5044 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

OFFICE OF PERSONNEL 

MANAGEMENT 

Personnel Demonstration Project; 

Alternative Personnel Management 

System for the U.S. Department of 

Agriculture, Food Safety and 

Inspection Service 

AGENCY: U.S. Office of Personnel 

Management. 

ACTION: Notice of approval of a 

demonstration project final plan. 

SUMMARY: Chapter 47 of title 5, United 

States Code, authorizes the U.S. Office 

of Personnel Management (OPM), 

directly or in agreement with one or 

more agencies, to conduct 

demonstration projects that experiment 

with new and different human resources 

management concepts to determine 

whether changes in human resources 

policy or procedures result in improved 

Federal human resources management. 

The Food Safety and Inspection Service 

(FSIS), the U.S. Department of 

Agriculture (USDA), and OPM will test 

a results-based, competency-linked payfor-performance system that is 

combined with a simplified, pay 

banding classification and 

compensation system. The final project 

plan has been approved by FSIS, USDA, 

and OPM. 

DATES: This demonstration project will 

be implemented on July 19, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Food Safety and Inspection Service: 

Laurie Lindsay, Director, HR 

Demonstration Project Staff, (202) 720– 

7983, 1400 Independence Avenue, SW., 

Room 2134 South Building, 

Washington, DC 20250. Office of 

Personnel Management: Patsy Stevens, 

Systems Innovation Group Manager, 

(202) 606–1574, U.S. Office of Personnel 

Management, 1900 E Street, NW., Room 

7456, Washington, DC 20415. 

SUPPLEMENTARY INFORMATION: 

1. Background 

FSIS is a premier public health 

regulatory agency that continually 

invests in human capital. In order to 

continue agency success in performing 

a range of food safety, food defense, and 

public health regulatory missions over 

the next decade, FSIS requires an 

innovative human resources (HR) 

system. FSIS has an expanded mission 

responsibility for food defense, 

biosecurity, and public health science 

and is no longer just limited to the 

inspection of meat, poultry, and 

processed egg products. FSIS must 

assure science-based development and 

execution of policy and must also 

emphasize risk-oriented assessment, 

planning, analysis, inspection, and 

management activities. 

This growing list of advanced public 

health functions along with the USDA 

strategic human capital plan and the 

President’s Management Agenda 

requires FSIS to manage human capital 

in the 21st century very aggressively. In 

the absence of enabling legislation, FSIS 

made the decision in 2005 to pursue the 

opportunity to propose a demonstration 

project in collaboration with OPM in an 

effort to address its human capital 

challenges. 

As the Federal Government’s 

workforce as a whole continues to 

experience significant changes, FSIS has 

been confronted with several 

considerable challenges that are driving 

the need for this demonstration project. 

FSIS faces critical shortages in the 

number of positions, such as public 

health veterinarians and other scientists 

and are threatened with the task of 

replacing an aging workforce. The 

average age of mission-critical 

employees is between 50 and 53 years 

old. The retirement eligibility within the 

next ten years is near 50 percent. 

FSIS also continues to experience 

shortages and turnover in spite of our 

aggressive use of recruitment and 

retention incentives (over $1 million 

annually), use of direct hire, and a new 

entry level for public health 

veterinarians. Moreover, almost 375,000 

Federal employees outside of USDA are 

covered by alternative performancebased pay systems. As more Federal 

employees transition into new pay 

systems, USDA will be one of the largest 

executive departments still covered by a 

less performance sensitive pay system 

which will significantly impede its 

ability to recruit and retain employees. 

Through the demonstration project, 

FSIS will be able to take a proactive role 

in finding solutions to all of these 

challenges in order to attract the best 

qualified candidates and to retain and 

motivate its current workforce. It will 

also simplify the current classification 

system for greater flexibility in 

classifying work and paying employees; 

improve hiring by allowing FSIS to 

compete more effectively for high 

quality employees through the judicious 

use of higher entry salaries; reaffirm the 

performance management and rewards 

system for improving individual and 

organizational performance; eliminate 

automatic pay increases (i.e., annual 

adjustments that normally take effect 

the first pay period beginning on or after 

January 1) by making pay increases 

performance sensitive, so that only 

Fully Successful and higher performers 

will receive payouts and the best 

performers will receive the largest 

payouts; test the effectiveness of multigrade pay bands in recruiting, 

advancing, and retaining employees; 

and improve the retention of highperforming employees in developmental 

positions by testing the use of 

developmental pay increases to 

recognize the faster progression that can 

occur in these positions. 

