Page 24276: In the ‘‘Project

Management’’ section, the role of the

DoC Acting Chief Financial Officer/

Assistant Secretary for Administration

(now the Director of the National

Institute of Standards and Technology)

as chairman has been clarified to show

that the role is specific to the

individual, who will serve as Chair of

the DPMB through the first cycle of the

project’s operation. After the first cycle,

chairmanship of the Board will be

assumed by one of the members of the

Board.

Janice R. Lachance,

Director.

Table of Contents

I. Executive Summary

II. Introduction

A. Purpose

B. Problems with the Present System

C. Changes Required/Expected Benefits

D. Participating Organizations

E. Participating Employees

F. Labor Participation

G. Project Design/Methodology

III. Personnel System Changes

A. Position Classification

B. Staffing

C. Reduction-in-Force

D. Pay Administration

E. Performance Evaluation and Rewards

IV. Conversion or Movement from a Project

Position to a General Schedule Position

A. Grade-Setting Provisions

B. Pay-Setting Provisions

V. Budget Discipline

A. Reprogramming Costs

B. Base Cost Assessment

C. Funding Pools for Performance Pay

Increases and Bonuses

D. Budget Monitoring

VI. Project Evaluation

VII. Project Management

VIII. Training

A. Manager and Supervisor Training

B. Employee Training

C. Support Staff Training

IX. Experimentation and Revision

X. Authorities and Waiver of Laws and

Regulations Required

I. Executive Summary

This project was designed by the

Department of Commerce with

participation and review by the Office of

Personnel Management (OPM). The

demonstration project will pursue

several key objectives of the National

Performance Review: to simplify the

current classification system for greater

flexibility in classifying work and

paying employees; to establish a

performance management and rewards

system for improving individual and

organizational performance; and to

improve recruiting and examining to

attract highly qualified candidates and

get new hires aboard faster. The

duration of the project will be 5 years,

except that the project may be extended

by OPM if further testing and evaluation

are warranted.

The proposed project will test

whether the interventions of the NIST

project can be successful in other

environments. Other reasons for testing

the NIST interventions in the

Department are: (1) all of the diverse

operating units in the proposed

coverage are within the same

Department, the U.S. Department of

Commerce, which is also the parent

agency of NIST; (2) several of the

operating units in the proposed

coverage have served for eight years as

comparison sites for the NIST project;

and (3) during the implementation and

operation of the NIST project, DoC and

NIST staff worked closely with the U.S.

Department of Agriculture’s National

Finance Center, which provides

personnel and payroll computing and

database services to all of DoC,

including NIST and the units proposed

for the new project.

II. Introduction

A. Purpose

The purpose of the proposed project

is to strengthen the contribution of

human resources management in

helping to achieve the missions of

specific operating units of the

Department of Commerce. The project

conducted by NIST successfully

demonstrated that certain innovative

changes could improve human

resources management in the NIST

environment. The proposed project will

test whether these same innovations

will produce similarly successful results

in other DoC environments.

B. Problems With the Present System

The Department of Commerce

encourages, serves, and promotes the

Nation’s international trade, economic

growth, and technological advancement.

Within this framework, and in the

interest of promoting the national

interest through the encouragement of

the competitive free enterprise system,

the Department provides a wide variety

of programs, some of which are

included in the proposed coverage of

the project.

The current system has three major

impediments to a manager’s ability to

effectively manage human resources and

shape the workforce: (1) Hiring

restrictions, (2) an overly complex job

classification system, and (3) poor tools

for rewarding and motivating

employees. These impediments,

embedded in a system that does not

assist managers in removing poor

performers, build stagnation in the

workforce and waste valuable time.

C. Changes Required/Expected Benefits

The innovations of the project and

their objectives are:

1. Classification

Career paths will replace occupational

groups, broad bands will replace grades,

and Departmental broad-band standards

will replace OPM classification

standards. The classification system will

be automated and classification

authority will be delegated to line

managers.

These changes are intended to

simplify and speed up the classification

process, make the process more

serviceable and understandable,

improve the effectiveness of

classification decision-making and

accountability, and facilitate pay for

performance. Broad bands provide

larger classification targets that can be

defined by shorter, simpler, and more

understandable classification standards.

This simpler system will be easier to

automate, will require fewer resources

to operate, and will facilitate delegation

to line managers.

By providing broader and more

flexible pay ranges for setting entry pay,

broad banding will provide hiring

officials with an important tool for

attracting high-quality candidates and

thus contribute to the objective of

increasing the quality of new hires.

By providing more flexible pay setting

based on performance, broad banding

will give managers the ability to

increase the pay of good performers to

higher and more competitive levels,

thus improving the retention of good

performers. At the same time, the

potential for higher pay increases for

good performance, supported by the

broader pay ranges of broad banding,

will contribute to the objective of

improving organizational and

individual performance.

2. Staffing

Staffing methods will include two

that were implemented in the NIST
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67439

Demonstration Project and which are

now available to all agencies through

examining authority delegated by OPM.

For the sake of simplification and to

parallel the NIST Demonstration Project,

they are retained with the same titles

under the Department of Commerce

Demonstration Project: Direct

Examination and Agency-Based

Staffing. In addition, there will be

placements under Merit Assignment

and various noncompetitive appointing

authorities. OPM registers will not be

used, but positions in occupations

covered by the Luevano Consent Decree

(Administrative Careers with America

or successor programs) will be filled

using OPM guidance. Other

supplemental staffing tools will include

such elements as paid advertising,

flexible entry salaries, probation, local

authority for recruiting and retention

payments, and more flexible pay

increases associated with promotion.

These changes are intended to attract

high-quality candidates, speed up the

recruiting and examining process,

increase the effectiveness of the

probationary review process, and

increase the retention of good

performers.

Agency-based staffing, supported by

paid advertising, will allow hiring

officials to focus on more relevant

recruiting sources. Direct examination

will allow managers to hire individuals

with shortage skills as they find them,

get them on board faster, and avoid the

loss of good candidates who may grow

impatient with a long hiring process,

thus contributing to the objectives of

increased quality of new hires and

better fit between position requirements

and candidate skills.

The three-year probationary period

will help ensure that scientists and

engineers who are retained beyond

probation are capable of carrying out the

full cycle of research and development

(R&D) work, thus contributing to the

objectives of high-quality hires and a

high-performing workforce. (See Section

III(B)(10) Probationary Period.) Local

authority for recruiting and retention

payments will provide extra incentives

for hiring and retaining individuals with

shortage skills, thus contributing to the

objectives of increasing the quality of

new hires, improving the fit between

position requirements and individual

qualifications, and improving the

retention of good performers.

3. Pay

The most important change in pay

administration is the introduction of

pay for performance, which will govern

individual pay progression within

bands. Funds currently applied to

within-grade increases, quality step

increases, and promotions from one

grade to a higher grade when both

grades are now in the same band, will

be used instead to grant performancebased pay increases within bands. The

amount of the basic pay and locality pay

increases approved by Congress and the

President, however, will continue to be

applied to pay schedules and to the

salaries of employees with a

performance rating of Eligible. Other

pay tools are supervisory performance

pay, flexible pay setting for new hires,

and more flexible pay setting upon

promotion.

Pay for performance promotes fairness

through the peer ranking process and

provides a motivational tool and a

retention tool. As a motivational tool,

the promise of higher pay increases for

good performance encourages high

achievement. As a retention tool, pay for

performance allows the organization to

quickly move the salaries of good

performers to levels that are more

competitive in the labor market.

Supervisory performance pay

provides an incentive for supervisors,

addressing the objective of improved

individual and organizational

performance. Supervisory performance

pay also addresses the objective of

improving retention by raising the pay

of high-performing supervisors to more

competitive levels.

Flexible pay setting for new hires is

a recruiting tool that gives hiring

officials greater flexibility to offer more

competitive salaries to high-quality

candidates, addressing the objective of

improving the quality of new hires. The

greater flexibility in setting pay upon

promotion gives managers another

retention tool to help retain top

performers.

4. Performance Appraisal

The new system replaces the current

five-level rating system with a two-level

rating system, using Unsatisfactory and

Eligible labels. (Unsatisfactory is

equivalent to Unacceptable, as used in

Part 430 of Title 5, Code of Federal

Regulations.) The most important

feature of the proposed performance

appraisal system is that it is based on

the application of a weighted 100-point

scoring system linked to pay for

performance. As in the current system,

each employee has an individual

performance plan composed of several

performance elements (all of which are

critical elements) that are measured

with the 100-point scoring system in

conjunction with the application of

benchmark performance standards.

Based on the resulting total scores,

supervisors rank employees by

performance within peer groups and

grant performance pay increases

according to the ranking. Highly ranked

employees within a peer group receive

relatively high pay increases and lower

ranked employees receive relatively

lower pay increases. Bonuses are

granted at the discretion of the

supervisor following the performance

appraisal process.

The performance appraisal process is

intended to (1) promote good

performance; (2) encourage a continuing

dialogue between supervisors and

employees on organizational objectives,

supervisory expectations, employee

performance, employee needs for

assistance and guidance, and employee

development; and (3) provide a basis for

performance-related decisions in

employee development, pay, rewards,

assignment, promotion, and retention.

The system will more effectively

communicate to employees how they

are performing in relation to their peers,

the rewards of good performance, and

the consequences of poor performance.

Performance-based pay increases give

an operating unit the ability to raise the

pay of good performers more rapidly,

thus improving retention of good

performers. The potential for higher pay

increases for good performance will

encourage achievement and promote the

objective of improved individual and

organizational performance.

5. Performance Bonuses

In accordance with 5 CFR 451, at the

end of the annual performance period,

Rating Officials, with the approval of

Pay Pool Managers, will have the

opportunity to reward employee

performance with bonuses up to

$10,000. Bonuses address two

objectives. First, rewarding achievement

will make high achievers more likely to

remain, thus improving retention of the

best performers. Second, the potential

for bonuses for achievement will

encourage improved individual

performance.

6. More Efficient Systems

The Department will improve the

efficiency of human resource systems by

streamlining procedures, reducing

paperwork, and automating processes

wherever possible.

7. Line Management Authority

Under the demonstration project,

greater authority and accountability will

be delegated to line managers. This

delegation is intended to improve the

effectiveness of human resources

management by strengthening the role

of line managers as the human resources

managers of their units. The project will
67440 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

be managed by the Departmental

Personnel Management Board (DPMB).

Through the first cycle, the Board will

be chaired by the Director of the

National Institute of Standards and

Technology. Following that, one of the

Board members will assume the role of

Chairman. Each major operating unit

will have its own Operating Personnel

Management Board (OPMB) to manage

and oversee local operations. (See the

section on Project Management.)

D. Participating Organizations

The Department of Commerce

encourages, serves, and promotes the

Nation’s international trade, economic

growth, and technological advancement.

Within this framework, and in the

interest of promoting the national

interest through the encouragement of

the competitive free enterprise system,

the Department provides a wide variety

of programs, some of which are

included in the proposed coverage. The

following organizations will participate

in the project:

Technology Administration (TA)

The Technology Administration,

which oversees NIST and the National

Technical Information Service (NTIS),

was established by Congress in 1988 as

the premier technology agency working

with U.S. industry in improving

competitiveness and increasing the

impact of technology on economic

growth. The TA coverage would include

only the Office of the Under Secretary

for Technology Administration and the

Office of Technology Policy. This

coverage would be an opportunity to

apply broad banding principles to a

policy, planning, and development

environment dealing with issues vital to

the future of the U.S. economy as it is

affected by technology. TA offices in the

proposed coverage are located at the

DoC headquarters building in

Washington, D.C.

The key occupations are: General

Administration, Management Analyst,

and General Business Specialist.

Bureau of Economic Analysis (BEA),

Economics and Statistics

Administration

BEA is responsible for providing a

current picture of the U.S. economy

through the preparation, development,

and interpretation of the national

income and product accounts showing

the gross domestic product, business

and other components of the national

wealth accounts, industrial market

interrelationships traced by the inputoutput accounts, and other accounts

showing such economic indicators as

personal income, foreign investment,

and balance of payments. The bureau

also develops surveys and other tools

for analyzing and forecasting economic

developments. This coverage provides a

test of the NIST system in an

environment that uses economists and

accountants as analysts, reporters, and

forecasters. BEA is located at 1441 L

Street, N.W., Washington, D.C.

The economic analysis work of the

organization is reflected in the following

key occupations: Economist,

Accountant, Financial Administrator,

Computer Specialist, Statistician, and

Statistical Assistant.

