[Federal Register Volume 62, Number 37 (Tuesday, February 25, 1997)]
[Notices]
[Pages 8586-8607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4761]



[[Page 8585]]

_______________________________________________________________________

Part IV





Office of Personnel Management





_______________________________________________________________________



Science and Technology Reinvention Laboratory Personnel Demonstration 
Project at the Naval Sea Systems Command Warfare Centers; Notice

Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / 
Notices

[[Page 8586]]



OFFICE OF PERSONNEL MANAGEMENT


Science and Technology Reinvention Laboratory Personnel 
Demonstration Project at the Naval Sea Systems Command Warfare Centers

AGENCY: Office of Personnel Management.

ACTION: Notice of intent to implement demonstration project.

-----------------------------------------------------------------------

SUMMARY: The National Defense Authorization Act for fiscal year 1995 
(Pub. L. 103-337) authorizes the Secretary of Defense, with Office of 
Personnel Management (OPM) approval, to conduct a Personnel 
Demonstration Project at Department of Defense (DoD) laboratories 
designated as Science and Technology Reinvention Laboratories. The 
legislation requires that most requirements of Section 4703 of Title 5 
shall apply to the Demonstration Project. Section 4703 requires OPM to 
publish the proposed project plan in the Federal Register. This notice 
meets that requirement.

DATES: Comment date: Written comments will be considered if received no 
later than April 9, 1997. Hearing date: A public hearing will be held 
on the proposed project plan on: March 26, 1997, at the Indian Head 
Pavillion, 100 Walter Thomas Road, Indian Head, MD, from 6:00 p.m. 
until testimony is completed.

ADDRESSES: Comment address: Send written comments to Shirley Scott, 
Head, Demonstration Project Office, NSWCDD, HR Department, 17320 
Dahlgren Road, Dahlgren, VA 22448.

FOR FURTHER INFORMATION CONTACT: Shirley Scott at (540) 653-4623.

SUPPLEMENTARY INFORMATION: A public hearing will be held by OPM at the 
Indian Head Pavillion, 100 Walter Thomas Road, Indian Head, MD 20640, 
during which interested persons or organizations may present their 
written or oral views concerning the proposed Demonstration Project 
plan. So that OPM may regulate the course of the hearing and provide 
time for all who wish to present comments, parties who want to testify 
at the hearing are asked to contact one of the persons listed under For 
Further Information Contact: for a specific scheduled time. Priority 
will be given to scheduled parties; others will be heard in the 
remaining available time. Each speaker's presentation will be limited 
to 10 minutes. In other respects, the hearing will be informal. The 
hearing record will be left open until April 9, 1997 to allow 
additional written data, views and arguments from the parties 
participating in the hearing.

    Dated: February 21, 1997.
Office of Personnel Management.
James B. King,
Director.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purpose
    B. Problems With Present System
    C. Changes Required/Expected Benefits
    D. Participating Organizations/Mission
    E. Participating Employees
    F. Employee/Labor Participation
III. Methodology
    A. Project Design
    B. Personnel System Changes
    1. Classification/Pay
    2. Performance Development System
    3. Incentive Pay System
    4. Reduction-In-Force (RIF)
    5. Competitive Examining/Distinguished Scholastic Appointments
    C. Project Implementation
    D. Entry Into/Exit From The Project
    E. Project Duration
IV. Evaluation Plan
V. Waivers of Law/Regulation
VI. Cost
VII. Project Oversight/Management

I. Executive Summary

    The Naval Surface Warfare Center and the Naval Undersea Warfare 
Center, designated as Science and Technology Reinvention Laboratories, 
wish to conduct a Personnel Demonstration Project similar in nature to 
that of the 1980 Demonstration Project approved for the Naval Weapons 
Center, China Lake, and Naval Ocean Systems Center, San Diego. The 
Warfare Centers' project includes the following key project components: 
A Broad Banding Classification and Pay System for ``white collar'' 
employees; a Performance Development System; an Incentive Pay System; a 
new Reduction-in-Force (RIF) system; and a Competitive Examining and 
Appointment System. The Warfare Centers' project addresses an 
organization which is substantially larger (over 23,000 employees), has 
greater diversity of mission than previous projects, and has extensive 
union involvement at all major sites. In addition, the project plan has 
been developed with on-going involvement of the various unions 
represented in the Warfare Centers.

II. Introduction

A. Purpose

    The overall goal of the Demonstration Project is to implement a 
Human Resource Management System that facilitates mission execution and 
organization excellence and responds to today's dynamic environment of 
downsizing, restructuring and closures by obtaining, developing, 
utilizing, incentivizing and retaining high performing employees; and 
adjusting workforce levels to meet program and organizational needs. 
The system to be demonstrated has the flexibilities to accommodate and 
support wide-ranging activity missions, strategies and cultures. It is 
responsive to business considerations and permits a high degree of 
control over workforce costs. Clearly, it is more streamlined and 
understandable for those who will use it as well as those affected by 
it. Most importantly, it is focused not just on the needs of the 
organization, but also on the needs of the people who are the 
organization.
    These objectives reflect the Federal and DoD goals of creating a 
government that works better and costs less, and a flexible system that 
can reduce, restructure or renew to meet diverse mission needs, expand 
or contract a workforce quickly, respond to workload exigencies, and 
contribute to quality products, people and workplaces. The objectives 
also align with the Federal and DoD values and guiding principles of 
empowering employees to get results, maximum flexibility tempered with 
accountability, innovation and continuous improvement, caring for 
people during downsizing, and vital partnerships and teaming with all 
the stakeholders in the process.

B. Problems with Present System

    The Warfare Centers find the current Federal Personnel System to be 
cumbersome, confusing, and unable to provide the flexibility necessary 
to respond to the current mandates of downsizing, restructuring, and 
possible closure while trying to maintain a high level of mission 
excellence. The present system--a patchwork of laws, regulations, and 
policies--often inhibits rather than supports the goals of developing, 
recognizing, and retaining the employees needed to realign the 
organization with its changing fiscal and production requirements.
    The current Civil Service General Schedule (GS) system has 15 
grades with 10 levels each and involves lengthy, narrative, individual 
position descriptions, which have to be classified by complex, OPM-
mandated position classification standards. Because these standards 
have to meet the needs of the entire federal government, they are often 
not relevant to the needs of the Warfare Centers and are frequently 
obsolete. Distinctions between levels are often not meaningful. 
Currently, standards do not provide for a clear progression beyond

[[Page 8587]]

the full performance level, especially for science/engineering 
occupations where career progression through technical as well as 
managerial career paths is important.
    In addition, there are limited mechanisms for dealing with an 
employee who has been promoted out of his/her level of expertise or 
who, after a successful career, has been unable to gain the skills 
required of a new work environment. In most cases, the only possible 
action may be a reduction in grade. Under the current system a demotion 
to a lower grade is considered an adverse action even if there is no 
loss in pay. Under the proposal, a reduction in band level without a 
loss in pay will not be considered an adverse action.
    Performance Management systems require additional emphasis on 
continuous, career-long development in a work environment characterized 
by an ever increasing rate of change. Since past performance and/or 
longevity are the factors on which pay raises are currently assessed, 
there is often no positive correlation between compensation and 
performance contributions nor value to the organization. These limited 
criteria do not take into account the future needs of the organization 
nor other culturally relevant criteria which an organization may wish 
to use as incentives.
    The present Reduction in Force (RIF) process is highly complicated 
and relatively unresponsive to requirements for rapid work force 
restructuring and retention of employees with mission appropriate 
skills. RIF is confused by an augmented service credit for performance 
that is based in a performance appraisal system fraught with 
contention. Round I adds complexity, confusion, and uncertainty. Cost 
savings expected from RIF are drastically reduced by the inordinate 
administrative costs of the process and the likelihood that the 
employee ultimately separated will be at a lower grade than the 
originally targeted position. Additionally there is the expense of 
retained grade and retained pay. Current RIF procedures impact 
negatively on morale because of the high number of people affected and 
frequent misunderstandings of a complicated system that leaves affected 
employees wondering why they have been ``targeted''.
    And finally, the complexity of the current examining system creates 
delays in hiring. Line managers find the complexity limiting as they 
attempt to accomplish timely recruitment of needed skills. To compete 
with the private sector for the best talent available, they need a 
process which is streamlined, easy to administer, and allows for timely 
job offers.

C. Changes Required and Expected Benefits

    The proposed Demonstration Project responds to problems in the 
classification system with a Broad Banding Classification system for GS 
employees; to problems in the current performance management system 
with a Performance Development and Incentive Pay Systems; to the 
problems of the existing RIF procedures with a streamlined RIF system; 
and to problems of complicated hiring and examining procedures with a 
simplified examining and appointment process.

D. Participating Organizations and Mission

    Both the Naval Surface Warfare Center and the Naval Undersea 
Warfare Center will participate in the project. The Warfare Centers are 
comprised of a total of seven Divisions with 14 major sites nationwide. 
The sites are diverse in employment profiles and size and have 
bargaining unit populations ranging from a small percentage to more 
than half of the workforce. These organizations operate throughout the 
full spectrum of research, development, test and evaluation, 
engineering and fleet support.
    The Warfare Centers are Defense Business Operations Fund (DBOF) 
activities. Under DBOF, the cost of operating is paid by billing 
customers for work performed. The Warfare Centers seek to maximize 
management flexibility to control expenditures since the continued 
economic viability of a DBOF activity depends in large measure on 
remaining cost competitive with other organizations.

E. Participating Employees

    This Demonstration Project will involve civilian personnel at all 
Warfare Center sites. There are 14 major sites (over 200 civilian 
personnel) and many smaller sites. Currently 23,697 civilians are 
employed as shown in Figure 1. The intent of the plan is to cover all 
civilian appropriated fund employees at all sites with the exception of 
the members of the Senior Executive Service. While the Demonstration 
Project, and its five components, cover all General Schedule (GS) 
employees, the Federal Wage System (FWS) employees are included only 
for purposes of changes in the Performance Development, Reduction-In-
Force and Competitive Examining systems. Likewise, Senior Level (SL) 
and Scientific and Technical (ST) employees are covered only under the 
Incentive Pay, Performance Development and Reduction-In-Force systems. 
The Demonstration Project may be implemented incrementally throughout 
the Warfare Centers. The Demonstration Project will be implemented in 
bargaining units when those units so request and a negotiated agreement 
is reached. Approximately fifty percent of the workforce is represented 
by unions.

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F. Employee/Labor Participation

    One of the keys to developing a project plan sensitive to the 
multiplicity of management and employee needs has been the involvement 
of a Steering Committee composed of representatives from the Warfare 
Center Divisions and six national unions having bargaining units at the 
Warfare Center sites. The American Federation of Government Employees 
(AFGE), Metal Trades Council (MTC), International Association of 
Machinists (IAM), National Association of Government Employees (NAGE), 
the National Federation of Federal Employees (NFFE) and Fraternal Order 
of Police (FOP) represent more than half of the more than 25,000 
employees in a variety of occupational groups at Warfare Center sites 
across the United States. Appendix A further describes the employee/
union participation in this effort. The Steering Committee developed a 
project plan capable of meeting the seemingly differing, sometimes 
conflicting, goals of management and the unions. The Steering Committee 
substantially altered the original concept to address those needs in 
order to provide a viable implementation framework capable of meeting 
the wide variety of cultures and needs across the Warfare Center 
spectrum. The Steering Committee is also working to foster the 
establishment of partnerships within the Warfare Centers.
    The Steering Committee agreed to the following language with 
respect to the implementation of the Demonstration Project in the 
Warfare Center bargaining units. ``Essential to the success of the 
Demonstration Project within a collective bargaining unit is the 
explicit choice of the parties to freely enter into the project with 
mutual agreement on all provisions associated with the project. To that 
end, either party will have the option NOT to enter the project up to 
the point where both parties sign a collective bargaining agreement 
covering the Demonstration Project and, if required, that agreement is 
ratified and approved. Further the parties may include in the contract 
provisions for evaluating, modifying and leaving the project during the 
life of the contract.'' Any disputes or impasses that arise in 
connection with the negotiation on the implementation of the 
Demonstration Project will be subject to mediation but not binding 
impasse procedures. For any bargaining subsequent to adoption of the 
Demonstration Project, the parties shall use impasse procedures defined 
in 5 U.S.C. 7119 unless alternative impasse procedures have been 
negotiated. In the event Executive Order 12871 is no longer in effect, 
the parties within the Demonstration Project will continue to negotiate 
issues covered by 5 U.S.C. 7106(b)(1) to the extent those issues impact 
on the provisions of the Demonstration Project. Within bargaining 
units, violations of provisions of the Demonstration Project may be 
covered by the negotiated grievance procedure.
    This Demonstration Project was developed with management and union 
input through a collaborative process; however, it was agreed that 
union participation did not necessarily constitute full and complete 
endorsement of all details of the project. The Project will be 
implemented in bargaining units only after there is full agreement 
through the collective bargaining process.
    While understanding that each bargaining unit will make its own 
choice about participating in the Demonstration Project, the Steering 
Committee has endeavored to create a project plan to fulfill the mutual 
interests of management and employees while supporting the long term 
objective of vital, competitive Warfare Centers capable of developing 
and delivering the best possible technology to their customers.