By implementing a modern human 

resources management system that 

supports and protects this critical role 

in public health, food safety, and food 

security, FSIS will be better prepared in 

serving the general public by ensuring 

the nation’s commercial supply of meat, 

poultry, and processed egg products are 

safe, wholesome, and correctly labeled 

and packaged. 

2. Overview 

The FSIS Demonstration Project 

proposal was approved by OPM and 

publicized in the Federal Register on 

May 9, 2008. Prior to publication, the 

agency’s program managers were briefed 

on the various management and mission 

implications of the project. There was a 

30-day public comment period 

immediately following publication of 

the proposed demonstration project 

plan in the Federal Register, 

culminating in a public hearing on June 

26, 2008, held at USDA Headquarters in 

Washington, DC. A total of 44 

individuals, mostly FSIS employees, 

and 1 employee organization submitted 

written comments and questions. Six 

individuals and the employee 

organization provided comments and 

asked questions at the public hearing. 

Many of the commenters offered 

multiple comments and questions. A 

total of 154 different comments and 

questions were received, with several of 

them duplicative. Comments covered a 

number of different management and 

HR topical areas, and in some cases, 

pertained to more than one topic. The 

topics that received the largest number 

of comments and questions related to 

management accountability (41), pay 

and pay pools (27) and staffing (24). 

Other topical issues receiving numerous 

comments/questions related to 

performance management (21), 

employee relations (8), and labor 

relations (7). There were seven 

comments on career paths and pay 

bands and two comments on project 

evaluation. An additional 17 comments 

and questions did not fall into one of 

the above topical areas. Every comment 

and question received was extremely 

important, as each helped to focus on an 

examination of the project plan and 

better understand the long-term 

management and employee implications 

of the project. Public comments and 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5045 

questions often served as the catalyst to 

raising additional questions on the part 

of top management. As a result of public 

comments received, FSIS has made 

some refinements to its plan and a few 

clarifying editorial and textual changes 

as well. 

3. Summary of Comments and 

Responses 

Comments are arranged into nine 

broad topical areas (including a 

miscellaneous ‘‘other’’ category) that 

correspond to the topics identified in 

the previous section and are presented 

not in an order dictated by the number 

of comments received, but in an order 

that reflects the logic of the project’s 

design scheme and contents (i.e., in a 

topical order beginning with pay 

banding and classification, and 

devolving through pay, staffing, 

management accountability, 

performance management, employee 

relations, labor relations, and project 

evaluation). FSIS’ responses are generic 

summaries relative to major issues 

raised by comments and questions 

rather than point-by-point responses. 

(a) Career Paths and Pay Bands 

There were several comments about 

the proposed career paths and pay band 

structure including a question about the 

occupational series covered by the 

Administrative, Professional and 

Scientific Career Path and comments 

that pay bands have an adverse impact 

on career development and on 

supervisors. 

(1) Career Paths 

Comments: A question was raised 

concerning the occupational series 

coverage for the Administrative, 

Professional, and Scientific Career Path. 

There was a perception that General 

Schedule (GS) Compliance Investigator 

positions (GS–1801) were not covered 

by this career path since this occupation 

does not have a positive education 

requirement and a path is needed to 

include investigators. There was also a 

comment questioning the placement of 

employees whose jobs do not require 

higher educational credentials or a 

positive education requirement in the 

same band with employees whose jobs 

do require credentials and a positive 

education. 

Response: In designing the proposed 

career paths, FSIS wanted to take the 

broadest approach that made sense 

given the nature of the work performed 

and the nature of the occupations 

requiring this work. The broader the 

design approach, the more employees 

are treated alike and the simpler it is to 

administer pay banding. Employee 

equity and systemic simplification are 

key goals of this project. In deciding on 

the original career path proposal, FSIS 

opted to essentially build its career 

paths using OPM’s white-collar 

‘‘PATCO’’ categories. The PATCO 

scheme encompasses extremely broad 

groupings of white-collar occupational 

categories, largely based on differences 

in the nature of work and the essential 

job knowledge required to successfully 

perform the work (for instance, whether 

work accomplishment requires certain 

educational attainments, or analytical 

ability, or subject-matter competencies, 

and so on). OPM defines each distinct 

occupational job series according to 

whether work is professional (‘‘P’’), 

administrative (‘‘A’’), technical (‘‘T’’), 

clerical (‘‘C’’), or falls into a 

miscellaneous others (‘‘O’’) category. 