Institute for Telecommunication

Sciences (ITS), National

Telecommunications and Information

Administration

ITS is a major component of the

National Telecommunications and

Information Administration (NTIA). ITS

is the principal Federal

telecommunications research and

engineering laboratory. The Institute

conducts telecommunications research

in support of NTIA’s responsibilities in

advising the President on

telecommunications and information

policy; developing U.S. plans and

policies in international forums; and

developing policy for Federal use of the

radio frequency spectrum. This

application will test how well the NIST

interventions work in a research and

development (R&D) environment quite

different from the NIST environment.

ITS is located in Boulder, Colorado.

The ITS R&D work is carried out

primarily by Electronics Engineers, with

help from Mathematicians.

The remaining units are subunits of

the National Oceanic and Atmospheric

Administration (NOAA):

Office of Oceanic and Atmospheric

Research (OAR)

OAR is the primary research and

development unit of NOAA. OAR

provides the science and technology to

support improvements in NOAA

services and address current and future

problems. OAR conducts research

programs in coastal, marine,

atmospheric, and space sciences

through its own laboratories and offices,

as well as through networks of

university-based programs. The work

consists of research, modeling, and

environmental observations relating to

weather, climate, and environmental

resources. The laboratory component of

OAR is the Environmental Research

Laboratories (ERL). ERL includes

research laboratories in space

environment, aeronomy, environmental

technology, weather forecast systems,

climate monitoring and diagnostics,

severe storms, air resources,

oceanography, and geophysical fluid

dynamics. This diversity provides a rich

new R&D environment for the testing of

broad banding principles. OAR and ERL

headquarters are located in Silver

Spring, Maryland. All ERL laboratories

will be included in the project, except

the Great Lakes Environmental Research

Laboratory (Ann Arbor, MI), the

Geophysical Fluid Dynamics Laboratory

(Princeton, NJ), and the Pacific Marine

Environmental Laboratory (Seattle,

WA). The project laboratories are:

Aeronomy Laboratory—Boulder, CO

Atlantic Oceanographic and

Meteorology Laboratory—Miami, FL;

Silver Spring, MD; San Diego, CA;

Norfolk, VA; and Seattle, WA.

Air Resources Laboratory—Silver

Spring, MD; Boulder, CO; Research

Triangle Park, NC; Oak Ridge, TN; Las

Vegas, NV; and Idaho Falls, ID

Climate Diagnostic Center—Boulder, CO

Climate Monitoring and Diagnostics

Laboratory—Boulder, CO; Hilo, HI;

Barrow, AK; Pago Pago, American

Samoa; South Pole, Antarctica

Environmental Technology

Laboratory—Boulder, CO Forecast

Systems Laboratory—Boulder, CO

National Severe Storms Laboratory—

Norman, OK Space Environmental

Laboratory—Boulder, CO

The dominant occupation within OAR

is Meteorologist. Other key occupations

are Physical Scientist, Physicist,

Electronics Engineer, Computer

Specialist, Electronics Technician,

Physical Science Technician, and

Mathematician.

National Environmental Satellite, Data,

and Information Service (NESDIS)

NESDIS operates NOAA’s satellites

and ground facilities; collects,

processes, and distributes remotely

sensed data; conducts studies, plans

new systems, and carries out the

engineering required to develop and

implement new or modified satellite

systems; carries out research and

development on satellite products and

services; provides ocean data

management and services to researchers

and other users; and acquires, stores,

and disseminates worldwide data

related to solid earth geophysics, solarterrestrial physics, and marine geology

and geophysics. NESDIS provides both

a technical operations environment and

a new R&D environment for testing the

NIST interventions. NESDIS

headquarters and most of its offices are

located in Suitland, Maryland. Ground

stations are located at Wallops Island,

Virginia, and Fairbanks, Alaska. The

National Climatic Data Center is located
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67441

in Asheville, North Carolina. All of

NESDIS will be included in the project,

except for the Wallops Island ground

station.

The key occupations within NESDIS

are Physical Scientist, Meteorologist,

Computer Specialist, Oceanographer,

Physical Science Technician,

Meteorological Technician, Electronics

Engineer, Engineering Technician,

Geophysicist, and Mathematician.

National Marine Fisheries Service

(NMFS)

The mission of the National Marine

Fisheries Service is the stewardship of

living marine resources for the benefit of

the Nation through their science-based

conservation and management and

promotion of the health of their

environment. NMFS supports domestic

and international conservation and

management of living marine resources.

The goals of NMFS are to rebuild and

maintain sustainable fisheries, to

promote the recovery of protected

species, and to protect and maintain the

health of coastal marine habitats. NMFS

brings in a variety of work in the

biological sciences never before

addressed by broad banding principles.

In addition to the headquarters office

in Silver Spring, Maryland, there are

five regions, each of which consists of

a Regional Office and a Fisheries

Science Center. The regional offices are

located in the following areas: Northeast

(Gloucester, Massachusetts); Southeast

(St. Petersburg, Florida); Northwest

(Seattle, Washington); Southwest (Long

Beach, California); and Alaska (Juneau).

All the above units of NMFS will be

included in the project except for the

following: in Headquarters, the Office of

Enforcement and the Inspection

Services Division; and in the regions,

the Fisheries Science Centers located in

Woods Hole, Massachusetts; Miami,

Florida; Seattle, Washington; La Jolla,

California; and the Alaska Center

located in Seattle, Washington.

NMFS is supported mainly by

occupations in the biological sciences:

Fish Biologist, Biologist, Microbiologist,

and Biology Technician. Other

important occupations are Chemist,

Oceanographer, Wildlife Biologist,

Computer Specialist, and General

Business Specialist.

E. Participating Employees

The project covers all positions that

would otherwise be in the General

Schedule (GS) system. Wage Grade

positions are not included.

Table 1 shows the total number of

employees in each operating unit to be

covered by the project. Table 2 lists the

occupational series in which current

positions are classified and shows the

number of employees in each series.

The OPM occupational series will be

retained. The series are listed under the

career path in which they will be

placed. (See Position Classification for

definitions of the four career paths.)

Table 3 shows the number of covered

employees in each series, by General

Schedule grade.

TABLE 1.—NUMBER OF COVERED EMPLOYEES BY UNIT

Operating unit Number

TA ..................................................................................................................................................................................... .................... 35

BEA, ESA ......................................................................................................................................................................... .................... 414

ITS, NTIA ......................................................................................................................................................................... .................... 82

NOAA ............................................................................................................................................................................... .................... 2114

OAR .......................................................................................................................................................................... (640)

NESDIS ..................................................................................................................................................................... (736)

NMFS ........................................................................................................................................................................ (738)

Total ................................................................................................................................................................... .................... 2645

TABLE 2.—OCCUPATIONAL SERIES, BY CAREER PATH

Series Title Number

Scientific and Engineering (ZP) Career Path

101 ............................ Social Scientist ................................................................................................................................................. 2

110 ............................ Economist ........................................................................................................................................................ 247

184 ............................ Sociologist* ...................................................................................................................................................... 1

190 ............................ Anthropologist* ................................................................................................................................................ 1

334 ............................ Computer Specialist ......................................................................................................................................... 267

401 ............................ Biologist ............................................................................................................................................................ 51

403 ............................ Microbiologist ................................................................................................................................................... 4

408 ............................ Ecologist* ......................................................................................................................................................... 4

480 ............................ Fish Administrator* .......................................................................................................................................... 43

482 ............................ Fish Biologist* .................................................................................................................................................. 182

486 ............................ Wildlife Biologist* ............................................................................................................................................. 2

499 ............................ Biological Science Student .............................................................................................................................. 1

701 ............................ Veterinary Medical Officer* ............................................................................................................................. 1

801 ............................ General Engineer ............................................................................................................................................. 3

810 ............................ Civil Engineer ................................................................................................................................................... 8

830 ............................ Mechanical Engineer ....................................................................................................................................... 3

850 ............................ Electrical Engineer ........................................................................................................................................... 1

854 ............................ Computer Engineer .......................................................................................................................................... 2

855 ............................ Electronics Engineer ........................................................................................................................................ 96

861 ............................ Aerospace Engineer* ...................................................................................................................................... 1

899 ............................ Engineering Trainee ......................................................................................................................................... 1

1301 .......................... Physical Scientist ............................................................................................................................................. 198

1310 .......................... Physicist ........................................................................................................................................................... 71

1313 .......................... Geophysicist* ................................................................................................................................................... 12

1315 .......................... Hydrologist* ..................................................................................................................................................... 1
67442 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

TABLE 2.—OCCUPATIONAL SERIES, BY CAREER PATH—Continued

Series Title Number

1320 .......................... Chemist ............................................................................................................................................................ 23

1330 .......................... Astronomer ....................................................................................................................................................... 8

1340 .......................... Meteorologist* .................................................................................................................................................. 226

1350 .......................... Geologist .......................................................................................................................................................... 2

1360 .......................... Oceanographer ................................................................................................................................................ 77

1372 .......................... Geodesist ......................................................................................................................................................... 3

1382 .......................... Food Technologist* ......................................................................................................................................... 2

1399 .......................... Physical Science Student ................................................................................................................................ 1

1515 .......................... Operations Research Analyst .......................................................................................................................... 1

1520 .......................... Mathematician .................................................................................................................................................. 24

1529 .......................... Mathematical Statistician ................................................................................................................................. 1

1530 .......................... Statistician ........................................................................................................................................................ 13

1550 .......................... Computer Scientist ........................................................................................................................................... 7

ZP ....................... Total ................................................................................................................................................................. 1591

Scientific and Engineering Technician (ZT) Career Path

332 ............................ Computer Operator .......................................................................................................................................... 3

392 ............................ Radio Frequency Technician ........................................................................................................................... 2

404 ............................ Biology Technician ........................................................................................................................................... 9

802 ............................ Engineering Technician ................................................................................................................................... 28

856 ............................ Electronics Technician ..................................................................................................................................... 22

1311 .......................... Physical Science Technician ........................................................................................................................... 79

1341 .......................... Meteorological Technician * ............................................................................................................................. 41

1531 .......................... Statistical Clerk/Assistant* ............................................................................................................................... 21

ZT ....................... Total ................................................................................................................................................................. 205

Administrative (ZA) Career Path

130 ............................ Foreign Affairs Specialist* ............................................................................................................................... 11

131 ............................ International Relations Specialist* ................................................................................................................... 7

260 ............................ Equal Employment Specialist .......................................................................................................................... 4

301 ............................ Miscellaneous Administration .......................................................................................................................... 77

340 ............................ Program Manager ............................................................................................................................................ 2

341 ............................ Administrative Officer ....................................................................................................................................... 22

342 ............................ Support Services Specialist* ........................................................................................................................... 3

343 ............................ Management Analyst ....................................................................................................................................... 76

346 ............................ Logistics Management Specialist* .................................................................................................................. 2

391 ............................ Telecommunications Specialist ........................................................................................................................ 1

501 ............................ Financial Administrator .................................................................................................................................... 10

510 ............................ Accountant ....................................................................................................................................................... 46

560 ............................ Budget Analyst ................................................................................................................................................. 28

610 ............................ Nurse * .............................................................................................................................................................. 1

696 ............................ Consumer Safety Specialist* ........................................................................................................................... 1

930 ............................ Appeals Officer* .............................................................................................................................................. 2

1001 .......................... General Arts and Information .......................................................................................................................... 3

1035 .......................... Public Affairs Specialist ................................................................................................................................... 6

1082 .......................... Writer/Editor ..................................................................................................................................................... 14

1083 .......................... Technical Writer/Editor ..................................................................................................................................... 4

1084 .......................... Visual Information Specialist ............................................................................................................................ 7

1101 .......................... General Business Specialist ............................................................................................................................ 72

1140 .......................... Trade Specialist ............................................................................................................................................... 8

1165 .......................... Loan Specialist* ............................................................................................................................................... 16

1410 .......................... Librarian ........................................................................................................................................................... 13

1412 .......................... Technical Information Specialist ...................................................................................................................... 5

1654 .......................... Printing Manager .............................................................................................................................................. 1

1670 .......................... Equipment Specialist ....................................................................................................................................... 1

1712 .......................... Training Instructor* .......................................................................................................................................... 1

1750 .......................... Instructional Systems Specialist* .................................................................................................................... 1

ZA ....................... Total ................................................................................................................................................................. 445

Support (ZS) Career Path

29 .............................. Environmental Protection Assistant* ............................................................................................................... 1

303 ............................ Miscellaneous Clerk/Assistant ......................................................................................................................... 72

305 ............................ Mail and File Clerk ........................................................................................................................................... 3

309 ............................ Correspondence Clerk/Assistant ..................................................................................................................... 1

318 ............................ Secretary .......................................................................................................................................................... 190

322 ............................ Clerk-Typist ...................................................................................................................................................... 2

326 ............................ Office Automation Clerk/Assistant ................................................................................................................... 40

335 ............................ Computer Clerk/Assistant ................................................................................................................................ 43
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67443

TABLE 2.—OCCUPATIONAL SERIES, BY CAREER PATH—Continued

Series Title Number

344 ............................ Management Clerk/Assistant ........................................................................................................................... 5

399 ............................ Student Trainee ............................................................................................................................................... 8

525 ............................ Accounting Technician ..................................................................................................................................... 8

561 ............................ Budget Clerk/Assistant ..................................................................................................................................... 3

963 ............................ Legal Instruments Examiner* .......................................................................................................................... 9

1087 .......................... Editorial Clerk/Assistant ................................................................................................................................... 1

1101 .......................... Trade Information/Financial Assistant* ........................................................................................................... 7

1105 .......................... Purchasing Agent ............................................................................................................................................. 4

1411 .......................... Library Technician ............................................................................................................................................ 4

2005 .......................... Supply Clerk/Assistant ..................................................................................................................................... 2

2102 .......................... Transportation Clerk/Assistant ......................................................................................................................... 1

ZS ....................... Total ................................................................................................................................................................. 404

* These occupations were not tested by the NIST project.