III. Methodology

A. Project Design

    An overarching objective in the project design has been the 
development of a personnel system that provides a maximum opportunity 
for local ``tailoring'' to meet the variety of requirements of 
organizations engaged in missions ranging from theoretical research 
into submarine vulnerability and survivability to the storage of 
torpedoes. While the Divisions seek to recruit and retain world class 
engineers and scientists in order to remain viable as laboratories, 
they must also meet the development and motivational needs of an 
extraordinarily diverse workforce; i.e., employees ranging from small 
arms repairers in Crane, Indiana to program analysts in Newport, Rhode 
Island. In order to accomplish that end, the goal is to begin the 
process of delegating decision making to the people who know the most 
about what they need and how to get their work accomplished: the 
Divisions and sites.

[[Page 8589]]

    While much of the Demonstration Project will be applied uniformly, 
there are decisions which will be delegated to the Divisions and 
activities so that the needs and cultures of those organizations may be 
taken into account. Decisions at the local level will be made through 
the collective bargaining process.

B. Personnel System Changes

1. Classification and Pay
    A fundamental element of the system is a simplified white collar 
classification and pay component. The proposed broad banding scheme 
reduces the fifteen GS grade levels and the Senior Level (SL) and 
Scientific & Technical (ST) pay levels, into five to six broad pay 
bands. (See Figure 2) GS occupations are further broken down into three 
separate career paths: Scientific and Engineering (ND), Administrative 
and Technical (NT), and General Support (NG).
    The OPM-developed classification standards are replaced by a small 
number of one-page, generic benchmark standards developed within the 
Demonstration Project. These standards also serve as the core of the 
position description and replace lengthy individually tailored position 
descriptions. These generic level descriptors encompass multiple series 
and provide maximum flexibility for the organization to assign 
individuals consistent with the needs of the organization, established 
level or rank that the individual has achieved, and the individual's 
qualifications. Career progression between levels will occur by 
promotion, and pay progression within levels will occur through 
incentive pay. Warfare Centers' long experience with industrial funding 
will ensure their ability to control costs, an essential requirement in 
today's environment.

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    a. Career Paths. The Warfare Centers request exemption from the 
current GS classification system and substitute career paths and band 
levels. The designated career paths are: Scientific and Engineering 
(ND), Administrative and Technical (NT), and General Support (NG). Like 
the China Lake system, the GS classification series would be retained. 
More detailed descriptions of the career paths and the classification 
series for each path are provided below. The breakdown of occupational 
series to career paths reflects only those occupations which currently 
exist within the two Warfare Centers.
    Additional series may be added as a result of changes in mission 
requirements or OPM recognized occupations. These additional series 
will be placed in the appropriate career path consistent with the 
established career path definitions.
    Scientific and Engineering: Professional engineering positions and 
scientific positions in the physical, biological, mathematical, and 
computer sciences; and student positions for training in these 
disciplines. Series and titles included in the path are: 0401, General 
Biological Science Series; 0403, Microbiology Series; 0408, Ecology 
Series; 0440, Genetics Series; 0460, Forestry Series; 0471, Agronomy 
Series; 0499, Biological Science Student Trainee Series; 0801, General 
Engineering Series; 0803, Safety Engineering Series; 0804, Fire 
Protection Engineering Series; 0806, Materials Engineering Series; 
0807, Landscape Architecture Series; 0808, Architecture Series; 0810, 
Civil Engineering Series; 0819, Environmental Engineering Series; 0830, 
Mechanical Engineering Series; 0840, Nuclear Engineering Series; 0850, 
Electrical Engineering Series; 0854, Computer Engineering Series; 0855, 
Electronics Engineering Series; 0861, Aerospace Engineering Series; 
0871, Naval Architecture Series; 0892, Ceramic Engineering Series; 
0893, Chemical Engineering Series; 0894, Welding Engineering Series; 
0896,

[[Page 8590]]

Industrial Engineering Series; 0899, Engineering and Architecture 
Student Trainee Series; 1301, General Physical Science Series; 1306, 
Health Physics Series; 1310, Physics Series; 1313, Geophysics Series; 
1320, Chemistry Series; 1321, Metallurgy Series; 1330, Astronomy and 
Space Science Series; 1350, Geology Series; 1360, Oceanography Series; 
1372, Geodesy Series; 1386, Photographic Technology Series; 1399, 
Physical Science Student Trainee Series; 1515, Operations Research 
Series; 1520, Mathematics Series; 1529, Mathematical Statistician 
Series; 1530, Statistician Series; 1550, Computer Science Series; 1599, 
Mathematics and Statistics Student Trainee Series.
    Administrative and Technical: Professional or specialist positions 
in such administrative, technical and managerial fields as finance, 
procurement, human resources, computer, legal, librarianship, public 
information, safety, social sciences, and program management and 
analysis; nonprofessional technician positions that support scientific 
and engineering activities through the application of various skills 
and techniques in electrical, mechanical, physical science, biology, 
mathematics, and computer fields; and student positions for training in 
these disciplines. Series and titles included in this path are: 0018, 
Safety and Occupational Health Management Series; 0020, Community 
Planning Series; 0028, Environmental Protection Specialist Series; 
0080, Security Administration Series; 0099, General Student Trainee 
Series; 0101, Social Science Series; 0110, Economist Series; 0132, 
Intelligence Series; 0170, History Series; 0180, Psychology Series; 
0185, Social Work Series; 0187, Social Services Series; 0188, 
Recreation Specialist Series; 0201, Personnel Management Series; 0205, 
Military Personnel Management Series; 0212, Personnel Staffing Series; 
0221, Position Classification Series; 0230, Employee Relations Series; 
0233, Labor Relations Series; 0235, Employee Development Series ; 0260, 
Equal Employment Opportunity Series; 0299, Personnel Management Student 
Trainee Series; 0301, Miscellaneous Administration and Program Series; 
0334, Computer Specialist Series; 0340, Program Management Series; 
0341, Administrative Officer Series; 0342, Support Services 
Administration Series; 0343, Management and Program Analysis Series; 
0346, Logistics Management Series; 0391, Telecommunications Series; 
0399, Administration and Office Support Student Trainee Series; 0501, 
Financial Administration and Program Series; 0505, Financial Management 
Series; 0510, Accounting Series; 0560, Budget Analysis Series; 0599, 
Financial Management Student Trainee Series; 0602, Medical Officer 
Series; 0610, Nurse Series; 0690, Industrial Hygiene Series; 0802, 
Engineering Technician Series; 0809, Construction Control Series; 0818, 
Engineering Drafting Series; 0856, Electronics Technician Series; 0895, 
Industrial Engineering Technician Series; 0899, Engineering and 
Architecture Student Trainee Series; 0905, General Attorney Series; 
0950, Paralegal Specialist Series; 0962, Contact Representative; 1001, 
General Arts and Information Series; 1010, Exhibits Specialist Series; 
1015, Museum Curator Series; 1016, Museum Specialist and Technician 
Series; 1020, Illustrating Series; 1035, Public Affairs Series; 1060, 
Photography Series; 1071, Audiovisual Production Series; 1082, Writing 
and Editing Series; 1083, Technical Writing and Editing Series; 1084, 
Visual Information Series; 1101, General Business and Industry Series; 
1102, Contracting Series; 1103, Industrial Property Management Series; 
1104, Property Disposal Series; 1150, Industrial Specialist Series; 
1152, Production Control Series; 1173, Housing Management Series; 1176, 
Building Management Series; 1199, Business and Industry Student Trainee 
Series; 1222, Patent Attorney Series; 1311, Physical Science Technician 
Series; 1410, Librarian Series; 1412, Technical Information Services 
Series; 1420, Archivist Series; 1521, Mathematics Technician Series; 
1601, General Facilities and Equipment Series; 1640, Facility 
Management Series; 1654, Printing Management Series; 1670, Equipment 
Specialist Series; 1701, General Education and Training Series; 1710, 
Educational and Vocational Training Series; 1712, Training Instruction 
Series; 1810, General Investigating Series; 1811, Criminal 
Investigating Series; 1910, Quality Assurance Series; 2001, General 
Supply Series; 2003, Supply Program Management Series; 2010, Inventory 
Management Series; 2030, Distribution Facilities and Storage Management 
Series; 2032, Packaging Series; 2050, Supply Cataloging Series; 2101, 
Transportation Specialist Series; 2130, Traffic Management Series; 
2150, Transportation Operations Series; 2181, Aircraft Operations 
Series.
    General Support: Assistant and clerical positions providing support 
in such fields as budget, finance, supply, human resources; positions 
providing support through application of typing, clerical, or 
secretarial knowledge and skills; positions providing specialized 
facilities support such as guards, police officers and firefighters; 
and student positions for training in these disciplines. This path 
includes the following series and titles: 0019, Safety Technician 
Series; 0029, Environmental Protection Assistant Series; 0081, Fire 
Protection and Prevention Series; 0083, Police Series; 0085, Security 
Guard Series; 0086, Security Clerical and Assistance Series; 0134, 
Intelligence Aid and Clerk Series; 0186, Social Services Aid and 
Assistant Series; 0189, Recreation Aid and Assistant Series; 0203, 
Personnel Clerical and Assistance Series; 0204, Military Personnel 
Clerical and Technician Series; 0303, Miscellaneous Clerk and Assistant 
Series; 0304, Information Receptionist Series; 0305, Mail and File 
Series; 0318, Secretary Series; 0322, Clerk-Typist Series; 0326, Office 
Automation Clerical and Assistance Series; 0332, Computer Operation 
Series; 0335, Computer Clerk and Assistant Series; 0344, Management 
Clerical and Assistance Series; 0350, Equipment Operator Series; 0351, 
Printing Clerical Series; 0356, Data Transcriber Series; 0361, Equal 
Opportunity Assistance Series; 0382, Telephone Operating Series; 0390, 
Telecommunications Processing Series; 0392, General Communications 
Series; 0394, Communications Clerical Series; 0399, Administration and 
Office Support Student Trainee Series; 0462, Forestry Technician 
Series; 0503, Financial Clerical and Assistance Series; 0525, 
Accounting Technician Series; 0530, Cash Processing Series; 0540, 
Voucher Examining Series; 0544, Civilian Pay Series; 0561, Budget 
Clerical and Assistance Series; 0640, Health Technician; 0647, 
Diagnostic Radiologic Technologist Series; 0679, Medical Clerk Series; 
0698, Environmental Health Technician Series; 0945, Clerk of Court 
Series; 0986, Legal Clerical and Assistance Series; 1087, Editorial 
Assistance Series; 1105, Purchasing Series; 1106, Procurement Clerical 
and Technician Series; 1107, Property Disposal Clerical and Technician 
Series; 1411, Library Technician Series; 1531, Statistical Assistant; 
1702, Education and Training Technician Series; 2005, Supply Clerical 
and Technician Series; 2091 Sales Store Clerical Series; 2102, 
Transportation Clerk and Assistant Series; 2131, Freight Rate Series; 
2135, Transportation Loss and Damage Claims Examining Series; 2151, 
Dispatching Series.