The Administrative, Professional, and 

Scientific Career Path includes all jobs 

that have a 2-grade interval career 

progression (e.g., GS–5, 7, 9, 11, 12, 13, 

14, 15, or any combination of these 

grades). This career path includes 

professional positions with a positive 

education requirement as well as 

administrative positions without a 

positive education requirement like GS– 

1801 Compliance Investigators. Using 

one career path for these 2 categories of 

positions ensures the greatest flexibility 

in pay setting and pay progression. The 

decision to include professional and 

administrative jobs in the same career 

paths was based on a review of the 

current classification and pay 

progression for most jobs in FSIS. 

Educational credentials are important 

for many of FSIS’ occupations and will 

continue to be used to make minimum 

qualifications determinations, where 

needed, upon appointment. For jobs 

where education can be substituted for 

experience, it may also positively 

impact the pay band a candidate is 

ultimately placed in at appointment. In 

FSIS, jobs that are either 

‘‘administrative’’ or ‘‘professional’’ have 

very similar grade level progressions 

under the GS system, irrespective of the 

educational requirements of the job. 

Therefore, it was determined that these 

positions would be appropriately placed 

together in the Administrative, 

Professional, and Scientific Career Path 

which includes all jobs that have a 2- 

grade interval progression (e.g., GS–5, 7, 

9, 11, etc.) in order to facilitate system 

simplification without compromising 

classification principles. 

(2) Pay Band Structure 

Comments: Several comments were 

made regarding the pay band structure 

that FSIS has established. There was a 

question as to whether FSIS plans to 

include non-supervisory employees and 

supervisory employees within the same 

bands. There was also a comment that 

banding grades together such as GS–12 

and 13, or GS–13 and 14, without 

competition would be similar to a 

demotion for employees currently 

classified at the higher of the two 

grades. There was a question regarding 

why senior executives were not covered 

under the project and a comment that 

eligibility to the Senior Executive 

Service Candidate Development 

Program (SESCDP) could be 

compromised because of the proposed 

supervisory pay band structure. One 

commenter also stated that employees 

with disabilities, especially those with 

targeted disabilities, tended to be in the 

lower pay bands in other Federal payfor-performance programs and that the 

elimination of within-grade increases 

and implementation of pay banding 

would adversely impact pay progression 

for employees with disabilities. 

Response: FSIS reviewed the 

proposed pay band structure and 

determined that no changes are needed. 

With respect to placing supervisory and 

non-supervisory employees in the same 

band, FSIS notes that the proposed 

project did not originally include 

supervisors in the same band as nonsupervisory employees unless the nonsupervisory technical work of the 

position is at a higher level than the 

supervisory work. This occurs 

principally with the GS–701 

Supervisory Public Health Veterinarian 

working in a plant where the 

supervisory work is at a lower level than 

the nonsupervisory veterinary work 

performed. Therefore, they are placed in 

the non-supervisory Pay Band 4 of the 

Administrative, Professional, and 

Scientific Pay Band. The FSIS 

Demonstration Project Policies and 

Procedures Handbook will provide 

guidance to further clarify the bands 

and career paths. 

FSIS disagrees with the comment that 

combining two or more grades in one 

band is similar to a demotion as several 

gradations of work are possible within 

a given pay band. In essence, pay 

banding assumes that different 

employees in the same career path, job 

series, and pay band of a properly 

classified position can operate at 

differing levels—within reason—due to 

variations in incumbent maturity 

(seasoning) and performance. In this 

circumstance, equal pay for equal work 

is not compromised even though one 

employee may be earning higher pay 

than another employee in the same pay 

band. In a fundamental respect, this is 

no different than disparities in pay that 

occur between employees in the same 


sroberts on PROD1PC70 with NOTICES
5046 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

properly classified GS–13 position 

where one employee is earning a GS–13, 

step 2, rate and another is earning a GS– 

13, step 9, rate. In addition, it is felt that 

the new pay band structure is actually 

more consistent with the manner in 

which most positions operate. For 

example, the main difference between 

two grades may simply be that 

supervisory controls are closer and/or 

guidelines are more defined at the lower 

grade. Oftentimes, classifiers use 

‘‘statements of difference’’ which 

indicate that the position performs the 

same work at both grades but 

supervisory controls are closer and 

guidelines are more defined. Combining 

two grades into a single pay band, for 

example, shifts the focus of the 

employee pay advancement from 

position classification and merit 

promotion criteria to performance-based 

pay criteria, one of the chief goals of the 

demonstration project. This shift in preeminence from classification and 

promotion criteria to performance also 

occurs in the examples of other pay 

bands in other occupational career 

paths, and serves in the aggregate to 

underscore how pay-banding 

intrinsically enhances the potential 

effectiveness of a performance-based 

pay system. As the demonstration 

project is reviewed and evaluated over 

time, OPM and FSIS will make 

decisions on whether an adjustment to 

the band structure is warranted. 