BILLING CODE 6325–01–P
67444 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67445
67446 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67447

BILLING CODE 6325–01–C

Senior Executive Service and ST–3104

Positions

The personnel systems for SES

positions (see 5 U.S.C. 3131–3136 and 5

U.S.C. 5381–5385) will not change for

the project. SES classification, staffing,

compensation, performance appraisal,

awards, and reduction-in-force will be

based on standard SES methods. The

personnel systems for ST–3104

positions (see 5 U.S.C. 3104 and 5376)

will change only to the extent that ST–

3104 positions are in the same

performance appraisal, awards, and

reduction-in-force systems as General

Schedule positions. Classification,

staffing, and compensation, however,

will not change. Neither SES nor ST–

3104 employees will be subject to the

pro rata share payouts upon conversion

to the demonstration project. Pay

adjustments for their positions under

the project will be carried out in

accordance with existing Federal rules

pertaining to SES and ST–3104 pay

adjustments.

General Schedule Positions

All General Schedule (GS and GM)

positions are incorporated in the new

career path/pay band system. The

within-grade increases of the General

Schedule will be replaced by the annual

performance pay increases. Except as

otherwise provided in the project plan,

laws and regulations pertaining to GS

employees (e.g., overtime pay and costof living allowance provisions) continue

in force for all project employees in the

same way as they do for GS employees.

F. Labor Participation

All unions affected by the project are

local units of the American Federation

of Government Employees (AFGE). All

of the AFGE representation is within the

National Oceanic and Atmospheric

Administration (NOAA). The following

table shows the number of project

employees represented by each union

local.

TABLE 4.—BARGAINING UNIT COVERAGE

Operating unit Location Union local Employees

covered

NESDIS ..................................................................... Camp Springs, MD .................................................. AFGE 3680 ............... 118

Asheville, NC ........................................................... AFGE 146 ................. 146

NMFS ......................................................................... Silver Spring, MD ..................................................... AFGE 2703 ............... 169

OAR ........................................................................... Research Triangle Park, NC ................................... AFGE 3347 ............... 39

The project operating units provided

numerous briefings on the project to

employees and union representatives.

Human resources representatives

traveled to the various organizational

locations to conduct three-hour

information briefings. In addition, each

bargaining unit covered was invited to

send a representative to Boulder,

Colorado, at management’s cost to

receive further information on the

project and to interact with a panel of

NIST managers and employees currently

in the NIST project. The project

operating units offered Impact and

Implementation Bargaining to each of

these unions on the conditions and

provisions of the proposed project. All

of the unions on the list have agreed to

the project.

G. Project Design/Methodology

The project methodology is to

introduce into selected DoC operating

units certain innovations in human

resources management, and to evaluate

over time the effects of those

innovations on the ability of the

operating units to manage their human

resources. The methodology includes

the following steps:

1. Selection of Innovations: After

review of the innovations tested at

NIST, the Department has determined

that all would have potential benefit in

other DoC units and therefore should be

included in the proposed project. These

innovations, and the procedures

associated with them, are described

below under Position Classification,

Staffing, Reduction-in-Force, Pay

Administration, and Performance

Evaluation and Rewards.

2. Selection of Operating Units: The

Department has selected several

operating units (See Participating
67448 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

Organizations.) that will provide a

useful test of whether the innovations

successfully tested at NIST will produce

similarly successful results in other

environments.

3. Establishment of Goals and

Objectives: The following section on

Goals and Objectives describes the

overall goals of the project and the

objectives associated with each of the

innovations.

4. Partnership: The Department has

sought input on the proposal from each

affected local union. (See Labor

Participation.) The Department will also

ensure that partnership in accordance

with Executive Order 12871 continues

to be an integral part of planning and

implementation.

5. Baseline Evaluation: To provide a

basis of comparison between employee

opinions of the current system and their

future opinions of the project system,

each employee in the covered operating

units will be asked to complete an

opinion questionnaire on the current

system prior to implementation of the

project. To establish a baseline cost

analysis, each operating unit will be

required to analyze its personnel costs

during fiscal years 1994, 1995, and

1996.

6. Training: The Department and the

operating units will provide training to

human resources staff, managers, and

employees prior to implementation of

the project and will provide additional

training to managers on the pay-forperformance system prior to the end of

the first performance cycle. (See

Training.)

7. Implementation: To ensure a

smooth implementation, the Department

and the operating units will emphasize

top management support; the

development of detailed operating

procedures prior to implementation;

thorough training of managers and

human resources office staff; step-bystep implementation planning; adequate

backup systems, particularly in

automated personnel and payroll

systems; and sufficient operating

resources.

8. Operation: The Department will

exercise continual oversight, under the

direction of the Departmental Personnel

Management Board (See Project

Management.) to ensure that project

authorities and procedures are

administered correctly.

9. Evaluation: The Department will

arrange for an annual evaluation of the

project under an OPM-approved

evaluation plan. (See Project

Evaluation.) The evaluation will be

designed to determine whether the

innovations are achieving the goals and

objectives described in the following

sections and are operating within

acceptable cost limits. (See Budget

Discipline.)

III. Personnel System Changes

A. Position Classification

1. Introduction

Career paths will replace occupational

groups, broad bands will replace grades,

and Departmental broad-band standards

will replace OPM classification

standards. The classification system will

be automated, and classification

authority will be delegated to line

managers.

These changes are intended to

simplify and speed up the classification

process, make the process more

serviceable and understandable,

improve the effectiveness of

classification decision-making and

accountability, and facilitate pay for

performance. Broad bands provide

larger classification targets that can be

defined by shorter, simpler, and more

understandable classification standards.

This simpler system will be easier to

automate, will require fewer resources

to operate, and will facilitate delegation

to line managers.

By providing broader and more

flexible pay ranges for setting entry pay,

broad banding will provide hiring

officials with an important tool for

attracting high-quality candidates and

thus will contribute to the objectives of

increasing the quality of new hires and

improving workforce performance.

By providing more flexible pay setting

based on performance, broad banding

will give managers the ability to

increase the pay of good performers to

higher and more competitive levels,

thus improving the retention of good

performers. At the same time, the

promise of higher pay increases for good

performance, supported by the broader

pay ranges of broad banding, will

contribute to the objective of improving

organizational and individual

performance.

2. Career Paths

A career path aggregates comparable

occupations that have parallel career

patterns and are suitable for similar

treatment in staffing, classification, pay,

and other personnel functions.

There are four career paths: (a)

Scientific and Engineering (ZP): twograde interval professional technical

positions in the physical, engineering,

biological, mathematical, computer and

social science occupations; and student

trainee positions in these disciplines.

(b) Scientific and Engineering

Technician (ZT): one-grade interval

positions support scientific and

engineering activities through the

application of various skills and

techniques in the electrical, mechanical,

physical science, biological,

mathematical, and computer fields; and

student trainee fields.

(c) Administrative (ZA): two-grade

interval positions in such administrative

and managerial fields as finance,

procurement, personnel, librarianship,

public information and program and

management analysis; and student

trainee positions in these fields.

(d) Support (ZS): one-grade interval

positions that provide administrative

support through the application of

typing, clerical, secretarial, assistant,

and similar knowledge and skills;

positions that provide specialized

facilities support, such as guards and

firefighters; and student trainee

positions in these areas.

3. Bands

Each career path is divided into five

bands, which replace GS grades. The

maximum rate of a band is step 10 of the

highest GS grade in the band including

locality rates in the 48 contiguous States

and the District of Columbia. When a

special rate for an occupation in the

band is higher than the applicable

locality rate, the Departmental

Personnel Management Board will have

to use the maximum applicable special

rate to set the maximum rate of the band

for specific occupations in certain

geographical areas. (See Pay

Administration.) For each regular band,

there is a corresponding supervisory

band for employees who receive

supervisory performance pay. The

supervisory band has the same

minimum rate as the nonsupervisory

band, but has a maximum rate 6 percent

higher than the maximum rate of the

nonsupervisory band. Positions in the

supervisory band include positions that

meet the DoC Demonstration Project

definition of ‘‘supervisor’’. (See Pay

Administration.) The following chart

shows the four project career paths, the

bands in each career path, and the

relationship between bands and General

Schedule grades.

BILLING CODE 6325–01–P
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BILLING CODE 6325–01–C

4. Occupational Series

The General Schedule occupational

series will be retained. Existing OPM

occupational series may be added or

deleted in response to programmatic

needs.

5. Classification Standards

Each classification standard will

describe each band in two factors: (1)

general duties and responsibilities and

(2) knowledge, skills, and abilities.

These two factors complement each

other at each band in a career path and

may not be separated in classifying a

position. OPM classification standards

will not be used.

6. Position Descriptions

Line managers will follow an

automated menu-driven process to

classify positions and produce position

descriptions.

7. Delegation of Classification Authority

The Operating Personnel Management

Boards (OPMBs) will oversee the

delegation of classification authority to

line managers. Under authority

delegated by the DPMB, the

Department’s human resources staff will

monitor and review classification

decisions made by managers to ensure

consistent and uniform application of

classification policies and guidelines.

Under this authority, the Department’s

Director for Human Resources

Management will establish a plan to

review the accuracy of classification

decisions made by line managers and

make periodic reports to the DPMB. A

variety of approaches will be used to

conduct classification reviews, such as

regularly scheduled Departmental

oversight reviews as well as ad hoc

reviews conducted to address specific

classification issues identified through

data analysis, random sampling of

classification actions, project evaluation

reports, etc. The Governmentwide

system of approval of SES and ST–3104

positions will be maintained.

8. Classification Appeals

An employee covered by the DoC

Demonstration Project may appeal the

career path (when the position is in a

series that may be assigned to more than

one career path, e.g., GS–1101),

occupational series, or pay band of his

or her position at any time. An

employee wishing to formally appeal

must first appeal to the Operating Unit

(OU). If the employee is dissatisfied

with the OU decision, he or she may

appeal further to the Department level

(DPMB or designee). The decision of the

Department will be final.

Details pertaining to the classification

appeals process are found in the project

operating procedures.

B. Staffing

1. Introduction

The project operating units will use a

variety of staffing methods to fill

positions, including Direct Examination,

Agency-Based Staffing, Merit

Assignment, and various

noncompetitive placements. Recruiting

and examining will be carried out

directly by the operating units except

for positions covered by the Luevano

Consent Decree. OPM registers will not

be used. These methods will be

supplemented by other staffing tools,

such as paid advertising, flexible entry

salaries, probation, recruitment and

retention payments, and flexible pay

increases associated with promotion.