[[Page 8591]]

    b. Broad Bands and Levels of Responsibility. A fundamental purpose 
of broad banding is to make the distinctions between levels easier to 
discern and more meaningful. In that regard, the 15 GS grade levels are 
reduced to no more than six band levels, each representing a defined 
level of work. Within each career path, bands typically include the 
following categories of positions: student trainee and/or entry level, 
developmental, full performance level, and expert and/or supervisor/
manager.
    With fewer band levels than GS grades, the level of responsibility 
reflected in each band typically encompasses the responsibilities of 
two or more GS grade levels. For example, the responsibilities of a 
band level covering work at the full performance level may represent a 
synthesis of GS-11 and GS-12 responsibilities. For the NT career path, 
the responsibilities associated with the top two bands do not precisely 
align with equivalent GS levels. Some GS-14 level responsibilities band 
best with GS-13 while others band best with GS-15.
    Although band VI of the ND career path covers SL and ST positions, 
this does not represent a requested change in the basis for 
classification or allocation of billets for these positions. The 
authority to allocate new billets, classify positions and set initial 
pay for assignment to SL and ST positions within the Warfare Centers 
will be retained at the Assistant Secretary of the Navy (Manpower and 
Reserve Affairs) level. The intent of including these positions in the 
SE career path was two fold: (1) to emphasize the dual career 
progression for scientists and engineers in nonsupervisory and 
nonmanagerial career paths; and (2) to include SL and ST employees in 
all other aspects of the Demonstration Project, i.e., performance 
development, incentive pay and reduction-in-force systems. Consistent 
with our goal of developing, recognizing, and retaining employees 
needed to meet our changing organizational needs, the Demonstration 
Project seeks the authority to manage its SL and ST workforce under the 
same performance development and incentive system as other employees. 
This includes the authority at the Division level to adjust the pay of 
SL and ST employees up to Level IV of the Executive Schedule. Incentive 
pay decisions will be made against criteria relevant to the needs of 
the organization including the criticality and difficulty of the 
position, critical skills, and current salary level of the employees.
    c. Simplified Classification Process. A limited number of Warfare 
Center one-page generic, level descriptor that also serve as the core 
of preclassified position descriptions will be created within the 
Demonstration Project. Those descriptions may be further tailored with 
an addendum to provide information on Fair Labor Standards Act (FLSA) 
coverage, selective placement factors, specialized knowledge/skills/
abilities, etc. Within the Demonstration Project, the term 
``classification of a position'' for positions covered by broad banding 
is defined as the placement of a position in its appropriate career 
path, occupational series, and band level based on the application of 
standards (referred to as level descriptors or benchmark standards) 
established at the Warfare Center level. Line managers will be 
meaningfully involved in the classification process to make it more 
relevant to their organization's needs.
    d. Simplified Assignment Process. Today's environment of downsizing 
and workforce transition mandates that the organization has maximum 
flexibility to assign individuals. Broad banding can be used to address 
these needs. As a result of the assignment to a particular level 
descriptor, the organization will have maximum flexibility to assign an 
employee within broad descriptions consistent with the needs of the 
organization, and the individual's qualifications and rank or level. 
Subsequent assignments to projects, tasks, or functions anywhere within 
the organization requiring the same level and area of expertise, and 
qualifications would not constitute an assignment outside the scope or 
coverage of the current level descriptor. Such assignments within the 
coverage of the generic descriptors are accomplished as realignments 
and do not constitute a position change. For instance, a technical 
expert can be assigned to any project, task, or function requiring 
similar technical expertise. Likewise, a manager could be assigned to 
manage any similar function or organization consistent with that 
individual's qualifications. This flexibility allows a broader latitude 
in assignments and further streamlines the administrative process and 
system.
    e. Broad Bands and Salary Ranges. The basis for the Demonstration 
Project pay system is each band level having a basic salary range that 
exactly corresponds to salaries of three or more GS grade levels. This 
continued linkage with the GS system will result in adjustments to the 
salary ranges through future general and locality pay increases under 
the General Schedule System. To more closely replicate the salary 
overlap found in the current GS system, there is a one grade extended 
salary overlap with each lower band for bands II and above. (See Figure 
3) The one exception is the band for ST and SL positions (ND VI). 
Consistent with law, the pay range for these positions will continue to 
be 120% of GS 15/1 salary up to Executive Level IV. The purpose of the 
salary overlap is twofold. First, it is to provide pay setting 
flexibilities and cost containment opportunities in promotions. This 
reduces the instances of non discretionary promotion pay increases of 
greater than 6% that may otherwise be required to advance pay to the 
lower end of the next higher band level. The second purpose is to 
facilitate an assignment back to the next lower level without loss in 
pay when appropriate.

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BILLING CODE 6325-01-C
    f. Locality Pay and Special Salary Rates. For each band level, the 
basic annual rate of pay will be adjusted to reflect the appropriate 
locality pay percentage. The maximum salary with locality pay will be 
referred to as ``locality pay point''. When the special salary rates 
authorized under the GS system exceed the locality pay point, the top 
of the applicable band will be extended to the maximum special salary 
rate authorized for that series and geographic location. Placement 
within this special rate extension will be restricted to employees in a 
series covered by that special rate. An employee will be considered a 
special rate employee only if his/her basic pay falls within the 
extension, i.e., the basic pay exceeds the locality pay point. 
Consistent with the intent of locality pay, special salary rate 
employees, as defined above, will not be eligible for locality pay 
adjustments. When the locality pay point overtakes the employee's rate 
of basic pay through general or locality pay increases, the employee 
will no longer be considered a special salary rate employee. In this 
instance, the employee's total adjusted basic pay will be increased to 
the new locality pay point. The employee's new adjusted salary will 
then be reallocated into a new basic pay and a locality pay adjustment 
rate. Pay retention provisions and adverse action procedures will not 
apply to the reallocation of the employee's salary as the employee's 
total adjusted salary will remain the same.
    g. Pay Administration. The following definitions and policies will 
apply to the movement of employees within the Demonstration Project 
from one career path or band level to another, or placement in a 
Demonstration Project Career Path from the GS, FWS, or other personnel 
systems:
    Advanced In-Hire Rate: Upon initial appointment, the individual's 
pay may be set anywhere within the band level consistent with the 
special qualifications of the individual and the unique requirements of 
the position. These special qualifications may be in the form of 
education, training, experience, or any combination thereof that is 
pertinent to the position in which the employee is being placed.
    Geographic Movement Within the Demonstration Project: An employee 
covered by broad banding who moves to a new duty station in a different 
geographic area and continues to be an employee covered by the Warfare 
Center Demonstration Project will have his/her pay in the new area 
computed as explained below. In all cases, the geographic movement is 
processed before any other simultaneous pay action (e.g., promotion, 
reassignment, downgrade, change in series, etc.) effective on the same 
day.
    1. Regular Range Employees. An employee paid at a rate below the 
locality pay point for his or her band level will receive no change in 
his or her rate of basic pay upon geographic movement. The employee's 
locality pay adjustment will be recomputed using the newly applicable 
locality pay percentage, which may result in a higher or lower locality 
pay adjustment and, thus, a higher or lower adjusted rate (locality 
rate or special rate, as applicable). Exception: For employees who 
would be eligible for a special rate under the GS system and who are in 
the regular range of a band with a special rate extension, the new 
adjusted salary following a geographic move may not be less than the 
old adjusted salary multiplied by the factor derived by dividing the 
new adjusted band maximum by the old adjusted band maximum.
    2. Special Rate Extension Employees. For an employee being paid at 
a rate in a special rate extension, the new adjusted salary following a 
geographic

[[Page 8593]]

move is equal to the old adjusted salary multiplied by the factor 
derived by dividing the new adjusted band maximum by the old adjusted 
band maximum; however, the new adjusted rate may not be less than the 
applicable locality pay point in the new area.
    3. Pay Protection Provision. A special pay protection provision 
applies to employees who (a) were entitled to a special rate 
immediately before conversion into the demonstration project, (b) 
continue to meet the GS special rate eligibility conditions, and (c) 
are paid at a rate that equals or exceeds the dollar amount of the pre-
conversion special rate. For these employees, the new adjusted rate 
following a geographic move may not be less than the dollar amount of 
the employee's pre-conversion special rate. Adverse action and pay 
retention provisions of Title 5, United States Code, will not apply to 
any reduction in basic pay due solely to the operation of the above 
rules.
    Promotion: Within the Demonstration Project Broad Banding system a 
promotion will be defined as the movement of an employee from a lower 
to a higher band level in the same career path, or from one career path 
to another wherein the band in the new career path has a higher maximum 
salary than the band from which the employee is moving.
    After the implementation of the Demonstration Project, for an 
employee moving from the GS, a promotion will be defined as placement 
in a band level which incorporates a GS grade level which is higher 
than the employee's current grade.
    For an employee moving from the FWS, a promotion will be defined as 
placement in the Demonstration Project in a band level where the 
representative rate of the highest GS grade covered (i.e. step 04 of 
the highest GS grade) is higher than the representative rate of the 
employee's current FWS grade (i.e. step 02).
    Promotions will follow basic federal merit promotion policy that 
provides for competitive and non-competitive promotions. Upon 
promotion, an employee will normally receive an increase of six percent 
unless a higher increase is necessary to raise the employee's salary to 
the minimum salary of the new band. The employee's total adjusted pay 
(basic pay and locality pay; if any) will be used in determining the 
amount of the promotion increase and in setting the employee's adjusted 
pay in the higher band. Decisions not to increase pay or for increases 
of other than six percent or to the minimum level of the band must be 
approved at the Division level, unless otherwise delegated to lower 
levels. In no situation may an employee's salary upon promotion be 
established lower than the minimum salary range of the new band.
    Factors to be used to help determine the amount of the increase may 
include, but are not limited to, the employee's directly related 
experience which may be of immediate use in the new position; the 
employee's current pay; and the relationship to salaries of other 
similarly qualified employees.
    Reassignment: For movement within the Demonstration Project Broad 
Banding system, a reassignment will be movement to a position covered 
by the same band level, or from one career path to another when the 
salary range of the new band level and the employee's current band 
level remains the same.
    For an employee moving from the GS, a reassignment will be defined 
as placement in the Demonstration Project in a band level where the 
highest GS grade covered is the same as the employee's current GS 
grade.
    For an employee moving from the FWS, a reassignment will be defined 
as placement in the Demonstration Project in a band level where the 
representative rate of the highest GS grade covered (i.e., step 04 of 
the highest GS grade included in that broad band) is the same as the 
representative rate of the employee's current FWS grade.
    Demotion or change to lower band level: For movement within the 
Demonstration Project Broad Banding system, a demotion will be defined 
as the movement of an employee from a higher band to a lower band 
within the same career path, or from one career path to another where 
the band in the new career path has a lower maximum salary than the 
band from which the employee is moving.
    For an employee moving from the GS, a demotion will be defined as 
placement in the Demonstration Project in a band level where the 
highest GS grade covered is lower than the employee's current GS grade.
    For employees moving from the FWS, a demotion will be defined as 
placement in the Demonstration Project in a band level where the 
representative rate of the highest GS grade covered (i.e. step 04 of 
the highest grade included in that pay band) is lower than the 
representative rate of the employee's current FWS grade.
    Salary adjustment: A salary adjustment is defined as an increase in 
an employee's base pay (by other than the incentive pay process) within 
the employee's current band level to an amount which does not exceed 
the top of the band. The salary adjustment may be used to adjust the 
pay of individuals who have acquired a level of education that would 
otherwise make the employee qualified for an appointment at a higher 
level and would be used in lieu of a new appointment. For example, this 
authority may be used to adjust the pay of graduate level Cooperative 
Education (COOP) students or employees who have obtained an advanced 
degree, e.g., Ph.D.
    Other: Current provisions for Highest Previous Rate, Pay Retention 
(except as otherwise noted), Special Recruitment and Relocation 
Bonuses, Retention Allowances and Accelerated Promotions will continue. 
The use of OPM's Operating Manual for ``Qualification Standards For 
General Schedule Positions'' will continue with minor modifications; 
``Band'' will be substituted for ``Grade'' where appropriate and the 
time in grade requirement will be eliminated.
2. Performance Development System
    The philosophical base of this Demonstration Project is that 
employees are valued and trusted and are the organization's most 
critical assets. Accordingly, the primary objectives of the 
Demonstration Project are to: Develop employees to meet the changing 
needs of the organization; to help employees achieve their career 
goals; to improve performance in current positions; to retain high 
performers, and to improve communication with customers, colleagues, 
managers and employees. The system focuses on continuous performance 
improvement and minimizes administrative requirements. On-going 
dialogue between the employee and supervisor is fundamental to this 
development focus, and Performance Development Resources are provided 
as part of the system to facilitate this dialogue and assist with 
diagnosis of performance issues. The emphasis on continued improvement 
is carried over into the process for addressing performance problems. 
The proposed system substitutes an early intervention which focuses 
immediately on a formal performance plan designed to support the 
employee's success. A determination of unacceptable performance is made 
only if the employee does not meet the requirements for acceptable 
performance detailed in that plan. The following paragraphs describe 
the key components of the Performance Development System. Figure 4 
depicts the relationship of these components

[[Page 8594]]

and their linkage with the Incentive Pay system.