The Department will make necessary

adjustments in response to future

revisions in staffing statutes. These

changes are intended to attract higher

quality candidates, speed up the

recruiting and examining process,

increase the effectiveness of the

probationary review process, and

improve the retention of good

performers.
67450 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

Agency-based staffing, supported by

paid advertising, will allow hiring

officials to focus on more relevant

recruiting sources. Direct examination

will allow managers to hire individuals

with shortage skills as they find them,

get them on board faster, and avoid the

loss of good candidates who may grow

impatient with a long hiring process,

thus contributing to the objectives of

increasing the quality of new hires and

improving the fit between position

requirements and candidate skills. The

three-year probationary period will help

ensure that scientists and engineers who

are retained beyond probation are

capable of carrying out a full cycle of

R&D work, thus contributing to the

objectives of high-quality hires and a

high-performing workforce (see Section

III(B)(10)). Local authority for recruiting

and retention payments will provide

extra incentives for hiring and retaining

individuals with shortage skills, thus

contributing to the objectives of

increasing the quality of new hires,

improving the fit between position

requirements and individual

qualifications, and improving the

retention of good performers.

2. Direct Examination

The project will apply two direct

examination authorities: (a) Direct

Examination: Critical Shortage

Occupations and (b) Direct

Examination: Critical Shortage Highly

Qualified Candidates. These vacancies

will normally be filled through direct

recruiting by selecting officials,

supplemented by a required search of

the operating unit Applicant Supply

File. Direct examination procedures are

not exempt from the application of

veteran preference rules.

(a) Direct Examination: Critical Shortage

Occupations

Direct examination procedures will be

used for categories of occupations that

require skills that are in short supply.

Included in this group are specific

occupations in two categories listed in

the Project Operating Procedures: (1)

some occupations for which there is a

special rate under the General Schedule

pay system, and (2) some occupations at

Pay Band III and above in the ZP Career

Path. Any position in these shortage

categories may be filled through direct

examination procedures.

(b) Direct Examination: Critical Shortage

Highly Qualified Candidates

Direct examination procedures will be

used for additional positions for which

there is a shortage of highly qualified

candidates. Candidates for positions at

Band I or II of the ZP Career Path who

have a bachelor’s degree with at least a

2.9 GPA (on a 4.0 scale) in a job-related

major or a master’s degree in a jobrelated field constitute a shortage

category; candidates for positions at

Band I of the ZT Career Path who have

at least a 2.9 GPA in a job-related field

during a minimum of at least 2 years in

an accredited college, junior college, or

technical institute constitute a shortage

category; and candidates for positions at

Band II of the ZT Career Path who have

at least a 2.9 GPA in a job-related field

in 4 years of college study constitute a

shortage category.

3. Agency-Based Staffing

Agency-based staffing procedures will

be used to fill vacancies not covered by

direct examination or the project

operating unit Merit Assignment Plan

(MAP). Vacancies filled by agency-based

procedures will be advertised at a

minimum through the Governmentwide

automated employment information

system operated by OPM.

4. Merit Assignment Plan (MAP)

MAP procedures will be used to fill

positions restricted to current or former

Federal employees with competitive

status. These plans will be amended to

include any demonstration project

flexibilities.

5. Applicant Supply Files

The operating units will advertise the

availability of job opportunities in

direct-examination occupations by

continuous posting of an Applicant

Supply Bulletin (that conforms with the

requirements of 5 U.S.C. 3327) on the

Governmentwide automated

employment information system

operated by OPM. The operating units

will accept applications for this file on

an open-continuous basis for all directhire authorities. Selecting officials will

be able to recruit directly for applicants,

but any applicants they find must

compete with applicants who apply

through the Applicant Supply Bulletin

and other applicants whose applications

are stored in the operating unit

Applicant Supply File.

6. Referral Procedures for Direct

Examination and Agency-Based Staffing

Authorities

Either direct referral or rating and

ranking will be used to refer applicants

for vacancies under direct examination

and agency-based staffing authorities.

(a) Direct referral

A qualified candidate may be referred

directly without rating and ranking: (1) When there are no more than three

qualified candidates and no preference

eligibles; or (2) If the candidate is a preference

eligible with a compensable Serviceconnected disability of 10 percent or

more. (These preference eligibles are

given absolute preference except when

the position is at Band III or above in

the Scientific and Engineering Career

Path.) Selecting officials may choose

any of these preference eligibles when

more than one are referred.

(b) Rating and ranking

Rating and ranking (including veteran

preference and ‘‘rule-of-three’’

procedures) will be used when the list

of qualified candidates contains:

(1) More than three candidates; or

(2) Two or more candidates including

at least one preference eligible (except

when direct referral of a 10-point

veteran is made under (a)(2) above).

7. Priority Placement

All Department of Commerce and

OPM priority placement programs will

be followed.

8. Paid Advertising

Paid advertising may be used as one

of the first steps in recruitment without

having to first try unpaid methods.

9. Private Sector Temporaries

Private sector temporary help services

may be used as appropriate.

10. Probationary Period

Probation under the project will

follow current law and regulations,

except for employees in the Scientific

and Engineering (ZP) Career Path

performing research and development

(R&D) work. ZP employees performing

R&D work will be required to serve a

probationary period of three years,

except that a supervisor may end the

probationary period of a subordinate

R&D employee at any time after one

year. Near the end of the first year of the

R&D employee’s probationary period,

the supervisor will be required to decide

whether to: (1) change the employee

from probationary status to nonprobationary status; (2) remove the

employee; or (3) continue the employee

on probation. If the employee is

continued on probation, the supervisor

must select from the same options near

the end of the second year of probation.

If probation is continued into the third

year, the supervisor must make a final

decision on whether to retain or remove

the employee near the end of the third

and final year of probation.

The purpose of the three-year

probationary period for scientists and

engineers performing R&D work is to

allow a hiring official to view the full

cycle of a research assignment before
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67451

making a final decision on retaining the

employee. The one-year probationary

period is insufficient to cover the full

cycle of research and development from

assignment of a research project to

publication of results. For other

positions, the one-year probationary

period is adequate.

11. Qualification Standards

The qualifications required for

placement within a band and within a

career path will be based on the OPM

Qualification Standards for General

Schedule Positions, except that testing

requirements will not be used and the

Superior Academic Criterion will be

defined as a 2.9 GPA (on a 4.0 scale).

The minimum qualifications for the

occupation and for the GS grade

corresponding to the lowest grade in the

band will apply. The DPMB may

authorize new or modified qualification

standards based on current practices in

the scientific, engineering, and

computer science fields and to reflect

modern curricula in recognized degree

programs.

12. Recruitment and Retention

Payments

The project operating units may grant

recruiting and retention payments in

appropriate circumstances, not to

exceed $10,000 or 25 percent of basic

pay, whichever is greater. Decisions on

allowances will be based on market

factors such as salary comparability and

salary offer issues, relocation and

dislocation issues, programmatic

urgency, emerging technologies,

turnover rates, special qualifications,

and shortage categories or scarcity of

positions unique to the operating unit.

All scientific, engineering, and other

hard-to-fill positions will be eligible.

Recruitment and retention payments

will not be considered part of basic pay.

13. Travel Expenses

Travel and transportation expenses,

advancement of funds, per diem

expenses incident to travel, and/or

relocation expenses may be provided to

new hires in the same manner as is

authorized in sections 5723, 5724,

5724a, 5724b, and 5724c of title 5, U.S.

Code. Recipients must sign service

agreements indicating commitment to at

least 12 months of continued service.

14. Promotion

A promotion is a change of an

employee to (1) a higher band in the

same career path, or (2) a band in

another career path in combination with

an increase in pay. To be eligible for

promotion, an employee must have a

current performance rating of Eligible.

The time-in-band requirement for

promotion eligibility is 52 weeks, with

two exceptions: (1) an employee may be

promoted from Band I to Band II in the

Support Career Path without time

restriction; and (2) an employee may be

promoted from Band II to Band III in the

Support Career Path without time

restriction if the employee was not

promoted from a Band I to a Band II

position during the previous 52 weeks.

(For pay provisions related to

promotion, see Pay Administration.)

C. Reduction-in-force

1. Introduction

The project operating units will

follow reduction-in-force procedures

contained in law and regulation, except

that career path will be added to the

definition of competitive areas,

retention credit for performance will be

based on performance ranking, and

grades will be converted to bands for the

purpose of interpreting reduction-inforce regulations.

The objective of the link between

career paths and competitive areas is to

improve the fit between the skills of

displaced employees and the positions

they are offered through reduction-inforce procedures. The objective of the

link between performance and retention

standing is to continue to make

performance a factor in retention during

reduction-in-force.

2. Competitive Areas

Each of the four career paths in each

project operating unit local commuting

area will be a separate competitive

area—separate from the other career

paths and separate from the competitive

areas of other operating unit employees.

3. Link Between Performance and

Retention

An employee with an overall

performance score in the top 20 percent

of scores within a career path in a pay

pool (See Performance Evaluation and

Rewards below.) will be credited with

10 additional years of service for

retention purposes. The total credit will

be based on the employee’s three most

recent annual performance scores

received during the 4-year period prior

to an established cutoff date, for a

potential total credit of 30 years. Career

status and veteran preference will

continue to have the same effect on

retention standing as they now have

under current regulations. No

performance-related retention credit

will convert to this system from any

other performance appraisal system.

4. Link Between Bands and Grades

OPM reduction-in-force regulations

on assignment rights (5 CFR 351.701)

will be applied to the project by

substituting ‘‘one band’’ for ‘‘three

grades’’ and ‘‘two bands’’ for ‘‘five

grades.’’

D. Pay Administration

1. Introduction

The most important change in pay

administration is the introduction of

pay for performance, which will govern

individual pay progression within

bands. The amount of the basic pay and

locality pay increases approved by

Congress and the President will

continue to be applied to pay schedules

and employee salaries, with the

variations described below. Other pay

tools are supervisory performance pay,

flexible pay setting for new hires, and

more flexible pay setting upon

promotion.

Pay for performance promotes fairness

and provides a motivational tool and a

retention tool. It is fair that higher

achievement should produce higher

rewards. In particular, the quality work

that arises from a commitment to the

goals and objectives of the organization

should be rewarded by higher pay

increases. As a motivational tool, the

promise of higher pay increases for good

performance encourages high

achievement. As a retention tool, pay for

performance allows the organization to

more quickly move the salaries of good

performers to levels that are more

competitive in the labor market.

Supervisory performance pay

provides an extra performance incentive

for supervisors, addressing the objective

of improved individual and

organizational performance.

Supervisory performance pay also

addresses the objective of improving

retention by raising the pay of highperforming supervisors to more

competitive levels. Flexible pay setting

for new hires is a recruiting tool that

gives hiring officials greater flexibility to

offer more competitive salaries to highquality candidates, addressing the

objective of improving the quality of

new hires. The greater flexibility in

setting pay upon promotion gives

managers another retention tool to help

retain top performers.

2. Pay for Performance

Pay for performance has three

components: (a) the annual adjustment

to basic pay, which includes the annual

general increase and the locality pay

increase; (b) annual performance pay

increases; and (c) bonuses. The first

component, the annual adjustment to
67452 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

basic pay, is set according to the

subsections referring to general and

locality increases. The second

component, performance pay increases,

is set according to the procedures under

Performance Evaluation and Rewards.

The third component, bonuses, is

managed in accordance with the

subsection on Performance Bonuses

under Performance Evaluation and

Rewards.

3. Placement in a Lower Band

An employee whose performance

rating is Unsatisfactory does not receive

the annual adjustment to basic pay.

Because the minimum pay rate for each

band is increased each year by the

amount of the annual adjustment to

basic pay, it is possible that the new

minimum rate of a band will exceed the

basic pay of an employee in that band

who does not receive the annual

adjustment to basic pay due to

unsatisfactory performance. When this

happens, the employee is placed in the

next lower band. This placement shall

not be considered an adverse action

under 5 U.S.C. 7512, nor shall grade

(i.e., band) retention under 5 U.S.C.

5362 be applicable.

4. Supervisory Performance Pay

Employees who meet the

demonstration project definition of

‘‘supervisor’’ will be eligible for

supervisory performance pay. Positions

that require incumbents to spend 25

percent or more of their time performing

all of the following duties will be titled

‘‘supervisory’’ for classification and

other official purposes and will be

eligible for supervisory performance

pay.

1. Assign and review work daily,

weekly, or monthly;

2. Assure that production and

accuracy requirements are met;

3. Approve leave;

4. Evaluate work performance of

subordinates; and

5. Exercise at least four of the

following authorities and

responsibilities: (a) plan work to be

accomplished by subordinates, set and

adjust short-term priorities, and prepare

schedules for completion of work; (b)

assign work to subordinates based on

priorities, selective consideration of the

difficulty and requirements of

assignments, and the capabilities of

employees; (c) give advice, counsel, or

instruction to employees on both work

and administrative matters; (d)

interview candidates for positions in the

unit and recommend appointment,

promotion, or reassignment to such

positions; (e) hear and resolve

complaints from employees, referring

group grievances and more serious

unresolved complaints to a higher level

supervisor or manager; (f) effect minor

disciplinary measures, such as warnings

and reprimands, recommending other

action in more serious cases; (g) identify

developmental and training needs of

employees, providing or arranging for

needed development and training; (h)

find ways to improve production or

increase the quality of the work

developed; and (i) develop performance

standards.

Supervisory performance pay will be

considered a part of basic pay. Upon

conversion to the project, all eligible

supervisory positions will be placed in

the supervisory bands. The incumbents

of these positions will be converted at

their basic pay (including special rates

or locality pay) at the time of

conversion. New hires into supervisory

positions after the date of conversion

will have their pay set at the

supervisor’s discretion within the pay

range of the applicable supervisory

band.

Supervisors in all career paths will be

eligible for salaries up to 6 percent

higher than the maximum rate of their

pay bands. The amount by which a

supervisor’s pay exceeds the maximum

rate of the band constitutes supervisory

performance pay. The higher salaries

shall be reached through performance

pay increases granted through the

regular performance appraisal cycle.

The payment of supervisory

performance pay is not considered a

promotion or a competitive action.

Supervisory performance pay will be

canceled when an employee’s

supervisory responsibilities are

discontinued. The cancellation of

supervisory pay does not constitute an

adverse action, and there is no right of

appeal under 5 U.S.C. Chapter 75. Pay

retention under 5 U.S.C. 5363 is not

applicable. Before entering a

supervisory position, an employee will

be required to sign a statement

certifying that the employee

understands that the supervisory pay

will be canceled when the employee

ceases to be a supervisor.

5. Pay and Compensation Ceilings

The maximum rate for a band

(excluding special bands established to

allow for supervisory performance pay)

will be equal to the maximum rate— GS

rate, locality rate, or special rate, as

applicable—payable to GS employees

for the grades corresponding to the

band. An employee’s basic pay may not

exceed the maximum rate of the

employee’s band (including a

supervisory band), except for employees

receiving retained rates of pay.

An employee’s rate of basic pay

payable under any pay band may not

exceed the rate of basic pay payable for

Level IV of the Executive Schedule. An

employee’s aggregate monetary

compensation for a calendar year may

not exceed the basic rate of pay for

Level I of the Executive Schedule, as

required by 5 U.S.C. 5307 and OPM

regulations in Subpart B of 5 CFR 530.

6. Locality Pay

Locality pay is implemented as basic

pay for all purposes except as otherwise

provided in this plan. The locality

adjustment will be applied to the

minimum and maximum rates of each

band, as applicable. For bands affected

by special rates, the maximum rate will

be the higher of the special rate or the

locality rate. A locality adjustment may

be applied to an eligible employee’s

basic pay only to the extent that it does

not cause the employee’s basic pay to

exceed the maximum rate of the band.

7. Special Salary Rates

When appropriate, special salary rates

will be used to determine employees’

maximum pay rates in lieu of the

normal pay band ceilings. The

provisions of current regulations (5 CFR

530.303) will be followed to determine

the appropriateness of special salary

rates. As provided for under these

regulations, special salary rates will be

restricted to occupations and/or

geographic locations for which there is

an existing or likely difficulty in the

recruitment or retention of wellqualified personnel.

8. Effect of General and Locality Pay

Increases on Bands

The minimum and maximum rates of

each band will be increased at the time

of a general pay increase under 5 U.S.C.

5303 and/or a locality pay increase

under 5 U.S.C. 5304 or 5304a so that

they equal the new locality-adjusted

minimum and maximum rates of the

grades corresponding to the band. The

maximum rates of bands set according

to special rates, however, may exceed

this amount to the extent necessary to

equal the 10th step of the appropriate

special rate scale if that rate is higher.

9. Effect of General and Locality Pay

Increases on Individual Pay

Only employees with a current annual

performance rating of record of Eligible

may receive an increase in their basic

pay at the time of band adjustments.

This increase in basic pay will reflect

any applicable general and/or locality

pay increase for General Schedule

employees. The increase in basic pay for

eligible employees whose basic pay is at
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67453

the ceiling of their band will equal the

increase in the ceiling.

The basic pay increase for eligible

employees whose basic pay is below the

ceiling of their band will be calculated

by applying two factors to the

employee’s rate of pay. One factor is the

general increase factor representing the

increase in General Schedule rates

under 5 U.S.C. 5303 (e.g., 1.02 if the

general increase is 2 percent). The

second factor is the locality pay increase

factor, which is derived by dividing the

newly applicable locality pay

percentage factor by the formerly

applicable locality pay percentage

factor. (For example, if the locality

payment percentage for an area

increased from 4.23 percent to 5.48

percent, the locality pay increase factor

would be 1.0548 divided by 1.0423, or

approximately 1.012.) Thus, the new

rate of basic pay would be calculated

using the following formula:

new pay rate = general increase factor 1+ newly applicable locality pay percentage

1+ formerly applicable locality pay percentage

× × former pay rate

However, a basic pay increase will be

applied only to the extent that it does

not cause an employee’s basic pay to

exceed the ceiling of the applicable

band.

10. Basic Pay

Employees covered by the project will

not have separate basic pay rates and

locality pay rates, as do General

Schedule employees. Project basic pay

rates will be basic pay for all purposes,

except as specifically provided in the

demonstration project plan.

11. Pay Setting Upon Promotion

The new basic pay rate upon

promotion may be set at any level in the

new band (If the move is to a different

career path, any band in the new career

path would be considered a ‘‘new

band.’’), except that the minimum pay

increase upon promotion is 6 percent.

OPMBs will establish operating unit

guidelines and delegate approval

authority for setting pay levels for

promotions.

12. Pay Setting for New Hires

The setting of initial salaries within

bands for new appointees will be

flexible, particularly for hard-to-fill

positions in the Scientific and

Engineering Career Path. OPMBs will

establish operating unit guidelines and

delegate approval authority for setting

pay levels for new hires.

13. Conversion of Employees From the

General Schedule to the Demonstration

Project

For employees being converted from

the GS pay system to the demonstration

project, GS grades will translate directly

to the project’s career path and band

structure. Employees will be converted

at their current highest rate under the

GS pay system (i.e., highest of locality

rate or special rate or similar rate) at the

time of conversion. No one’s salary will

be reduced as a result of the conversion.

When conversion of an employee into

the project is accompanied by a

geographic move, the employee’s GS

pay entitlements (including any locality

rate or special rate) in the new area will

be determined before converting the

employee’s pay to the demonstration

project pay system.

At the time of conversion, each

converted employee will be given a

lump-sum cash payment for the time

credited to the employee toward what

would have been the employee’s next

within-grade increase. The payment for

a General Schedule employee will be

computed by (1) calculating the ratio of

(a) the number of days the employee

will have spent in the employee’s

current rate through the day prior to the

day of conversion, to (b) the total

number of days in the employee’s

current waiting period for a regular

within-grade increase (364, 728, or 1092

days), and (2) multiplying that ratio by

the dollar value of the employee’s next

within-grade increase, as in effect at the

time of conversion.

14. Movement of GS Employees From

Other Organizations to the

Demonstration Project

GS employees can move into the

project from other organizations through

transfer, reassignment, promotion, or

new appointment. When the movement

is by lateral transfer or lateral

reassignment, the employee’s GS grade

will translate directly to the project’s

career path/band structure, and the

employee’s rate of basic pay under the

demonstration project will equal his or

her current highest rate under the GS

pay system (i.e., highest of locality rate

or special rate or similar rate). When a

lateral transfer or lateral reassignment is

accompanied by a geographic move, the

employee’s GS pay entitlements

(including any locality rate or special

rate) in the new area will be determined

before converting the employee’s pay to

the demonstration project pay system.

When the movement is by new

appointment, promotion, reassignment

with pay adjustment (through merit

assignment plan competition), or

transfer to ‘‘higher grade’’ (i.e., to a band

higher than the band that corresponds to

the employee’s current GS grade), the

new pay rate is set according to project

pay setting flexibilities for new hires

and promotions.

15. Pay Setting Upon Movement of an

Employee to a Different Pay Area

Employees who move (voluntarily or

involuntarily) from one geographic area

to another within their operating unit

will have their pay adjusted to account

for any change in the band maximum

rates between the two areas. This

adjustment ensures that the employee’s

relative position in the band (measured

as a percentage of the band maximum

rate) will be maintained upon

movement. The pay rate in the new area

will be derived using the following

formula:

new pay rate = former pay rate pay band maximum rate after movement

pay band maximum rate before movement

×

The new pay rate is calculated before

any other simultaneous pay action (e.g.,

general pay adjustment or promotion

effective on the same date). Any

reduction in pay solely attributable to a

movement from one pay area to a lowerpaying area shall not be considered a

reduction in basic pay under the

adverse action provisions of 5 U.S.C.

7512(4) or under the pay retention

provisions of 5 U.S.C. 5363. (The

employee retains the right to grieve or

file a complaint regarding a geographic

reassignment if there is an allegation of
67454 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

a violation of nondiscrimination statutes

or a prohibited personnel practice.)

16. Severance Pay

OPM severance pay regulations (5

CFR 550.703) will be applied to the

project by substituting ‘‘one band’’ for

‘‘two grades’’ and ‘‘two grades or pay

levels.’’

17. Grade and Pay Retention

Grade and pay retention will follow

current law and regulations, except as

allowed by specific waiver (e.g., ‘‘career

path and band’’ for ‘‘grade’’). Specific

waivers are listed in the section entitled,

Authorities and Waiver of Laws and

Regulations Required.

E. Performance Evaluation and Rewards

1. Introduction

The most important feature of the

performance evaluation system is that it

is based on the application of a

weighted 100-point scoring system in

support of pay for performance. As in

the current system, each employee has

an individual performance plan

composed of several performance

elements. Through application of

benchmark performance standards and a

100-point scoring system, supervisors

rank employees by performance within

peer groups and grant performance pay

increases according to the ranking.

Highly ranked employees within a peer

group receive relatively high pay

increases and lower ranked employees

receive relatively lower pay increases.

The performance appraisal process is

intended to (1) promote good

performance; (2) encourage a continuing

dialogue between supervisors and

employees on organizational objectives,

supervisory expectations, employee

performance, employee needs for

assistance and guidance, and employee

development; and (3) provide a basis for

performance-related decisions in

employee development, pay, rewards,

assignment, promotion, and retention.

The system will more effectively

communicate to employees how they

are performing in relation to their peers,

the rewards for good performance, and

the consequences of poor performance.

Performance-based pay increases give

an operating unit the ability to raise the

pay of good performers more rapidly,

thus improving retention of good

performers. The promise of higher pay

increases for good performance will

encourage achievement and promote the

objective of improved individual and

organizational performance.

2. Coverage

All employees covered by the project

will be covered by the project

performance evaluation and rewards

system, except that the Departmental

Personnel Management Board may

remove from the system any position

not filled by career or career conditional

appointment. ST–3104 employees will

have their performance evaluated under

the structure of the performance

evaluation system and may receive

bonuses, but do not receive performance

pay increases. Members of the Senior

Executive Service will remain under the

non-demonstration DoC SES

performance appraisal, pay, and bonus

system.

Upon conversion to the

demonstration project, any

administrative action already initiated

under a previous appraisal program will

continue to be processed in accordance

with the requirements and procedures

of the program in effect when the action

was initiated.

3. Performance Cycle

The performance year begins October

1 and ends September 30. The stages of

the performance cycle are performance

planning, performance review,

performance appraisal, and

performance-related decisions.

4. Performance Plans

Performance plans will be developed

each year by supervisors with input

from employees. Critical performance

elements will be established for each

position. (All elements are critical.) The

supervisor weights each element so that

the total weight of all elements is 100

points. Benchmark performance

standards define the range of

performance. A supervisor may add

supplemental standards to a

performance plan to further elaborate on

the benchmark performance standards.

5. Mid-Year Review

A required mid-year review addresses

mid-year accomplishments,

performance successes and deficiencies,

and any need for performance plan

modifications. Additional reviews may

be held as needed.

6. Performance Appraisal

Performance appraisals bring

supervisors and employees together to

discuss performance and

accomplishments during the

performance year. The appraisals lead to

decisions by supervisors and Pay Pool

Managers on performance scores,

performance ratings, performance pay

increases, and bonuses. Performance

appraisal is scheduled for the final

weeks of the performance year.