BILLING CODE 6325-01-P
[GRAPHIC] [TIFF OMITTED] TN25FE97.008


BILLING CODE 6325-01-C
    a. Performance Development Resources. At the heart of the 
performance development system is the concept of providing 
organizational resources to support the development process. While the 
design of these resources will be delegated to each Division, they will 
typically consist of a pool of people, including union representatives, 
who act as a support system to identify or help provide for the needs 
of employees and managers in the development process. Current 
limitations regarding union involvement in discussions concerning 
assigning and directing employees will not prevent the parties within 
the Demonstration Project from developing appropriate procedures for 
the Performance Development Resources.
    The Resources will be available to facilitate communications around 
expectations and needs, and help supervisors and employees seek 
agreement throughout all aspects of the performance development 
process. Should performance problems arise, these resources will be 
particularly useful in diagnosing issues impacting performance (e.g., 
employee skills, attitudes and motivation, clarity of job expectations, 
systemic issues, access to information and resources, relationships 
with co-workers and supervisor, etc.) and identifying options for 
addressing these issues (e.g., development opportunities, tools or 
equipment to support improved performance, reassignment of the employee 
to a position that better matches his/her capabilities and interests, 
etc.). They will also make referrals to others who may be helpful, and 
identify systemic or organization wide issues which may be affecting 
performance.
    Supervisors are expected to utilize the Resources for assistance in 
preventing and alleviating performance problems. Employees may also use 
the resources to assist them in correcting self-identified performance 
problems, in development planning to enhance their career opportunities 
consistent with the needs of the organization, and to facilitate 
communication and feedback with their supervisors, etc.
    b. Two Level Rating System. The system employs a two level rating 
system: ``acceptable'' and ``unacceptable'' performance. ``Acceptable'' 
performance is defined as ``performance that fulfills the requirements 
for which the position exists.'' An employee's performance may not be 
determined ``unacceptable'' unless the employee has been placed on and 
failed a performance plan. Employee performance ratings will be 
documented annually.
    c. Establishing Performance Expectations. Clear, mutually 
understood performance expectations that are linked to organizational 
goals, strategies and values are fundamental to successful individual 
and organizational performance. The outcome of this component of the 
Performance Development System is clear communication of the products 
and/or services to be delivered by the employee(s), and the success 
criteria against which those outputs will be assessed. Documentation of 
outputs and success criteria is expected when necessary to facilitate 
mutual understanding of performance expectations.
    The most effective means of creating a common understanding is 
through a process in which the supervisor and

[[Page 8595]]

employee(s) discuss requirements and establish performance goals and 
expectations. Employees and supervisors are expected to actively 
participate in these discussions to seek clarity regarding expectations 
and identify potential obstacles to meeting goals. In addition, 
employees should explain (to the extent possible) what they need from 
their supervisor to support goal accomplishment. The timing of these 
goal setting discussions will vary based on the nature of work 
performed, but will occur at least annually. More frequent, task 
specific, discussions of expectations may be more appropriate in some 
organizations. In cases where work is accomplished by a team, team 
discussions regarding goals and expectations may be appropriate; 
however, expectations for individual contributions to the team goals 
should always be clearly specified. Either the supervisor, the 
employee, or the union may enlist the assistance of the Performance 
Development Resources to facilitate effective dialogue with regard to 
these issues.
    Documentation of performance expectations is a helpful mechanism 
for ensuring clarity of understanding and providing a focus for later 
discussions on progress and developmental needs. As a minimum, formal 
documentation of expectations is required when an employee begins a new 
or substantially different job. Documentation in other situations is 
based on the needs and desires of the employee and supervisor, and may 
rely on other existing documentation (e.g., project plans, process 
documentation, customer requirements, etc.) No prescribed format is 
required for such documentation; the employee and supervisor are 
encouraged to seek agreement on what form of documentation will meet 
their needs and who will be responsible for producing it. The 
assistance of the Performance Development Resources may be enlisted by 
either party to support their efforts to reach agreement. In bargaining 
units, documentation procedures will be subject to bargaining. Current 
limitations regarding union involvement in decisions concerning 
assigning and directing employees will not prevent the parties within 
the Demonstration Project from developing appropriate procedures for 
documenting performance discussions.
    d. On-going Performance Dialogue. To facilitate performance 
development, employees and supervisors will engage in on-going 
dialogue. Ideally this dialogue will occur as part of normal day-to-day 
interactions for the purpose of ensuring a common understanding of 
expectations, reviewing whether expectations are being met, providing 
support in identifying resources or solving problems, providing 
coaching on complex or sensitive issues, providing information to 
increase the understanding of the project context, and keeping the 
supervisor informed of progress. In addition to this on-going 
interaction, however, it is expected that periodically a more formal 
dialogue will occur focused on reviewing progress, discussing customer 
feedback, exploring process improvements that could remove obstacles to 
effective performance, and identifying developmental needs to support 
continual improvement and career growth. The employee and supervisor 
should seek agreement on the frequency and form for both the formal and 
informal dialogues to ensure they will meet their needs. Either the 
supervisor, the employee or the union may call upon the Performance 
Development Resources to facilitate communications or conflict 
resolution around these issues. In cases where work is accomplished by 
a team, team meetings may be an appropriate forum for some of this 
interaction; however, team discussions do not eliminate the need for 
the supervisor to have some form of individual dialogue with each 
employee.
    The expected outcomes from this on-going dialogue component are 
plans to support the continuous improvement of individual and 
organizational performance. Documentation of these discussions and 
resulting plans is encouraged to the extent that it contributes to 
clarity of understanding and facilitates later review of progress on 
continuous improvement efforts. The nature and content of such 
documentation is based on the needs and desires of the employee and 
supervisor. No prescribed format is required for such documentation; 
the employee and supervisor are encouraged to seek agreement on what 
form of documentation will meet their needs and who will be responsible 
for producing it. The assistance of the Performance Development 
Resources may be enlisted by either party to support their efforts to 
reach agreement.
    In bargaining units, these procedures are subject to bargaining. 
Current limitations regarding union involvement in decisions concerning 
assigning and directing employees will not prevent the parties within 
the Demonstration Project from developing appropriate procedures for 
ongoing performance dialogues and for documenting performance 
discussions.
    e. Feedback from Multiple Sources. The primary purpose of feedback 
in the Performance Development System is to provide employees with 
information regarding how well their performance is meeting customer 
requirements in order to help the employees continually improve their 
performance. The outputs expected from this component are data and 
customer feedback which enable review of performance against success 
criteria. These data provide input to the review and continuous 
performance improvement planning discussed as part of the on-going 
dialogue component.
    The responsibility for employee development and continuous 
improvement is jointly held between the supervisor and employee. They 
are expected to work together to identify internal and external 
customers and to define and implement a process by which the employee 
can regularly receive feedback. A variety of mechanisms may be 
appropriate, such as customer surveys, process measures which track 
customer requirements, and discussions with customers. Supervisors are 
expected to facilitate this process and work with employees to 
interpret the feedback and establish improvement goals. Performance 
Development Resources may be helpful during this process. Their 
assistance may be requested by the supervisor, the employee or the 
union. Current limitations regarding union involvement in decisions 
concerning assigning and directing employees will not prevent the 
parties within the Demonstration Project from developing appropriate 
mechanisms and procedures for obtaining feedback from multiple sources.
    Managers and supervisors are also expected to obtain feedback from 
their customers, including their employees, and to use that feedback as 
a basis for establishing both personal and organizational performance 
development goals. The use of an anonymous instrument is appropriate 
for providing feedback to supervisors and managers on the impact of 
their behavior. The use of these instruments will help focus attention 
on desired leadership behaviors, structure the feedback in a 
constructive manner, and offset the power imbalance that often prevents 
supervisors from getting useful feedback from their employees. When 
necessary, supervisors and managers may choose to use the Performance 
Development Resources to help support their own developmental needs.
    f. Performance Plan. When an employee has continued performance 
difficulties, the organization will provide a formal Performance Plan 
to support the supervisor and employee in resolving the performance 
problems.

[[Page 8596]]

Use of the Performance Development Resources will be an integral part 
of this effort. Supervisors are expected to call on the Resources for 
assistance in preventing or alleviating performance problems before the 
need for formal action arises. When there is an indication that 
performance is not consistently meeting customer requirements, 
supervisors are expected to call on the Resources to analyze the causes 
of the difficulty and develop an approach for resolving it. Development 
of a formal Performance Plan is indicated if and when it is determined 
that the employee's performance (vs. system performance) is a 
contributor to the problem and informal intervention has not been 
successful in correcting the problem. Use of the Performance 
Development Resources is expected throughout the period of the 
Performance Plan in an attempt to facilitate a solution to the problem. 
The Performance Plan must be written, and will clearly document 
organizational expectations for successful job performance, specify 
accountability, identify developmental resources to correct any skill 
deficiencies, define the time frame of the performance plan, specify 
organizational support that will be provided and how performance 
results will be monitored. In addition, the Plan will clearly specify 
the potential consequences if performance is not acceptable. Periodic 
discussions between the supervisor and employee must occur during the 
time frame of the Performance Plan to review progress; these 
discussions must be documented. Current limitations regarding union 
involvement in decisions concerning assigning, directing, removing or 
reducing in grade employees will not prevent the parties within the 
Demonstration Project from developing appropriate procedures and 
documentation in connection with Performance Plans. (Note: Nothing in 
this subsection will preclude action under Title 5, United States Code, 
Chapter 75, when appropriate.)
    g. Accountability for Performance. An employee will be given a 
rating of unacceptable only if and when the employee is unable to 
successfully complete the Performance Plan. When an employee's 
performance is rated as unacceptable, one of four actions will be 
taken: (1) removal from the Federal Service, (2) placement in a lower 
band level with a corresponding reduction in pay (demotion), (3) 
reduction in pay while remaining in the same band level, or (4) 
placement in a lower band level with no reduction in pay (demotion).
    For the third category of action, the amount of reduction in pay 
will be up to, but may not exceed, the maximum amount of incentive pay 
(see below) that the employee could be eligible to receive during the 
current payout period, i.e., up to the equivalent of 4 continuing pay 
points as of the most recent payout cycle. Following the pay reduction, 
the objective is to restore performance and pay commensurate with it. A 
formal Development Plan will be established to maximize the opportunity 
for success in the assignment by clearly identifying performance 
expectations and defining a plan to achieve them within an appropriate 
time frame, not to exceed 12 months. The activity's Performance 
Development Resources will be utilized throughout this process. If and 
when performance improves during the period in which the employee is 
otherwise ineligible for incentive pay, some or all of the reduced pay 
may be restored. Such restoration is not retroactive and is separate 
and apart from incentive pay.
    For the fourth category of action, the employee may be moved to the 
next lower band level provided no loss in pay results and the 
employee's pay does not exceed the top of the lower band level. Within 
the Demonstration Project, this would not be considered an adverse 
action and would not be appealable through a statutory appeals process 
except for preference eligible employees. Employees will be provided 
with a written notice of the decision and preference eligibles will be 
notified of their right to appeal the action to the Merit Systems 
Protection Board. Current limitations regarding union involvement in 
decisions concerning reducing employees in grade will not prevent the 
parties within the Demonstration Project from developing procedures for 
the non-adverse reduction in band level. The decision to reduce an 
employee to a lower band level with no reduction in pay will be subject 
to review under existing grievance or alternative dispute resolution 
procedures.
3. Incentive Pay System
    The Incentive Pay System provides a mechanism for encouraging and 
rewarding performance contributions and other outcomes resulting from 
the continuous improvement focus of the performance development system.
    Incentive Pay for Employees Covered by Broad Banding: Supervisors 
will conduct an annual review of each employee's salary and decide how 
total compensation should be adjusted to reflect the employee's 
performance contribution to the organization. The adjustment may be 
made as a continuing increase to base pay and/or as a one-time cash 
bonus to adjust total compensation. The philosophical foundation for 
incentive pay is described below:

BILLING CODE 6325-01-P

[[Page 8597]]

[GRAPHIC] [TIFF OMITTED] TN25FE97.009


BILLING CODE 6325-01-C
    a. Eligibility. All employees who are making positive performance 
contributions as demonstrated by acceptable performance will share in 
incentive pay with the amounts and time intervals set by the Divisions 
and sites. Employees receiving an unacceptable rating since the last 
incentive payout are ineligible for the next incentive pay 
consideration.
    b. Incentive Pay Pool. Payments under the Incentive Pay System are 
made from the incentive pay pool. Within the

[[Page 8598]]

incentive pay pool, there are separate funds for continuing pay 
increases and bonus payments. The incentive pay pool is not used to 
fund promotions between pay bands. It is also not used to fund general 
pay increases, special rate increases, or locality pay increases; 
rather, employees will continue to receive any such increases 
consistent with other employees outside the demonstration project.
    The incentive pay pool will be operated within the parameters of 
the overall finance system governing the Warfare Centers. As a Defense 
Business Operating Fund (DBOF) activity, the Warfare Centers are 100 
percent industrially funded and operate as ``not-for-profit'' 
competitors within the Department of Defense. Under DBOF, the Centers 
are reimbursed for their work by their customers through billings based 
on stabilized rates. The assistant Secretary of the Navy for Financial 
Management and Comptroller oversees the establishment of these 
stabilized rates through reviews of Biannual Financial Management 
Budget submissions, which are highly visible at all Command levels. 
This funding process imposes a discipline in controlling costs 
(including salary expenditures) for the Warfare Centers that is not 
present under appropriated funded organizations.
    The size of the continuing pay fund is based on appropriate 
factors, including the following:
    a. historical spending for within-grade increases, quality step 
increases, and in-level career promotions (with dynamic adjustments to 
account for changes in law or in staffing factors e.g., average 
starting salaries and the distribution of employees among job 
categories and band levels);
    b. labor market conditions and the need to recruit and retain a 
skilled workforce to meet the business needs of the organization; and
    c. the fiscal condition of the organization.
    Given the implications of base pay increases on long-term pay and 
benefit costs, the amount of the continuing pay fund will be derived 
after a cost analysis with documentation of the mission-driven 
rationale for the amount. Any decision to substantially reduce the 
amount of funds devoted to continuing pay increases would typically 
occur only in lieu of more drastic cost cutting measures (e.g., RIF or 
furlough). As part of the evaluation of the project, average salary 
(base pay) will be tracked over time using two comparison groups: (1) 
the original two Navy Demonstration labs in China Lake and San Diego, 
and (2) a comparison group constructed using OPM's Central Personnel 
Data File.
    The size of the bonus pay fund will be based on appropriate 
factors, including the following:
    a. historical spending for performance awards, special act awards, 
and awards for beneficial suggestions;
    b. the organization's fiscal condition and financial strategies; 
and
    c. employee retention rates.
    The decision process for defining the size of the incentive pay 
pool and the two funds within that pool will be established at the 
Division/site level. The design of the decision process, insofar as it 
affects bargaining unit employees, will be subject to collective 
bargaining.
    d. Delegated Criteria Setting. The criteria and process for 
incentive pay will be substantially defined at the Division/site level. 
The incentive pay decision may be based on some combination of past, 
present and future performance. Examples of criteria may include 
criticality of skills, difficulty of position, criticality of position, 
individual or team contributions, suggestions for improving system or 
organization processes, length and/or quality of experience, current 
total compensation, etc. The criteria and process for incentive pay 
distribution for bargaining unit employees are subject to collective 
bargaining. Current limitations regarding union involvement in 
decisions concerning assigning and directing employees will not prevent 
the parties from developing the criteria and process for incentive pay 
decisions. (Note: The movement of an employee within a band based on 
the execution of an incentive pay decision is not a ``classification'' 
action.)
    e. Pay points. The payout process will utilize a point system to 
distribute incentive pay increases. A maximum of four (4) points will 
be available, thus each employee performing in an acceptable manner 
will be eligible to receive 0,1,2,3 or 4 pay points in the form of 
continuing pay, bonus pay or some combination.
    For FWS employees, cash awards continue to be available under the 
existing Incentive Awards system based on performance and special acts.
    f. Communication and Documentation. It is important that employees 
understand what is expected in order to receive a pay increase. 
Supervisors will interpret organizational criteria for their employees 
to clarify how it applies to their work and have periodic assessment 
discussions with employees to prevent surprise decisions at the time of 
payout. These assessment discussions should normally be held separately 
from performance development dialogues. Supervisors and employees are 
encouraged to seek agreement on their documentation needs. In addition, 
supervisors are expected to document their payout recommendation 
decisions and to discuss their decision rationale with employees. In 
bargaining units, documentation procedures will be subject to 
bargaining. Current limitations regarding union involvement in 
decisions concerning assigning and directing employees will not prevent 
the parties from developing documentation procedures for the 
communication and documentation of incentive pay discussions and 
decisions.
    g. Reconsideration of Incentive Pay Decisions. Employees will have 
the opportunity for a reconsideration of incentive pay decisions. While 
the specific purpose of the reconsideration is to address employee 
concerns about such decisions, the process is also intended to 
facilitate communication and understanding between employees and 
supervisors/managers concerning performance contributions and their 
impact on pay decisions. In addition, the process seeks to identify 
possible systemic problems that need to be addressed. In that regard, 
reconsideration is considered a positive and integral component of an 
effective incentive pay system by providing a mechanism to support 
continuous improvement. Accordingly, employees will not be discouraged 
from requesting reconsideration. Neither will they be subjected to 
reprisal or stigma. The specific process for reconsideration will be 
defined at the Division/site level. Current limitations regarding union 
involvement in decisions concerning assigning and directing employees 
will not prevent the parties from developing procedures for the 
reconsideration of incentive pay decisions. That process will include, 
but will not necessarily be limited to, the following characteristics: 
It should be administratively streamlined; provide expedited 
resolution; maintain appropriate confidentiality; be fair and 
impartial; address assertions of harmful error involving issues of 
process and procedure; and ensure that management payout decisions 
reflect reasonableness in judgment in evaluating applicable criteria.
    h. Guidance on Managing Incentive Pay. Each Division is expected to 
develop policies and criteria to guide the implementation of the 
incentive pay system which are consistent with their mission, 
strategies and organizational values, and supportive of the Naval Sea 
Systems Command and Warfare Center

[[Page 8599]]

strategic plans. Some Divisions may rely on individual management 
judgment based on general guidance, while other Divisions may define a 
more mechanical process based on highly objective criteria. Additional 
guidance may be provided by major organizational components (e.g., 
departments or directorates) to tailor or interpret the command-level 
criteria for their specific mission and strategies. Each major 
organizational component will have authority to manage the incentive 
pay allocation derived from the salaries of employees in that 
component. Departments/Directorates may further delegate authority to 
manage a prorated portion of the fund to the next lower echelon. 
Supervisors and managers within the unit will be assessing the nature 
of each employee's contribution, consistent with the organization's 
policy and criteria as reflected in the written guidance. They will 
then make recommendations to a second level reviewer regarding the 
number of pay points to be awarded to each employee (i.e., 0 to 4 
points) and the nature of incentive pay (i.e., continuing pay and/or 
bonus pay). Decisions regarding approval/disapproval of recommendations 
will be made at the organizational level to which authority has been 
delegated to manage the pay pool; typically this will be the second or 
third level reviewer. In cases where work is accomplished by a team, 
the team members may be involved in formulating the recommendation for 
distribution of incentive pay.
4. Reduction in Force (RIF)
    Flexible and responsive alternatives are needed to restructure an 
organization in a short period of time. The current RIF system is 
complicated, costly, and relatively unresponsive to the needs of the 
organization.
    The proposed RIF system will have a single round of competition to 
replace the current ``two round'' process. Once the position to be 
abolished has been identified, the incumbent of that position may 
``displace'' another employee when the incumbent has a higher retention 
standing and is fully qualified for the position occupied by the 
employee with a lower standing. Retention standing is based on tenure, 
veteran's preference, length of service, and performance. However, 
there will be no augmented service credit based on performance ratings. 
An employee rated as unacceptable during the 12 month period preceding 
the effective date of a RIF may only displace an employee rated 
unacceptable during that same period. The same ``undue disruption'' 
standard currently utilized will serve as the criteria to determine if 
an employee is fully qualified. The displaced individual may similarly 
displace other employees. If/when there is no position in which an 
employee can be placed by this process or assigned to a vacant 
position, that employee will be separated.
    Displacement is limited to one broad band level below the 
employee's present level. A preference eligible employee with a 
compensable service connected disability of 30 percent or more may 
displace up to two broad band levels (or the equivalent of five General 
Schedule grades) below the employee's present level. Employees not 
covered by broad banding (FWS), may ``displace'' up to three grades/
intervals (five grades/intervals for preference eligibles with a 
service connected disability of 30 percent or more).
    The new system will eliminate retained grade but will preserve 
retained pay.
    All positions included in the Demonstration Project within an 
activity at a specific geographic location will be considered a 
separate competitive area.
5. Competitive Examining and Distinguished Scholastic Appointments
    The Warfare Center needs a process which will allow for the rapid 
filling of vacancies, is less labor intensive, and is responsive to our 
needs. Restructuring the examining process and providing an authority 
to appoint candidates meeting distinguished scholastic achievements 
will help achieve these goals. When a Division implements the 
Demonstration Project for some portion of their workforce, this 
component may be available for all occupations. This will eliminate the 
imposition of multiple examining and appointment systems on the public 
and will strengthen efficiencies gained under the Demonstration 
Project. To further minimize resource requirements and the complexities 
inherent in administering two different sets of examining and hiring 
processes, this component may also be applied to GS and FWS positions 
in activities for which the Warfare Center Divisions provide human 
resource services.
    a. Delegated Examining Authority. The Warfare Centers propose to 
demonstrate a streamlined examining process for both permanent and non-
permanent positions. This authority will be further delegated to the 
Division level. This authority will apply to all positions with 
exception of positions in the Senior Executive Service, to Senior Level 
(ST/SL) positions, to the Executive Assignment System or positions of 
Administrative Law Judge. This authority will include the coordination 
of recruitment and public notices, the administration of the examining 
process, the administration of veteran's preference, the certification 
of candidates, and selection and appointment consistent with merit 
principles.
    b. Description of Examining Process: The primary change in the 
examining process to be demonstrated is the grouping of eligible 
candidates into three Quality Groups using numerical scores and the 
elimination of consideration according to the ``rule of three''.
    For each candidate, minimum qualifications will be determined using 
OPM's Operating Manual for ``Qualification Standards For General 
Schedule Positions''/''Job Qualification Systems For Trades and Labor 
Occupations (Handbook X-118C)'' including any selective placement 
factors identified for the position. Candidates who meet basic 
(minimum) qualifications will be further evaluated based on knowledge, 
skills and abilities which are directly linked to the position(s) to be 
filled. Based on this assessment, candidates will receive a numerical 
score of 70, 80, or 90. No intermediate scores will be granted except 
for those eligibles who are entitled to veterans preference. Preference 
eligibles meeting basic (minimum) qualifications will receive an 
additional 5 or 10 points (depending on their preference eligibility) 
which is added to the minimum scores identified above. Candidates will 
be placed in one of three quality groups based on their numerical 
score, including any veterans preference points: Basically Qualified 
(score of 70 and above), Highly Qualified (score of 80 and above), or 
Superior (score of 90 and above). The names of preference eligibles 
shall be entered ahead of others having the same numerical.
    For scientific/engineering and professional positions at the 
equivalent of GS-9 and above, candidates will be referred by quality 
groups in the order of the numerical ratings, including any veterans 
preference points. For all other positions, i.e., other than 
scientific/engineering and professional positions at the equivalent of 
GS-9 and above, preference eligibles with a compensable service-
connected disability of 10 percent or more who meet basic (minimum) 
eligibility will be listed at the top of the highest group certified.
    In selecting the top candidate, selecting officials should be 
provided with a reasonable number of qualified candidates from which to 
choose. All candidates in the highest group will be

[[Page 8600]]

certified. If there is an insufficient number of candidates in the 
highest group, candidates in the next lower group may be certified in 
rank order. When two or more groups are certified, candidates will be 
identified by quality group (i.e., Superior, Highly Qualified, 
Basically Qualified) in the order of their numerical scores. In making 
selections, to pass over any preference eligible(s) to select a 
nonpreference eligible requires approval under current pass over or 
objection procedures.
    c. Distinguished Scholastic Achievement Appointment: The Warfare 
Centers further propose to establish a Distinguished Scholastic 
Achievement Appointment using an alternative examining process which 
provides the authority to appoint undergraduates and graduates through 
the doctoral level who meet basic eligibility as determined by using 
OPM's Operating Manual for ``Qualification Standards For General 
Schedule Positions'' plus any previously established selective 
placement factors, if applicable and the following scholastic 
standards:
    <bullet> 3.5 grade-point average (GPA) or above on a 4.0 scale for 
required courses in the major field of study, or for all course work; 
or
    <bullet> graduated in the top 10% of their graduating class.