However, at any time of the year, a

supervisor may determine that an

employee’s performance is not

satisfactory on one or more critical

elements and place the employee on a

Performance Improvement Plan.

7. Performance Ratings

The demonstration project

performance ratings of record are

Eligible (for performance pay increase,

bonus, and annual adjustment to basic

pay) and Unsatisfactory. The Eligible

rating of record covers the same

performance range as the former ratings

of Marginal, Fully Successful,

Commendable, and Outstanding.

Unsatisfactory covers the same

performance range as the former ratings

of Unsatisfactory and Unacceptable. An

employee whose performance is not

satisfactory is placed on a performance

improvement plan and given an

opportunity to improve before a final

rating of record is assigned.

8. Performance Scores

Each element is evaluated

individually against the benchmark

performance standards and any

supplemental standards. If a single

element in an employee’s plan is rated

Unsatisfactory, the rating of record is

Unsatisfactory and there is no

performance score. If all elements meet

at least the minimally acceptable

benchmark, the rating of record is

Eligible. Rating Officials score the

performance of employees rated Eligible

on a 100-point scale, which corresponds

to the 100-point element weighted scale.

An individual element score may be as

high as the weight of that element. The

total performance score is the sum of the

element scores. A perfect score on each

element would produce a total score of

100 points.

9. Performance Ranking

Employees are ranked, by

performance score, within a peer group.

A peer group may involve no more than

one career path, but may be otherwise

organized by any combination of

organization, occupation, band, or

appointment type. Rating Officials rank

their own employees, then Pay Pool

Managers interleave the rankings of

subordinate Rating Officials to produce

peer group rankings at the pay pool

level. A Pay Pool Manager is a line

manager who manages his or her

organization’s pay increase and bonus

funds and has final decision authority

over the performance scores,

performance pay increases, and bonuses

of subordinate employees.

10. Performance Pay Decisions

The Performance Pay Table divides

each band into three segments or
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67455

intervals. Each interval is linked to a

range of potential percentage pay

increases beginning at zero and

progressing to a maximum percentage

pay increase. The maximum

performance pay increase an employee

may receive, therefore, depends on the

interval into which the employee’s

salary falls. The Pay Pool Manager

makes a performance pay decision for

each employee in a peer group, based on

the Pay Pool Manager’s ranking and the

pay increase ranges in the Performance

Pay Table. Within a peer group, an

employee may not receive a higher

proportion-of-range than a higherranking employee or a lower proportionof-range than a lower-ranking employee.

Proportion-of-range is the percentage of

the maximum pay increase allowed for

a particular interval of a pay band, i.e.,

a percent of a percent. For example, if

the pay increase range for the pay

interval is 0–12 percent, and the

employee receives a 9 percent increase,

that employee receives a proportion-ofrange that equals 75 percent of the

maximum 12 percent.

11. Performance Bonuses

Bonuses are the only cash awards

directly linked to the project

performance appraisal system, and are

awarded at the end of the performance

year in conjunction with decisions on

performance pay increases. A Pay Pool

Manager may award a bonus to any

employee with an Eligible rating. The

OPMBs will determine the bonus

authority to be delegated to their pay

pool managers.

Bonuses address two objectives. First,

the ability to reward the

accomplishments of good performers

will make them more likely to remain,

thus improving the retention of high

achievers. Second, the promise of

bonuses for achievement will encourage

improved individual performance.

12. Action Based on Unsatisfactory

Performance

If, after an opportunity to improve, an

employee’s performance is still not

satisfactory, the operating unit will give

a rating of Unsatisfactory and must take

action to reassign or remove the

employee, or place the employee in a

lower band, in accordance with

performance action provisions in law

and regulation.

IV. Conversion or Movement From a

Project Position to a General Schedule

Position

If a DoC Demonstration Project

employee moves to a General Schedule

position, the following procedures will

be used to convert the employee’s

project pay band to an equivalent GS

grade and the employee’s project rate of

pay to an equivalent GS rate of pay. The

converted GS grade and rates of pay

must be determined before movement

out of the project and any

accompanying geographic movement,

promotion, or other simultaneous

action. For lateral reassignments and

lateral transfers, the converted GS grade

and rates of pay will become the

employee’s actual GS grade and rates of

pay, unless immediately affected by a

simultaneous geographic movement or

another pay action. For non-lateral

transfers, promotions, and other actions,

the converted GS grade and rates of pay

will be deemed to be the employee’s

grade and rates of pay at the time of

movement out of the project and will be

used in applying applicable pay setting

rules (e.g., promotion rules.)

A. Grade-Setting Provisions

An employee in a band corresponding

to a single GS grade is converted to that

grade. An employee in a band

corresponding to two or more grades is

converted to one of those grades

according to the following rules:

1. The employee’s project basic rate of

pay is compared with step 4 rates in the

highest applicable GS rate range

(including a rate range in the GS base

schedule, a rate range in the applicable

locality rate schedule, or a rate range in

a special rate schedule for the

employee’s occupation). If the series is

a two-grade interval series, only oddnumbered grades are considered below

GS–11.

2. If the employee’s pay rate equals or

exceeds the applicable step 4 rate of the

highest GS grade in the band, the

employee is converted to that grade.

3. If the employee’s pay rate is lower

than the applicable step 4 rate of the

highest grade, the pay rate is compared

with the step 4 rate of the second

highest grade in the employee’s band. If

the employee’s pay rate equals or

exceeds step 4 of the second highest

grade, the employee is converted to that

grade.

4. This process is repeated for each

successively lower grade in the band

until a grade is found in which the

employee’s rate of basic pay equals or

exceeds the applicable step 4 rate of the

grade. The employee is then converted

at that grade. If the employee’s rate of

pay is below the step 4 rate of the lowest

grade in the band, the employee is

converted to the lowest grade.

5. Exceptions: (1) If the employee’s

pay rate exceeds the maximum rate of

the grade assigned under the abovedescribed ‘‘step 4’’ rule but fits in the

rate range for the next higher applicable

grade in the band (i.e., between step 1

and step 4), then the employee shall be

converted to that next higher applicable

grade; (2) An employee will not be

converted to a lower grade than the

grade held by the employee

immediately preceding a conversion,

lateral reassignment, or lateral transfer

in the project unless since that time the

employee has undergone a reduction in

band; (3) In Band I of the ZP and ZA

Career Paths, students without a

bachelor’s degree or comparable

experience are converted no higher than

GS–4.

B. Pay-Setting Provisions

An employee’s pay within the

converted GS grade is set by converting

the project rate to GS pay rates in

accordance with the following rules:

1. The pay conversion is done before

any geographic movement or other payrelated action that coincides with the

employee’s movement out of the

demonstration project.

2. An employee’s project rate is

converted to a rate on the highest

applicable rate range for the converted

GS grade (including a rate range in the

GS base schedule, a rate range in the

applicable locality rate schedule, or a

rate range in a special rate schedule for

the employee’s occupation).

3. If the highest applicable rate range

is a locality pay rate range, the project

rate is converted to a GS locality rate of

pay. If this rate falls between two steps

in the locality-adjusted schedule, the

rate must be set at the higher step. The

converted GS rate of basic pay is the GS

base rate corresponding to the converted

GS locality rate (i.e., same step

position). (If this employee is also

covered by a special rate schedule as a

GS employee, the converted special rate

will be determined based on the GS step

position. This underlying special rate

will be basic pay for certain purposes

for which the employee’s higher locality

rate is not basic pay.)

4. If the highest applicable rate range

is a special rate range, the project rate

is converted to a special rate. If this rate

falls between two steps in the special

rate schedule, the rate must be set at the

higher step. The converted GS rate of

basic pay will be the GS rate

corresponding to the converted special

rate (i.e., same step position).

5. Exception: If an employee’s project

rate exceeds the maximum rate of the

highest applicable rate range upon

conversion to the General Schedule, the

affected employee’s project rate will be

converted to a retained rate under 5

U.S.C. 5363. If an employee is entitled

to a special rate under the General

Schedule, the project rate is converted
67456 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

directly to a retained rate. If an

employee is only entitled to locality pay

under the General Schedule, the

retained rate is derived by dividing the

project rate by the applicable locality

pay factor (i.e., 1 plus the locality

payment percentage). Thus, the localityadjusted retained rate will equal the

project rate the employee had been

receiving before conversion. Since the

employee’s total rate of pay is not

reduced upon conversion, this change to

converted rates under the General

Schedule will not be considered a

reduction in basic pay under 5 U.S.C.

5363 or 7512.

6. After conversion or movement out

of the demonstration project, an

employee’s converted GS rates will be

used in applying GS pay administration

rules, as necessary, in lieu of using his

or her demonstration project rate. Thus,

for example, the converted GS rate of

basic pay (or converted special rate, if

applicable) will be used in applying GS

rules for promotions, maximum payable

rate determinations, and pay retention,

as appropriate. For conversions upon

termination of the project and for lateral

reassignments, the converted GS rates

will become the employee’s GS rates

immediately after movement out of the

demonstration project (before

processing any accompanying

geographic move).

C. Equivalent Increase Determination

Service under the demonstration

project is creditable for within-grade

increase purposes upon conversion back

to the GS pay system. Performance 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).

V. Budget Discipline

Each project operating unit will

maintain compensation during the

project at the level it would have

reached under the current system.

Current costs will be reallocated to

cover project costs. To ensure

appropriate carryover of costs from preproject to project years, a base

assessment will be made using three

base years: Fiscal Years 1994, 1995, and

1996. Budget discipline will be required

and achieved by imposing specific

funding principles (described in detail

in the section on Funding Pools for

Performance Pay Increases and

Bonuses). Finally, both longitudinal and

site comparisons will be used to ensure

that spending remains within acceptable

limits.

A. Reprogramming Costs

The following actions and their costs

will be eliminated by the new system:

1. Promotions from one grade to a

higher grade where both grades are now

in the same broad band. For example,

because Band III of both the ZP and ZA

career paths will cover the same pay

range as current grades GS–11 and GS–

12, there will be no more promotions

from GS–11 to GS–12.

2. Regularly scheduled Within-Grade

Increases and Quality Step Increases.

There are no steps in the broad band

system. These actions will be

eliminated.

3. Cash awards related to the

performance appraisal cycle. (These

funds will be applied to bonus pools

only—not to pay pools).

The cost savings from eliminating

these actions will be used to finance the

following new actions:

—Performance-based pay increases

within bands, including the ability to

increase the pay of supervisors,

through performance-based pay

increases, to a higher level than under

the current system. There is no

guaranteed performance pay increase

in the proposed system, however, for

Eligible performance; and

—Performance bonuses.

B. Base Cost Assessment

In order to determine whether project

costs are being maintained at acceptable

levels, a base assessment of pre-project

costs will be needed. Costs will be

computed as annual averages over three

pre-project years: Fiscal Years 1994,

1995, and 1996. The costs of all

personnel actions of types that are being

replaced by project systems will be

totaled and averaged.

C. Funding Pools for Performance Pay

Increases and Bonuses

The results of the base cost

assessment will provide a basis for: (1)

setting maximum spending limits; and

(2) constructing performance pay

increase and bonus funding pools by

organization, career path, band, and

salary. Performance pay pools for

project employees will be subject to the

same budgetary constraints and

reductions imposed on other

Department funding allocations. Neither

allocations nor authorizations convey

funding. Therefore, managers will be

required to make payout decisions tied

to their individual budgets, within

allocations. The following principles

will be observed:

1. In terms of career paths and bands,

costs will be kept for the most part

where they are found in the base

assessment. That is, base costs for

promotions, within-grade increases, and

cash awards in a particular band and

career path will form the basis for

project spending in the same band and

career path.

2. Formulas will be devised to

authorize pay increase and bonus pools

up to the limits calculated from baseyear spending. For each pool, the

authorized spending ceiling will depend

on the number of employees in the pool

by career path, band, and salary.

3. No allocation will be placed in

performance pay increase pools for

employees who are not eligible for a

performance pay increase, such as those

who have insufficient time in the

position to be rated and those whose

salaries are at the ceilings of their bands.

No money will be placed in bonus pools

for employees not eligible for a bonus,

such as those not eligible for a

performance rating or who are not on

the payroll the last day of the

performance cycle.

4. The potential size of performance

pay increases will be relatively high for

employees whose salaries are near the

minimum rate of the band and relatively

low for those whose salaries are near the

maximum rate of the band. This

arrangement imposes a reduced rate of

salary increases as an individual

advances in the band, similar to the

reduced rate of within-grade increases

in a General Schedule grade imposed by

the one-year, two-year, and three-year

waiting periods.

5. There will be no guaranteed

performance pay increase in the

proposed system. An employee with an

Eligible performance rating may, if

ranked at or near the bottom of a peer

group, get no performance pay increase.

6. Although Pay Pool Managers will

not be allowed, under normal

circumstances, to exceed their allocated

pay increase and bonus pools, they will

be allowed to spend less than the full

amounts of their pools.

7. Funds previously used to pay cash

awards will be applied to bonus pools

only—not to performance pay pools.

D. Budget Monitoring

These procedures permit changes in

operating unit expenditures which

result from legislatively mandated

program changes and changes in Federal

pay and benefits. The operating units

may offset selected salary increases with

savings by reducing turnover,

eliminating unnecessary overhead, and

cutting other personnel costs.

The operating units will measure their

adherence to cost control by preparing

budget estimates based on prescribed

Federal budget processes and
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67457

monitoring actual spending under the

project against these budget estimates.

Two cost comparisons will be used:

1. Longitudinal Comparisons

a. Project costs will be calculated on

an established schedule.

b. Costs will be compared against the

spending limits calculated from the base

years to ensure that budget limitations

are not being exceeded.

c. Each year, the funding of the

performance pay increase and bonus

pools will be used as an opportunity to

‘‘balance the books.’’ That is, the

funding of the pools will be limited to

the amount that is judged to maintain

budget discipline.

2. Site Comparisons

a. A number of non-project units will

be selected from within the Department

to serve as comparison sites. The

comparison sites will be selected to

reflect, as nearly as possible, the

missions and workforces of the project

units.

b. Periodically, the rate of increase in

salaries in the project units will be

compared to the rate of increase in

salaries in the comparison units.

c. When it is found that salaries in

project units are outpacing salaries in

comparison units, and the differences

cannot be explained by non-project

variables, appropriate adjustments will

be made in project funding.

VI. Project Evaluation

The Department will arrange for

annual evaluations of the project under

an OPM-approved evaluation plan. The

evaluation will be designed to

determine whether the interventions are

achieving the goals and objectives of the

project within acceptable cost limits.

(See Costs.)

The following table lays out the

project evaluation model, beginning

with and flowing from the objectives

that the project is designed to achieve.

The Objectives column and the

Interventions column together serve as

the project hypotheses; i.e., the

hypotheses to be tested are that the

objectives will be achieved by the

interventions linked to them. Most

objectives are linked to more than one

intervention. Each intervention is

associated with at least one expected

result. The Measures column lists

means by which actual results will be

measured. Other measures of results

may be used in order to fully evaluate

the hypotheses. The Data Sources

column shows where data required for

the measurements can be found.

A hypothesis will be supported—that

is, the intervention will be deemed to

have achieved the objective—when

actual results are found to match

expected results. Tests of hypotheses

will be made by comparing results to

appropriately defined comparison

groups.

TABLE 5.—PROJECT EVALUATION MODEL

Objectives Interventions Expected results Measures Data sources

Increased quality of new

hires; improved fit between position requirements and individual

qualifications; greater

likelihood of getting a

highly qualified candidate.

Agency-Based Staffing ..... Hiring officials will be able

to focus on more relevant recruiting sources

and avoid losing candidates who grow impatient with long hiring

processes.

• Hiring officials’ judgments of the improvement in the quality of

new hires.

• Hiring officials’ judgments of improvements

in the fit of qualifications

of new hires.

• Rate of acceptance of

offers.

• Interviews with hiring officials.

• Focus groups.

• HRM office records on

offers and acceptances.

• Periodic employee/supervisor surveys.

• Exit interviews.

Direct Examination ............ For skill areas in which

well qualified individuals

are hard to find, managers will be able to hire

good candidates as they

find them, thus avoiding

the loss of well qualified

individuals through

delays.

• Hiring officials’ judgments of the improvement in the quality of

new hires.

• Hiring officials’ judgments of improvements

in the fit of qualifications

of new hires.

• Rate of acceptance of

offers.

• Interviews with hiring officials.

• Focus groups.

• HRM office records on

offers and acceptances.

• Periodic employee/supervisor surveys.

Broad-band Classification

System, in conjunction

with Flexible Entry Salaries.

Broad bands and flexible

entry salaries within

bands provide a more

competitive range of

entry salaries for managers to use in negotiating with candidates, thus

increasing the ability to

hire highly qualified candidates.

• Hiring officials’ judgments of the improvement in the quality of

new hires.

• Hiring officials’ judgments of improvements

in the fit of qualifications

of new hires.

• Rate of acceptance of

offers.

• Interviews with hiring officials.

• Focus groups.

• HRM office records on

offers and acceptances.

• Periodic employee/supervisor surveys.

More Flexible Paid Advertising.Managers will be able to

make greater use of

paid advertising, thus

expanding the scope of

recruiting efforts or focusing the recruitment

effort on specialized

sources.

Number of selections resulting from paid advertising.HRM office records.
67458 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

TABLE 5.—PROJECT EVALUATION MODEL—Continued

Objectives Interventions Expected results Measures Data sources

3-Year Probationary Period for Scientists and

Engineers.

Greater likelihood that scientists and engineers

who are retained after

probation will be capable of the full range of

R&D functions.

Number of scientists and

engineers released during probation after the

first year.

• Automated history file

data.

• HRM office records.

Local Authority for Recruitment Payments.The ability of managers to

grant recruitment payments during negotiations with highly qualified candidates will increase competitiveness.

Number of selections

made for which the recruitment payment was

instrumental in attracting

the candidate.

• HRM office records.

• Interviews with hiring officials.

• Focus groups.

Increased retention of good

performers.

Broad-Band Classification

System.

Broad-banding gives an

operating unit the ability

to raise the pay of good

performers to higher and

more competitive levels,

thus improving retention

of good performers.

Turnover rates among

good performers.

Turnover rates of low performers.

Automated history file

data.

Performance-Based Pay

Increases.

Performance-based pay

increases give an operating unit the ability to

raise the pay of good

performers more rapidly,

thus improving retention

of good performers.

Turnover rates among

good performers.

• Automated history file

data.

• Interviews with hiring officials.

• Focus groups.

Bonuses ............................ The ability to reward the

accomplishments of

good performers will

make them more likely

to remain.

Turnover rates compared

to size of bonus.

Automated history file

data.

Local Authority for Retention Payments.The ability of managers to

grant retention payments will improve their

ability to retain employees in critical skill areas

in a job-related course

of study.

A count of the instances in

which a retention payment is instrumental in

retaining an employee

who would otherwise

have left.

• HRM office records.

• Interviews with hiring officials.

• Focus groups.

Supervisory Performance

Pay.

The ability to raise the pay

of high-performance supervisors to higher levels will make their salaries more competitive,

improving retention.

Turnover rates among supervisors in relation to

pay and performance.

Automated history file

data.

More Flexible Pay Increase Upon Promotion.Flexible pay increases

upon promotion gives an

operating unit the ability

to raise the pay of highperforming employees

and employees in critical

skill areas to higher and

more competitive levels,

thus improving their retention.

Turnover rates in relation

to pay and performance.

Automated history file

data.

Improved individual and organizational performance.Two-Level, 100-Point,

Peer Group Performance Appraisal System.

This system will more effectively communicate to

employees how they are

performing in relation to

their peers, the consequences of poor performance, and the rewards for good performance.

Judgments of Pay Pool

Managers, Rating Officials, and Employees.

• Interviews with hiring officials.

• Periodic employee/supervisor surveys.

• Focus groups.

Pay Increases Linked to

Performance.

The promise of higher pay

increases for high

achievement will encourage improved performance.

Judgments of managers,

supervisors, and employees.

• Periodic employee/supervisor surveys.

• Focus groups.
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67459

TABLE 5.—PROJECT EVALUATION MODEL—Continued

Objectives Interventions Expected results Measures Data sources

Supervisory Performance

Pay.

The promise of higher pay

levels for effective supervision will encourage

improved supervisory

performance.

Judgments of higher-level

managers.

• Management interviews.

Bonuses Linked to Performance.The promise of bonuses

for good performance

will encourage improved

performance.

Judgments of managers,

supervisors, and employees.

• Periodic employee/supervisor surveys.

• Focus groups.

Hiring interventions (listed

above).

By improving the quality of

new hires, the hiring

interventions will gradually produce a higherperforming workforce.

Judgments of managers

and supervisors.

• Interviews with hiring officials.

• Focus groups.

Retention Interventions

(listed above).

By improving the retention

of good performers, the

quality of the workforce

will be higher than it otherwise would be.

Judgments of managers

and supervisors.

• Interviews with hiring officials.

• Focus groups.

More effective human resources management.Broad-Band Classification The broad-band classification system will be simpler to use, more understandable to managers

and employees, and

more accurate.

Judgments of managers,

supervisors, and employees.

• Interviews with managers.

• Periodic employee/supervisor surveys.

More effective human resources management

(cont.)

Delegated Classification

Authority to Managers.

Line managers understand

the organizational mission and the work related to the mission and

are therefore better prepared to classify the

work.

Judgments of managers

and supervisors.

• Interviews with hiring officials.

• Periodic employee/supervisor surveys.

Focus groups.

Delegated Pay Authority to

Managers.

Line managers are in a

better position to understand the labor market

forces related to the

work they manage and

will therefore be more

effective pay mangers.

Judgments of managers

and supervisors.

• Interviews with hiring officials.

• Focus groups.

More efficient human resources management.Automated Broad-Band

Classification System.

The broad-band classification system will be simpler, faster, easier to

automate, require fewer

resources to operate,

and involve fewer classification decisions.

• Judgments of managers

and supervisors.

• Time required to

produce position descriptions and classify

positions.

• Number of classification

decisions.

• Interviews with hiring officials.

• Periodic employee/supervisor surveys.

• Focus groups.

• HRM office records.

• Automated history file.

Support for EEO/Diversity

goals in recruiting, rewarding, paying, and retaining minorities; providing opportunities for a diverse workforce; and in

maximizing contributions

of all employees.

Hiring Interventions (listed

above).

Managers will be able to

hire good minority candidates as they find

them, thus avoiding the

loss of well qualified minorities through delays.

• Increases in the numbers of minorities hired.• HRM and EEO records

on offers and acceptances.

Performance-Based Pay

Increases.

Performance-based pay

increases give an operating unit the ability to

raise the pay of good

performers.

Comparisons between pay

of minorities and nonminorities.

• HRM records.

Bonuses ............................ The ability to reward good

performers will allow

managers to more easily

recognize the performance of minorities.

Comparisons between the

bonuses received by minorities and non-minorities.

• HRM records.
67460 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

TABLE 5.—PROJECT EVALUATION MODEL—Continued

Objectives Interventions Expected results Measures Data sources

Pay Interventions (listed

above).

Supervisory pay bands,

flexible pay increases

upon promotion, and

flexible entry salaries

will allow managers

greater flexibilities in

paying minorities at

competitive salaries.

Comparisons between the

salaries of minorities

and non-minorities.

• HRM records.

Retention Interventions

(listed above).

Broad-banding, flexibilities

in setting pay, performance pay increases, and

bonuses, will make it

easier for supervisors to

retain good performing

minorities.

Turnover rates of minorities in relation to pay for

performance.

• Automated history file

data/EEO records.

VII. Project Management

The Office of Personnel Management

will oversee the project under its

demonstration project authority in 5

U.S.C. 4703. The DoC Departmental

Personnel Management Board will

manage the project at the Department

level. Each major operating unit will

have its own Operating Personnel

Management Board to oversee local

operations.

The Director of NIST will chair the

Departmental Personnel Management

Board through the first cycle. After the

first cycle, chairmanship of the Board

will be assumed by one of the members

of the Board. The DPMB members will

be senior managers of the operating

units in the project. The DoC Director

for Human Resources Management will

serve as Executive Secretary. Each

OPMB will typically be chaired by the

senior manager designated to serve on

the DPMB. The operating units will

appoint other key managers to their

boards as they think appropriate.

The following table lists the separate

responsibilities of these three bodies.

TABLE 6.—PROJECT AUTHORITIES

Arena

Project authorities

OPM DPMB OPMB

General ......................................... • Final approval authority for the

Project Plan, operating procedures, and any future changes

to the plan or operating procedures.

• Approval authority within the

Department for the Project Plan

and operating procedures.

• Approval authority within the

Department for proposing

changes in the Project Plan or

operating procedures to OPM.