At the undergraduate level, the GPA may be based on 4 years of 
education or on those courses completed during the final 2 years of the 
curriculum.

    Veterans preference procedures will apply when selecting candidates 
under this authority. Preference eligibles who meet the above criteria 
will be considered ahead of nonpreference eligibles. In making 
selections, to pass over any preference eligible(s) to select a 
nonpreference eligible requires approval under current objection 
procedures.
    This authority allows for the competitive appointment to positions 
at the equivalent of GS-7 through GS-11, and GS-12 for positions 
involved in research. Distinguished Scholastic Achievement Appointments 
will enable the Warfare Centers to respond quickly to hiring needs with 
eminently qualified candidates possessing distinguished scholastic 
achievements.

C. Project Implementation

    While many of the basic elements of each component of the project 
will be implemented uniformly at all sites through policies established 
at the Warfare Center level, a number of policies, procedures, or 
processes will be delegated to the Division and/or site levels. This 
permits the system to be operationally defined, within a Warfare Center 
directed framework, to fit the culture and needs of the local 
organizations. In bargaining units, the project will be implemented 
only after there is full agreement through the collective bargaining 
process.

D. Entry Into and Exit From the Project

    1. Initial Conversion of Current Workforce. For the most part, 
current GS/GM employees will be converted automatically from their 
current grades to the appropriate career paths and band levels. 
However, the Warfare Centers consider it essential to the success of 
the project that employees, upon entering the project, feel that they 
are not losing a pay entitlement accrued under the GS system. 
Accordingly, current employees of the Warfare Centers will be ``made 
whole'' through a one year ``buy-in'' period. On the day of conversion, 
employees typically will receive base pay increases for prorated step 
increase equivalents. Employees at the 10th step are not eligible for 
the increase. Further, during the first 12 months following conversion, 
employees will receive pay increases for non-competitive promotion 
equivalents when the grade level of the promotion is encompassed within 
the same band, the employee's performance warrants the promotion and 
promotions would have otherwise occurred during that period. Employees 
who receive an in-level promotion at the time of conversion will not 
receive a prorated step increase equivalent.
    Additionally, in many cases, employees who are today covered by a 
local or national special salary rate will no longer be considered a 
special rate employee under the Demonstration Project and will thus 
gain eligibility for full locality pay. To control conversion costs and 
to avoid a salary increase windfall for these employees, the adjusted 
salaries of these employees will not change. Rather, the employees will 
receive a new basic pay rate computed by dividing their adjusted basic 
pay by the locality pay factor for their area. A full locality 
adjustment will then be added to the new basic pay rate. Adverse action 
and pay retention provisions will not apply to the conversion process 
as there will be no change in total salary.
    2. New and Transfer Employees. New hires, including employees 
transferring from other Federal activities, will be converted into the 
Demonstration Project in the career path and at the level and pay 
consistent with the duties and responsibilities of the position and 
individual qualifications.
    3. Exit From the Demonstration Project. Employees who leave the 
Demonstration Project broad banding system to accept federal employment 
in the traditional Civil Service system will have their pay set by the 
gaining activity. To assist activities in setting pay and in 
determining whether such placement constitutes a promotion, 
reassignment, or change to lower grade, the employee's band and salary 
level will be converted to a General Schedule equivalent grade prior to 
leaving the Demonstration Project in the following manner:
    Employees who exit the Demonstration Project will be tentatively 
converted to a GS grade most comparable to the employee's current 
Demonstration Project level and salary. In instances where the current 
salary is in the area between two overlapping GS grades within the same 
level, the converted grade is either (1) the higher of the two 
overlapping GS grades if the current salary meets or exceeds Step 4 of 
the higher GS grade, or (2) the lower of the overlapping grades if the 
current salary is less than Step 4 of the higher GS grade. In those 
instances where the current salary falls below the established GS 
salary range for the lowest GS grade covered by that Demonstration 
Project band level, the converted grade is the lowest GS grade level in 
that band. In those situations where an employee has not been promoted 
or placed in a lower pay band while covered by the Demonstration 
Project, the employee will be converted at a level which is no lower 
than the GS grade held immediately prior to entering the Demo project. 
This converted GS grade is the GS equivalent grade and is not 
necessarily the grade the employee will have upon transfer or 
reassignment outside the Demonstration Project.
    An employee's pay within the converted GS grade is set by 
converting the demonstration project adjusted rate of pay to a rate on 
the highest applicable adjusted rate range for the converted GS grade 
(including locality rates and special rates, as applicable). For 
example, if the highest applicable adjusted rate range under the GS pay 
system for a particular employee is a special rate range, the adjusted 
project rate (locality rate or special rate) is converted to the lowest 
special rate in that range that equals or exceeds the project rate; 
from this converted special rate, the employee's unadjusted GS rate and 
locality rate would be derived. This pay conversion is done before 
processing any geographic movement or other pay-related action 
coinciding with the employee's conversion out of the demonstration 
project.
    When an employee transfers to another activity, the employee's 
rating

[[Page 8601]]

of record will be transferred. When the gaining activity uses other 
than a two level performance system, the employee may be provided a 
supplementary performance assessment using the gaining organizations 
appraisal criteria. If the employee requests such an appraisal, the 
employee will be responsible for providing the criteria to the 
supervisor for completion. Gaining organizations are not bound to use 
this supplementary performance appraisal in any formal actions.

E. Project Duration

    The initial implementation period for the Project will be five 
years. At that time, the entire demonstration project will be 
reexamined to determine whether to continue, modify or terminate the 
Project.

IV Evaluation Plan

    Chapter 47 (Title 5 U.S.C.) requires that an evaluation system be 
implemented to measure the effectiveness of the proposed personnel 
management interventions. An evaluation plan for the entire laboratory 
demonstration program covering 24 DOD labs was developed by a joint 
OPM/DOD Evaluation Committee. A Comprehensive evaluation plan was 
submitted to the Office of Defense Research & Engineering in 1995 and 
subsequently approved. (Proposed Plan for Evaluation of the Department 
of Defense S&T Laboratory Demonstration Program, Office of Merit 
Systems Oversight & Effectiveness, June 1995). The overall evaluation 
effort will be coordinated and conducted by OPM's Personnel Resources 
and Development Center(PRDC). The primary focus of the evaluation is to 
determine whether the waivers granted result in a more effective 
personnel system than the current as well as an assessment of the costs 
associated with the new system.
    The present personnel system with its many rigid rules and 
regulations is generally perceived as an impediment to mission 
accomplishment. The Demonstration Project is intended to remove some of 
those barriers and therefore, is expected to contribute to improved 
organizational performance. While it is not possible to prove a direct 
causal link between intermediate and ultimate outcomes (improved 
personnel system performance and improved organizational 
effectiveness), such a linkage is hypothesized and data will be 
collected and tracked for both types of outcome variables.
    An intervention impact model (Appendix B) will be used to measure 
the effectiveness of the various personnel system changes or 
interventions. Additional measures will be developed as new 
interventions are introduced or existing interventions modified 
consistent with expected effects. Measures may also be deleted when 
appropriate. Activity specific measures may also be developed to 
accommodate specific needs or interests which are locally unique.
    The evaluation model for the Demonstration Project identifies 
elements critical to an evaluation of the effectiveness of the 
interventions. The overall evaluation approach will also include 
consideration of contact variables that are likely to have an impact on 
project outcomes: e.g., HRM regionalization, downsizing, cross-service 
integration, and the general state of the economy. However, the main 
focus of the evaluation will be on intermediate outcomes, i.e., the 
results of specific personnel system changes which are expected to 
improve human resources management. The ultimate outcomes are defined 
as improved organizational effectiveness, mission accomplishment and 
customer satisfaction.
    Data from a variety of different sources will be used in the 
evaluation. Information from existing management information systems 
supplemented with perceptual data will be used to assess variables 
related to effectiveness. Multiple methods provide more than one 
perspective on how the demonstration project is working. Information 
gathered through one method will be used to validate information 
gathered through another. Confidence in the findings will increase as 
they are substantiated by the different collection methods. The 
following types of data will be collected as part of the evaluation: 
(1) Workforce data; (2) personnel office data; (3) employee attitudes 
and feedback using surveys, structured interviews and focus groups; (4) 
local activity histories; (5) core measures of laboratory 
effectiveness.

V. Waivers of Law and Regulation

A. Waivers to Title 5, United States Code

Chapter 33, Section 3317(a): Competitive service, certification from 
register (in so far as ``rule of three'' is eliminated under the 
Demonstration project).
Chapter 33, Section 3318(a): In so far as ``rule of three'' is 
eliminated under the Demonstration project.
Chapter 43, Section 4301: Definitions
Chapter 43, Section 4302: Establishment of performance appraisal 
systems.
Chapter 43, Section 4303: Modified to the extent that an employee may 
be removed, reduced in band level with a reduction in pay, reduced in 
pay without a reduction in band level or reduced in band level without 
a reduction in pay based on unacceptable performance. For employees who 
are reduced in band level without a reduction in pay, Sections 4303(b) 
and 4303(e) do not apply.
Chapter 43, Section 4303(b)(1)(A)(ii): Requirement for critical 
elements.
Chapter 51, Section 5101-5111: Purpose, definitions, basis, 
classification of positions, review, authority--To the extent that 
white collar employees will be covered by broad banding. Pay category 
determination criteria for Federal Wage System positions remain 
unchanged.
Chapter 53, Section 5301; 5302(1), (8), and (9); Section 5303; and 
Section 5304: Pay Comparability System. (To the extent necessary to 
allow Demonstration project employees covered by broad banding to be 
treated as General Schedule employees and to allow basic rates of pay 
under the Demonstration project to be treated as scheduled rates of 
basic pay.) (This waiver does not apply to Federal Wage System (FWS) 
employees. This waiver does not apply to SL/ST employees who continue 
to be covered by these positions, as appropriate.)
Section 404 of the Federal Employees Pay Comparability Act of 1990 (PL 
101-509): Special Pay Adjustments for Law Enforcement Officers in 
Selected Cities. (To the extent necessary to allow law enforcement 
officers under the demonstration project to be treated as law 
enforcement officers under the General Schedule.)
Chapter 53, Section 5305: Special Pay Authority. (This waiver does not 
apply to FWS employees.)
Chapter 53, Sections 5331-5336: General Schedule Pay Rates.
Chapter 53, Section 5362: Grade Retention.
Chapter 53, Section 5363: Pay Retention. (Only to the extent necessary 
to provide that pay retention does not apply to--(1) conversions from 
General Schedule special rates to Demonstration project pay and 
reallocations of Demonstration project pay rates within special rate 
extensions to locality adjusted pay rates due to promotions or general 
or locality pay increases, as long as the employee's total rate of pay 
is not reduced; and (2) reductions in basic pay due solely to the 
operation of the pay setting