• Establishing operating unit

project guidelines within the

Project Plan, operating procedures, and DPMB policies.

• Management of authorities outlined below and any additional

athorities delegated by the

DPMB.

• Monitoring the success of

project interventions so as to

propose appropriate mid-course

corrections to OPM.

• Setting project policies within

the parameters of the Project

Plan and operating procedures.

• Delegating authority to OPMBs,

including the withdrawal of authority when warranted.

• Exercising the authority to make

exceptions to normal project

procedures on a case-by-case

basis when it believes an exception is warranted (the

OPMBs will not have this authority).

• Delegating authority to managers within the operating unit,

including the withdrawal of authority when warranted.

• Assuring adequate resources

for implementing and operating

the project within the operating

unit.

• Overseeing training of operating

unit managers, employees, and

support staff in project policies

and procedures.

• Assuring adequate resources

for designing, implementing,

and operating the project.

• Establishing a training plan to

train managers, employees, and

support staff in project policies

and procedures.
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67461

TABLE 6.—PROJECT AUTHORITIES—Continued

Arena

Project authorities

OPM DPMB OPMB

Position Classification ................... • Approval of the project Classification Interventions.• Setting project classification policy within the Project Plan and

operating procedures.

• Approving automated classification systems and classification

standards.

• Establishing operating unit classification guidelines within the

Project Plan, operating procedures, and DPMB policies.

• Delegating classification authority to operating unit managers.

• Establishing career ladders.

• Ensuring proper classification of

positions within the operating

unit.

• Resolving issues in operating

unit classifications.

• Approving or delegating the approval of new specialty

descriptors.

Staffing .......................................... • Approval of the project Staffing

Interventions.

• Approving project staffing policies.

• Establishing policy and criteria

for recruiting and retention payments.

• Establishing operating unit staffing guidelines within the Project

Plan, operating procedures, and

DPMB policies.

• Approving or delegating the approval of individual recruiting

and retention payments.

• Establishing career ladders.

• Approving use of recruiting

services.

• Delegating and overseeing use

of paid advertising.

• Overseeing the application of

the three-year probationary period.

• Establishing operating unit practices on vacancy distribution,

opening timeframes, and similar

local issues.

Reduction in Force ........................ • Approval of the project reduction-in-force Interventions.• Approving project reduction-inforce policies.• Establishing operating unit reduction-in-force guidelines within the Project Plan, operating

procedures, and DPMB policies.

• Establishing procedures on operating unit competitive levels.

• Establishing guidelines for, and

overseeing, reductions in force

within the operating unit.

Pay Administration ........................ • Approval of the project Pay Administration Interventions.• Approving project pay administration and pay for performance

polices.

• Approving project pay tables ....

• Approving performance pay increase ranges.

• Approving automated performance pay increase systems.

• Approving formulas used to develop performance pay increase

pools.

• Establishing operating unit pay

guidelines within the Project

Plan, operating procedures, and

DPMB policies.

• Establishing operating unit performance pay increase pools.

• Establishing operating unit

guidelines and delegating approval authorities for setting pay

levels for new hires and promotions.

Performance Evaluation ................ • Approval of the project Performance Evaluation Interventions.• Approving project performance

evaluation policies.

• Approving project-wide forms

for performance plans and appraisals and for recording outcomes.

• Establishing operating unit performance evaluation guidelines

within the Project Plan, operating procedures, and DPMB policies.

• Overseeing the operating unit

annual performance appraisal

process, from development of

plans to individual pay increases and bonuses.

• • • Establishing operating unit

guidelines on performance elements.

• • • Delegating rating, review, and

pay pool management authorities.
67462 Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices

TABLE 6.—PROJECT AUTHORITIES—Continued

Arena

Project authorities

OPM DPMB OPMB

Bonuses ........................................ • Approval of the project Bonus

Interventions.

• Approving project bonus policies.

• Delegating bonus limits to

OPMBs.

• Establishing operating unit

bonus guidelines within the

Project Plan, operating procedures, and DPMB policies.

• Delegating bonus limits to pay

pool managers.

• Establishing operating unit

bonus pools.

Costs and Budget Discipline ......... • Approval of the project cost

plan.

• Approving project budget policies.• Establishing and overseeing operating unit budget procedures.

• Assuring operating unit budget

discipline.

• Designating pay pool managers.

• Establishing and overseeing the

use of operating unit performance pay increase and bonus

pools.

Project Evaluation ......................... • Approval of the project Evaluation Model.

• Approval of evaluation reports ..

• Approving the approach for selecting an evaluator to carry out

the annual project evaluation.

• Assuring adequate resources

for project evaluation.

• Approving project policies for internal Departmental assessments.

• Overseeing and assuring operating unit participation in project

evaluations, including data collection, focus group participation

by operating unit employees,

and availability of managers for

interviews.

• Approving objectives and procedures for internal operating unit

assessments.

VIII. Training

The project operating units will

schedule training for managers,

supervisors, employees, and support

staff.

A. Manager and Supervisor Training

The operating units will give

managers and supervisors general

training in the overall features of the

project and specific hands-on training in

the new authorities they are to exercise.

Computer training facilities will be used

to teach managers and supervisors how

to use the automated classification

system to produce position descriptions.

The classification training will

emphasize principles of project

classification, such as the classification

logic embedded in the automated

classification system, career path

coverage criteria, occupational series

definitions and coverage, proper

classification by bands in accordance

with project classification standards,

sound titling practices, and economic

and effective position management.

Managers and supervisors will also be

given specific training in performance

appraisal and pay for performance. A

key part of this training will be a

simulation of the performance

evaluation and rewards system prior to

the actual end-of-year performance

evaluation. Prior to the simulation, each

Rating Official and Pay Pool Manager

will be trained in the automated

performance pay increase system.

During the simulation, Rating Officials

and Pay Pool Managers will carry out

the appraisal, scoring, rating, and

performance pay increase process just as

they would at the end of a performance

year, but for training purposes only. The

results will not be official and will not

be communicated to employees. This

training exercise was used in the first

year of the NIST project and was found

to be an effective approach to revealing

and correcting problems and

misunderstandings prior to the real endof-year process.

B. Employee Training

Through general presentations,

handouts, and direct training from

supervisors, employees will be given an

understanding of project systems and

how those systems affect them.

In the general presentations

scheduled for everyone covered by the

project, employees will be led through

all project systems, from classification

to pay administration to pay for

performance. As each system is

presented, it will be contrasted with the

General Schedule system so employees

can see how the system is changing and

how the changes affect them. The

presentations will also cover employee

rights and grievance procedures.

Employees will be given ample

opportunity to ask questions at the

presentations and will be given the

names and numbers of individuals to

call if they have questions later.

In addition to the general

presentations that will be scheduled for

all employees, supervisors will be

instructed to pass along more

individualized information about the

system in conjunction with the

implementation of those systems. For

example, at the time supervisors give

employees their new project position

descriptions, the supervisors will

explain the position descriptions, the

process that produced them, and the

process for keeping them current. Also,

at the time of the performance appraisal

simulation, supervisors will explain to

employees how they fit into the

performance scoring and peer-group

ranking process and how the process

leads to decisions on performance pay

increases.

C. Support Staff Training

There are three categories of support

staff: (1) Personnel specialists in the

various HRM offices serving project

operating units; (2) budget specialists in

operating unit budget offices assigned to

monitor and advise on budget discipline

issues and specifically to assist in
Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 / Notices 67463

establishing performance pay increase

and bonus pools; and (3) administrative

officers in the operating units, who will

assist in processing personnel actions,

distributing local performance pay

increase and bonus pools, and

electronically transmitting Pay Pool

Manager decisions to the automated

payroll system.

Two of the HRM offices that will

serve project operating units have

served the NIST Demonstration Project

since its implementation in 1988. These

two offices will help train personnel

specialists in the other HRM offices.

Budget specialists in the operating

units, besides receiving the general

employee training, will receive advice

from a NIST budget specialist and will

receive further training on the

distribution of performance pay increase

and bonus pools during the simulation

of the performance evaluation and

rewards system. Administrative officers

will be invited to take part in the

supervisory training sessions and will

also receive further training during the

simulation of the performance

evaluation and rewards system.

IX. Experimentation and Revision

Many aspects of a demonstration

project are experimental. Modifications

must be made from time to time as

experience is gained, results are

analyzed, and conclusions are reached

on how the system is working. The

DPMB, with OPM approval, will

authorize minor modifications, such as

changes in the occupational series in a

career path, without further notice.

Major changes, such as a change in the

number of career paths, will require

OPM approval and will be published in

the Federal Register.

X. Authorities and Waiver of Laws and

Regulations Required

The following waivers of law and

regulation are necessary:

Title 5, U.S. Code

Section 3308 Competitive Service;

examinations, educational requirements

prohibited; exceptions

Section 3502(a)(4) Order of retention

(Waiver is applicable to allow the use

of ‘‘performance scores’’ in lieu of

‘‘efficiency or performance ratings.’’)

Chapter 51 Classification

Section 5303 Annual adjustments to

pay schedules

Section 5304 Locality-based

comparability payments

Section 5305 Special Pay Authority

Subchapter III of chapter 53 General

Schedule Pay Rates

Subchapter VI of chapter 53 Grade

and Pay Retention

(Waiver is applicable only to allow

the following modifications: (1) Using

bands in lieu of grades; (2) providing no

band retention if reduction in band is

caused by employee’s pay being

exceeded by band minimum rate; (3)

providing no pay retention upon

reduction in pay caused solely by

geographic movement; (4) providing no

pay retention upon conversion to the

General Schedule as long as the

employee’s total rate of pay is not

reduced; and (5) providing no pay

retention upon cancellation of

supervisory performance pay).

Section 5753–5754 Recruitment and

relocation bonuses; Retention

allowances (except that relocation

bonuses under Section 5753 continue to

apply)

Section 7512(3) Actions covered

(Waiver is applicable only to use

bands in lieu of grades and to exclude

from section 7512(3) reductions in band

not accompanied by a reduction in pay,

due to the employee’s pay being

exceeded by the band minimum rate.)

Section 7512(4) Actions covered

(Waiver is applicable only to allow

the following modifications: (1) Exclude

reductions in pay that are solely due to

recomputation upon geographic

movement; (2) exclude conversions to

GS pay that do not result in a reduction

in the employee’s total rate of pay; and

(3) exclude reductions in pay due to the

cancellation of supervisory performance

pay.)

Title 5, Code of Federal Regulations

Section 315.801 Probationary period;

when required

(Waived only for research and

development positions in the Scientific

and Engineering Career path).

Section 315.802 Length of

probationary period

(Waived only for positions in the

Scientific and Engineering Career path).

Section 351.401 Determining retention

standing

Section 351.402 Competitive area in

RIF

Section 351.403 Competitive level in

RIF

Section 351.504 Credit for

performance

Section 351.701 Assignment involving

displacement

Part 511 Classification under the

General Schedule

Part 530 Subpart C, Special salary rate

schedules

Part 531 Pay under the General

Schedule

Part 536 Grade and Pay Retention

(Waived only to allow the following

modifications: (1) Using bands in lieu of

grades; (2) providing no band retention

if reduction in band is caused by

employee’s pay being exceeded by band

minimum rate; (3) providing no pay

retention upon reduction in pay caused

solely by geographic movement; (4)

providing no pay retention upon

conversion to the General Schedule as

long as the employee’s total rate of pay

is not reduced; and (5) providing no pay

retention upon cancellation of

supervisory performance pay.)

Section 550.703 Definition of

reasonable offer

(Waiver is applicable only to allow

substitution of (1) ‘‘one band’’ for ‘‘two

grade or pay levels’’ and ‘‘two grades’’

and (2) ‘‘band’’ for ‘‘grade.’’)

Part 575, Subpart A, Recruitment

bonuses

Part 575, Subpart C, Retention

allowances

Section 752.401(a)(3) Coverage,

Reductions in grade

(Waiver is applicable only to use

bands in lieu of grades and to exclude

reductions in band not accompanied by

a reduction in pay due to the

employee’s pay being exceeded by the

band minimum rate.)

Section 752.401(a)(4) Coverage,

Reductions in pay

(Waiver is applicable only to exclude

reductions in pay that are solely due to

recomputation upon geographic

movement; (2) exclude conversions to

GS pay that do not result in a reduction

in the employee’s total rate of pay; and

(3) exclude reductions in pay due to the

cancellation of supervisory performance

pay.)

[FR Doc. 97–33458 Filed 12–23–97; 8:45 am]

BILLING CODE 6325–01–P