[[Page 8602]]

rules for geographic movement within the Demonstration Project.)
Chapter 55, Section 5545(d): Hazardous Duty Differential. ( Only to the 
extent necessary to allow Demonstration project employees covered by 
broad banding to be treated as General Schedule employees.) (This 
waiver does not apply to FWS and SL/ST employees.)
Chapter 57, Sections 5753, 5754, and 5755: Recruitment; Relocation 
Bonuses; Retention Allowances; Supervisory Differentials: (Only to the 
extent necessary to allow employees and positions under the 
Demonstration project covered by broad banding to be treated as 
employees and positions under the General Schedule.) (This waiver does 
not apply to FWS employees. This waiver does not apply to SL/ST 
employees who continue to be covered by these provisions, as 
appropriate.)
Chapter 59, Section 5941: Allowances based on living costs and 
conditions of environment; employees stationed outside continental 
United States or Alaska (Only to the extent necessary to provide that 
COLA's paid to employees under the demonstration project are paid in 
accordance with regulations prescribed by the President (as delegated 
to OPM)). (This waiver does not apply to FWS employees. This waiver 
does not apply to SL/ST employees who continue to be covered by these 
provisions, as appropriate.)
Chapter 71, Section 7106(a)(2): In so far as provision on assigning and 
directing, documenting performance discussions, Performance Development 
Resources, Performance Plans, criteria and process for incentive pay, 
and communication and documentation requirements for incentive pay and 
reconsideration of incentive pay decisions; and, in so far as provision 
on reducing employees in grade may prevent the parties from negotiating 
procedures for non-adverse assignment of employees to a lower pay band.
Chapter 71, Section 7119(b)(1): In so far as provision for either party 
to request impasse proceedings would be contrary to provisions of the 
Demonstration project.
Chapter 75, Section 7512(3): To the extent necessary to exclude 
reductions in band level not accompanied by a reduction in pay taken 
under Chapter 43.
Chapter 75, Section 7512(4): Adverse Action. (Only to the extent 
necessary to provide that adverse action provisions do not apply to--
(1) conversions from General Schedule special rates to Demonstration 
project pay and reallocations of Demonstration project pay rates within 
special rate extensions to locality adjusted pay rates due to 
promotions or general or locality pay increases, as long as the 
employee's total rate of pay is not reduced; and (2) reductions in 
basic pay due solely to the operation of the pay setting rules for 
geographic movement within the demonstration project.)

B. Waivers to Title 5, Code of Federal Regulations

Part 300, Sections 300.601 through .605: Time in grade restrictions are 
eliminated in the Demonstration project.
Part 332, Section 332.401(b): Only to the extent that for non-
professional or scientific positions equivalent to GS-9 and above, 
preference eligibles with a compensable service-connected disability of 
10 percent or more who meet basic (minimum) qualification requirements 
will be entered at the top of the highest group certified without the 
need for further assessment.
Part 332, Section 332.402: ``Rule of three'' will not be used in the 
Demonstration project.
Part 332, Section 332.404: Order of selection is not limited to highest 
three eligibles.
Part 351, Section 351.402(b): Competitive area to the extent that the 
Demonstration project will be a separate competitive area within the 
activity.
Part 351, Sections 351.403(a) and (b): Competitive levels to the extent 
that there is no requirement for the establishment of competitive 
levels in the Demonstration project.
Part 351, Section 351.404(a) and (b): Retention register to the extent 
that the requirement to establish separate retention registers by 
competitive level is eliminated.
Part 351, Section 351.501(a)(3): For order of retention, delete ``as 
augmented by credit for performance under Section 351.504.
Part 351, Section 351.504: Credit for performance to the extent that 
the Demonstration project eliminates service credit for performance.
Part 351, Section 351.601 through .608: References to competitive 
levels are eliminated.
Part 351, Section 351.701(b) and (c) Assignment rights (bump and 
retreat). To the extent that the distinction between bump and retreat 
is elimininated and the placement of ``white collar'' Demonstration 
Project employees is restricted to no more than one broad band level 
below the employee's current level, except that for a preference 
eligible with a compensable service connected disability of 30 percent 
or more, the limit is two broad band levels (or the equivalent of five 
General Schedule grades) below the employee's present level.''
Part 430, Subpart B: Performance appraisal for General Schedule, 
Prevailing Rate and certain other employees: Employees under the 
Demonstration project will not be subject to the requirements of this 
subpart.
Part 432: Modified to the extent that an employee may be removed, 
reduced in band level with a reduction in pay, reduced in pay without a 
reduction in band level and reduced in band level without a reduction 
in pay based on unacceptable performance. Also modified to delete 
referenced to critical element. For employees who are reduced in band 
level without a reduction in pay, Sections 432.105 and 432.106(a) do 
not apply, except that such sections continue to apply to preference 
eligible employees.
Part 432, Section 432.104 and .105: Proposing and Taking Action Based 
on Unacceptable Performance: In so far as references to ``critical 
elements'' are deleted and adding that the employee may be ``reduced in 
grade or pay or removed'' if performance does not improve to acceptable 
levels after a reasonable opportunity. In addition, requirements waived 
to the extent that a reduction in band level is taken based on skill 
utilization criteria when there is no reduction in pay.
Part 511, Section 511.201: Coverage of and exclusions from the General 
Schedule. (To the extent that White Collar positions are covered by 
broad banding. Pay category determination criteria for Federal Wage 
System positions remain unchanged.)
Part 511, Section 511.601: Classification appeals--modified to the 
extent that white collar positions established under 5 U.S.C. 4703, 
although specifically excluded from Title 5, are covered by the 
classification appeal process outlined in this section, as amended 
below.
Part 511, Section 511.603(a): Right to appeal--substitute ``band'' for 
grade.
Part 511, Section 511.607(b): Non Appealable Issues--add to the list of 
issues which are neither appealable nor reviewable, ``the assignment of 
series under 5 U.S.C. 4703 to appropriate career paths.''

[[Page 8603]]

Part 530, Subpart C: Special Salary Rates.
Part 531, Subparts B, D, and E: Determining The Rate of Basic Pay, 
Within-Grade Increases, and Quality Step Increases.
Part 531, Subpart C and F: Special Pay Adjustments for Law Enforcement 
Officers and Locality-Based Comparability Payments. (Only to the extent 
necessary to allow Demonstration Project employees covered by broad 
banding to be treated as General Schedule employees and to allow basic 
rates of pay under the demonstration project to be treated as scheduled 
annual rates of pay.) (This waiver does not apply to FWS employees. 
This waiver does not apply to SL/ST employees who continue to be 
covered by these provisions, as appropriate.)
Part 536: All provisions pertaining to grade retention.
Part 536, Section 536.104: Pay Retention. (Only to the extent necessary 
to provide that pay retention does not apply to--(1) conversions from 
General Schedule special rates to Demonstration project pay and 
reallocations of Demonstration project pay rates within special rate 
extensions to locality adjusted pay rates due to promotions or general 
or locality pay increases, as long as the employee's total rate of pay 
is not reduced; and (2) reductions in basic pay due solely to the 
operation of the pay setting rules for geographic movement within the 
Demonstration Project.)
Part 550, Section 550.703: Severance Pay. (Modify the definition of 
``reasonable offer'' by replacing ``two grade or pay levels'' with 
``one band level'' and ``grade or pay level'' with ``band level''.) 
(This waiver does not apply to FWS employees.)
Part 550, Section 550.902, definition of ``employee'': Hazardous Duty 
Pay. (Only to the extent necessary to treat demonstration project 
employees covered by broad banding as General Schedule employees.) 
(This waiver does not apply to FWS and SL/ST employees.)
Part 575, Subparts A, B, C, and D: Recruitment Bonuses, Relocation 
Bonuses, Retention Allowances, and Supervisory Differentials. (Only to 
the extent necessary to allow employees and positions under the 
demonstration project covered by broad banding to be treated as 
employees and positions under the General Schedule.) (This waiver does 
not apply to FWS employees. This waiver does not apply to SL/ST 
employees who continue to be covered by these provisions, as 
appropriate.)
Part 591, Subpart B: Cost-of-Living Allowances and Post Differential-
Nonforeign Areas. (To the extent necessary to allow demonstration 
project employees covered by broad banding to be treated as employees 
under the General Schedule.) (This waiver does not apply to FWS 
employees. This waiver does not apply to SL/ST employees who continue 
to be covered by these provisions, as appropriate.)
Part 752: Section 752.401(a)(3): To the extent necessary to exclude 
reductions in band level not accompanied by a reduction in pay taken 
under Chapter 43.
Part 752: Section 752.401(a)(4): Adverse Action. (Only to the extent 
necessary to provide that adverse action provisions do not apply to--
(1) conversions from General Schedule special rates to Demonstration 
project pay and reallocations of Demonstration project pay rates within 
special rate extensions to locality adjusted pay rates due to 
promotions or general or locality pay increases, as long as the 
employee's total rate of pay is not reduced; and (2) reductions in 
basic pay due solely to the operation of the pay setting rules for 
geographic movement within the demonstration project.)

VI. Cost

    The goal of this Demonstration Project is the implementation of a 
system in which payroll costs and resource utilization can be 
controlled consistent with the organization's larger fiscal strategies. 
This is especially critical in our industrially funded (DBOF) 
environment. The continued economic viability of the DBOF activities 
depends in large measure on controlling expenditures and remaining cost 
competitive with other organizations. This Demonstration Project 
proposes a system of pay incentives and processes that are flexible and 
can operate in harmony with the organization's operational needs and 
the financial needs of the larger organization. The costs of project 
implementation will be borne by the Divisions/sites.
    Costs associated with the development of the Demonstration project 
include software automation, training and project evaluation. All 
funding will be provided through the Warfare Centers budget. Training 
costs will be approximately $192K per thousand employees. The timing of 
the expenditure will be site specific and dependent upon the 
implementation schedules. Because automation requirements will be 
minimized as a result of system similarities to existing Navy 
Demonstration Projects, costs are estimated at $100K for the first two 
years of project implementation. Evaluation costs are estimated at 
approximately $60K per year.

VII. Project Oversight and Management

    Project oversight and management will be carried out by the Warfare 
Center's Executive Group, composed of the Commanders and Technical 
Directors of the two Warfare Centers. They will be assisted by the 
Demonstration Project Management Office and the Steering Committee. 
(See Figure 5)
    The Steering Committee, chaired by a senior executive or senior 
Navy officer appointed by the Executive Group, is comprised of a senior 
member of each Division of the Warfare Centers, and a member from the 
American Federation of Government Employees, Metal Trades Council, 
International Association of Machinists, National Association of 
Government Employees, National Federation of Federal Employees, and 
Fraternal Order of Police. This group serves as an advisory body to the 
Executive Group which makes final decisions on the Demonstration 
Project proposal and implementation. The role of the Steering Committee 
is to aggregate and analyze incoming data from formal and informal 
evaluations and make recommendations. It may also include facilitating 
information sharing, mediating impasses, and promotion of partnership 
roles.

BILLING CODE 6325-01-P

[[Page 8604]]

[GRAPHIC] [TIFF OMITTED] TN25FE97.010



BILLING CODE G325-01-C

Appendix A: Employee/Union Involvement Methodology

    From the inception of the Naval Sea Systems Command Warfare 
Centers' Personnel Demonstration Project, employee involvement in 
crafting the Project Proposal was viewed as essential to producing a 
plan that considered the needs of all parties. National union 
representatives participated as members of the Steering Committee which 
developed the Personnel Demonstration Project Proposal and will be 
overseeing its implementation. While the process that produced the 
Project Proposal was a collaborative one, union participation did not 
necessarily constitute full and complete endorsement of all details of 
the Proposal.
    At the Warfare Centers' various Divisions and sites, employees and 
unions are involved through a variety of communications strategies. 
Within the Divisions, communications teams composed of a cross section 
of the workforce have been formed for the purpose of disseminating 
information about the project as well as a focal point for employee 
questions. Further, Divisions are establishing groups or committees to 
help guide the implementation of the Project throughout the 
organization. This model of broad participation is envisioned to 
continue throughout the life of the Demonstration Project.

Unions Represented

Dahlgren, VA--American Federation of Government Employees
White Oak, MD--American Federation of Government Employees; Metal 
Trades Council
Panama City, FL--National Federation of Federal Employees
Crane, IN--American Federation of Government Employees; Fraternal Order 
of Police
Louisville, KY--International Association of Machinists & Aerospace 
Workers
Carderock, MD--Metal Trades Council; Federal Firefighters Association; 
Pattern Maker Association
Annapolis, MD--National Federation of Federal Employees
Philadelphia, PA--Metal Trades Council; Fraternal Order of Police; 
International Association of Firefighters
Ft. Lauderdale, FL--American Federation of Government Employees
Port Hueneme, CA--National Association of Government Employees; Federal 
Union of Scientists and Engineers
Indian Head, MD--American Federation of Government Employees; 
International Association of Firefighters; International Association of 
Machinists and Aerospace Workers
McAlester, OK--American Federation of Government Employees
Keyport, WA--Metal Trades Council
Newport, RI--National Association of Government Employees; Federal 
Union of Scientists and Engineers
New London, CT--National Association of Government Employees

Appendix B: Project Evaluation and Oversight

Intervention Impact Model--DOD Lab Demonstration Program

                                                 1. Compensation                                                
----------------------------------------------------------------------------------------------------------------
             Intervention                  Expected effects             Measures               Data sources     
----------------------------------------------------------------------------------------------------------------
a. Broad banding.....................  --Increased              --Perceived flexibility  --Attitude survey.     
                                        organizational                                                          
                                        flexibility.                                                            
                                       --Reduced                --Actual perceived time  --Personnel office     
                                        administrative           savings.                 data, PME results,    
                                        workload, paperwork                               attitude survey.      
                                        reduction.                                                              
                                       --Advanced in-hire       --Starting salaries of   --Workforce data.      
                                        rates.                   banded v. non-banded                           
                                                                 employees.                                     

[[Page 8605]]

                                                                                                                
                                       --Slower pay             --Progression of new     --Workforce data.      
                                        progression at entry     hires over time by                             
                                        levels.                  band, career path.                             
                                       --Increased pay          --Mean salaries by       --Workforce data.      
                                        potential.               band, career path,                             
                                                                 demographics.                                  
                                       --Increased              --Employee perceptions   --Attitude survey.     
                                        satisfaction with        of advancement.                                
                                        advancement.                                                            
                                       --Increased pay          --Pay satisfaction,      --Attitude survey.     
                                        satisfaction.            internal/external                              
                                                                 equity.                                        
                                       --Improved recruitment.  --Offer/acceptance       --Personnel office     
                                                                 ratios--Percent          data.                 
                                                                 declinations.                                  
                                       --No change in high      --Number/percentage of   --Workforce data.      
                                        grade (GS-14)            high grade salaries                            
                                        distribution.            pre/post banding.                              
b. Conversion buy-in.................  --Employee acceptance..  --Employee perceptions   --Attitude survey.     
                                                                 of equity, fairness.                           
                                                                --Cost as a percent of   --Workforce data.      
                                                                 payroll.                                       
----------------------------------------------------------------------------------------------------------------


                                            2. Performance Management                                           
----------------------------------------------------------------------------------------------------------------
             Intervention                 Expected benefits             Measures               Data sources     
----------------------------------------------------------------------------------------------------------------
a. Cash awards/bonuses...............  --Reward/motivate        --Perceived              --Attitude survey.     
                                        performance.             motivational power.                            
                                       --To support fair and    --Amount and number of   --Workforce data.      
                                        appropriate              awards by career path,                         
                                        distribution of awards.  demographics.                                  
                                                                --Perceived fairness of  --Attitude survey.     
                                                                 awards.                                        
                                                                --Satisfaction with      --Attitude survey.     
                                                                 monetary awards.                               
b. Performance/contribution based pay  --Increased pay-         --Perceived pay-         --Attitude survey.     
 progression.                           performance link.        performance link.                              
                                                                --Perceived fairness of  --Attitude survey.     
                                                                 ratings.                                       
                                       --Improved performance   --Satisfaction with      --Attitude survey.     
                                        feedback.                ratings.                                       
                                                                --Employee trust in      --Attitude survey.     
                                                                 supervisors.                                   
                                                                --Adequacy of            --Attitude survey.     
                                                                 performance feedback.                          
                                       --Decreased turnover of  --Turnover by            --Workforce data.      
                                        high performers;         performance rating                             
                                        increased turnover of    category.                                      
                                        low performers.                                                         
                                       --Differential pay       --Pay progression by     --Workforce data.      
                                        progression of high/     performance rating                             
                                        low performers.          category, career path.                         
                                       --Alignment of           --Linkage of             --Performance          
                                        organizational and       performance              expectations,         
                                        individual performance   expectations to          strategic plans;      
                                        expectations and         strategic plans/goals;   attitude survey/focus 
                                        results.                 performance              groups.               
                                                                 expectations;                                  
                                                                 perceived involvement.                         
                                       --Increased employee     --Performance            --Attitude survey/focus
                                        involvement in           management procedures.   groups; personnel     
                                        performance planning                              regulations.          
                                        and assessment.                                                         
c. New appraisal process.............  --Reduced                --Employee and           --Attitude survey.     
                                        administrative burden.   supervisor perception                          
                                                                 of revised procedures.                         
                                       --Improved               --Perceived fairness of  --Focus group.         
                                        communication.           process.                                       
d. Performance development...........  --Better communication   --Feedback and coaching  --Focus groups.        
                                        of performance           procedures used.                               
                                        expectations.                                                           
                                       --Improved satisfaction  --Organizational         --Attitude surveys.    
                                        and quality of           commitment.                                    
                                        workforce.                                                              
                                                                --Perceived workforce    --Attitude survey.     
                                                                 quality.                                       
----------------------------------------------------------------------------------------------------------------


                                       3. ``White Collar'' Classification                                       
----------------------------------------------------------------------------------------------------------------
             Intervention                  Expected effects             Measures               Data sources     
----------------------------------------------------------------------------------------------------------------
a. Improved classification systems     --Reduction in amount    --Time savings;          --Personnel office     
 with generic standards.                of time and paper-work   reduction of paper       data.                 
                                        spent on                 work/number of                                 
                                        classification.          personnel actions                              
                                                                 (classification/                               
                                                                 promotions).                                   
                                       --Ease of use..........  --Managers' perceptions  --Attitude survey.     
                                                                 of time savings, ease                          
                                                                 of use, improved                               
                                                                 ability to recruit.                            
                                       --Improved recruitment   --Perceived quality of   --Focus groups/        
                                        of employees with        recruits.                Interviews.           
                                        appropriate skills.                                                     
                                                                --GPA's of new hires,    --Personnel office     
                                                                 education levels.        data.                 

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b. Classification authority delegated  --Increased supervisory  --Perceived authority..  --Attitude survey.     
 to managers.                           authority/                                                              
                                        accountability.                                                         
                                       --Decreased conflict     --Number of              --Personnel records.   
                                        between management and   classification                                 
                                        personnel staff.         disputes/appeals pre/                          
                                                                 post.                                          
                                                                --Management             --Attitude survey.     
                                                                 satisfaction with                              
                                                                 service provided by                            
                                                                 personnel office.                              
                                       --No negative impact on  --Internal pay equity..  --Attitude survey.     
                                        internal pay equity.                                                    
c. Dual career ladder................  --Increased flexibility  --Assignment             --Focus groups,        
                                        to assign employees.     flexibility.             surveys.              
                                                                --Sup/non-sup ratios...  --Workforce data.      
                                       --Improved internal      --Perceived internal     --Attitude survey.     
                                        mobility.                mobility.                                      
                                       --Increased pay equity.  --Perceived pay equity.  --Attitude survey.     
                                       --Flatter organization.  --Supervisory/non-       --Workforce data.      
                                                                 supervisory ratios.                            
                                       --Improved quality of    --Employee perceptions   --Attitude survey.     
                                        supervisory staff.       of quality of                                  
                                                                 supervisors.                                   
----------------------------------------------------------------------------------------------------------------


                                             4. Staffing/Recruitment                                            
----------------------------------------------------------------------------------------------------------------
             Intervention                 Expected benefits             Measures                   Data         
----------------------------------------------------------------------------------------------------------------
Competitive examining and categorical  --Improved hiring        --Management             --Attitude survey.     
 grouping.                              process.                 satisfaction with                              
                                                                 hiring process, time                           
                                                                 to hire, perceived                             
                                                                 quality of new hires.                          
                                       --increased quality of   --GPA's of new hires,    --Personnel office data
                                        hires.                   education levels.        (from issue of Form 52
                                                                                          to referral of        
                                                                                          candidates).          
                                       --Increased timeliness.  --Time to fill           --Attitude survey.     
                                                                 positions.                                     
                                       --No negative impact on  --Candidate/employee                            
                                        fairness of process,     satisfaction.                                  
                                        openness to                                                             
                                        competition.                                                            
----------------------------------------------------------------------------------------------------------------


                                                     5. RIF                                                     
----------------------------------------------------------------------------------------------------------------
             Intervention                  Expected effects             Measures               Data sources     
----------------------------------------------------------------------------------------------------------------
Modified RIF.........................  --Prevent loss of high   --Separated employees    --Workforce data;      
                                        performing employees     by demographics,         attitude survey/focus 
                                        with needed skills.      performance.             groups.               
                                       --Contain cost and       --Satisfaction with RIF  --Attitude survey/focus
                                        disruption.              process.                 groups.               
                                                                --Cost comparisons of    --Rightsizing and      
                                                                 traditional v.           documenting systems/  
                                                                 modified RIF; time to    personnel office/     
                                                                 conduct RIF; number of   budget data.          
                                                                 appeals/reinstatements.                        
----------------------------------------------------------------------------------------------------------------


                                       6. Combination of All Interventions                                      
----------------------------------------------------------------------------------------------------------------
             Intervention                  Expected effects             Measures               Data sources     
----------------------------------------------------------------------------------------------------------------
All..................................  --Improved               --Combination of         --All data sources.    
                                        organizational           personnel measures.                            
                                        effectiveness.                                                          
                                       --Improved management    --Employee/management    --Attitude survey.     
                                        of R&D workforce.        satisfaction.                                  
                                       --Improved planning....  --Planning procedures..  --Strategic planning   
                                                                                          documents.            
                                       --Improved cross         --Perceived              --Attitude survey;     
                                        functional               effectiveness of         organizational charts.
                                        coordination.            planning procedures.                           
                                                                --Actual/perceived       --Attitude survey.     
                                                                 coordination.                                  
                                       --Increased product      --Customer satisfaction  --Customer satisfaction
                                        success.                                          surveys.              
                                       --Cost of innovation...  --Project training/      --Demo project office  
                                                                 development cost         records; contract     
                                                                 (staff salaries,         documents.            
                                                                 contract cost,                                 
                                                                 Training hours per                             
                                                                 employee).                                     
----------------------------------------------------------------------------------------------------------------


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                                                   7. Context                                                   
----------------------------------------------------------------------------------------------------------------
             Intervention                  Expected effects             Measures               Data sources     
----------------------------------------------------------------------------------------------------------------
a. Regionalization...................  --Reduced servicing      --HR servicing ratios..  --Attitude survey.     
                                        ratios/cost.                                                            
                                       --No negative impact on  --Average cost per       --Workforce data.      
                                        service quality.         employee served.                               
                                                                --Service quality,       --Attitude survey/     
                                                                 timeliness.              focus groups.         
b. GPRA..............................  --Improved               --Other measures to be   --As established.      
                                        organizational           developed.                                     
                                        performance.                                                            
----------------------------------------------------------------------------------------------------------------

[FR Doc. 97-4761 Filed 2-21-97; 1:08 pm]
BILLING CODE 6325-01-P