With respect to the comment that 

eligibility for the SESCDP may be 

compromised by the proposed pay band 

placement structure, FSIS disagrees and 

does not believe the band structure will 

adversely impact an employee’s 

eligibility for the program. The USDA 

SESCDP program is open to those who 

are at the GS–14 or 15 grade level or 

equivalent who are interested in 

applying and meet the qualifications 

requirements for the program. The 

proposed pay band 5S and 6S in the 

Administrative, Professional, and 

Scientific Career Path is considered 

equivalent to the GS–13/14 and GS–15 

under the General Schedule, 

respectively. FSIS applicants who 

convert into the project at Band 5S or 

6S and later apply to the SESCDP 

should not be adversely impacted by 

being in either pay band. Ultimately, as 

with any competitive process, the 

quality of the employee’s application 

package which includes job experience 

will weigh most heavily in the final 

selection decision. It is also noted that 

Senior Executive Service employees are 

not participating in the project as they 

are already covered under a pay-forperformance system. 

In response to the comment that 

employees with disabilities tend to be at 

the lower pay bands in Federal pay-forperformance programs and will be 

adversely impacted by pay banding and 

the elimination of within-grade 

increases, FSIS noted that employees in 

lower pay bands will be entitled to the 

same benefits and opportunities for 

performance payouts made available to 

employees in the highest pay bands. 

Although there was no reference cited 

for the data source that employees with 

disabilities tend to be at lower pay 

bands in other pay-for-performance 

systems, a review of the FSIS workforce 

data shows that as of September 2008, 

71 percent of FSIS employees with 

disabilities are at the GS–12 through 

GS–15 grade levels. Therefore, with a 

substantive number of FSIS employees 

with disabilities converting into the 

project at the highest pay bands, the 

comment is not substantiated for FSIS. 

It is noted that although within-grade 

increases will no longer be in effect, pay 

increases will be provided to all 

employees who perform at the ‘‘Fully 

Successful’’ level or higher, including 

employees with targeted disabilities. 

The demonstration project will uphold 

the enduring values and principles 

upon which the Civil Service was 

founded and protect employee’s 

fundamental rights and due process. 

While the demonstration project 

provides broad discretion in managing 

and compensating employees, actions 

taken by supervisors and managers must 

be based on legitimate, nondiscriminatory reasons and protections 

against Prohibited Personnel Practices 

remain. Plans are being made to 

distribute a handout outlining the Merit 

System Principles, Prohibited Personnel 

Practices, and protections against 

employment discrimination on the bias 

of national origin, religion, color, race, 

age, sex, sexual harassment, and mental 

or physical disability. Finally, 

individuals who believe they have been 

discriminated against will have the 

same legal rights and protections under 

the demonstration project as were 

afforded to them prior to conversion. 

(b) Pay and Pay Pools 

Comments: Several commenters 

posed questions seeking further 

clarification on how FSIS plans to 

establish, manage, and fund the pay 

pools. For instance, there were 

comments and questions relating to the 

size of the pay pools, composition of the 

pools, and share distribution. Concern 

was also raised regarding the adequacy 

of pay pool funding and the possible 

disparity of funds in the pools of 

differing sizes. There was a concern that 

there is a potential for employees in 

different pools with the same rating 

receiving different pay increases. 

Comments were also received about 

the merits of denying a pay increase to 

employees who receive a performance 

rating of less than ‘‘Fully Successful.’’ 

Commenters also expressed the opinion 

that a ‘‘cost of living’’ increase should 

not be dependent upon performance; 

therefore, employees should be entitled 

to receive the increases associated with 

the annual general increase and locality 

pay increase regardless of performance. 

One commenter inquired whether a 

lump sum is given to employees 

receiving an ‘‘Outstanding’’ rating who 

are at the top of the band or if the money 

and shares are returned to the pay pool 

for recalculation and distribution. 

Another commenter provided a 

recommendation for handling pay when 

the employee is at the maximum rate of 

the pay band by suggesting that FSIS 

provide an option for either issuing a 

monetary award or diverting the pay 

into the employee’s retirement account. 

Some commenters had concerns that 

loyalty or longevity or seniority would 

no longer be factors in determining pay, 

and the security that longevity afforded 

employees would be jeopardized under 

the demonstration project. 

Response: A significant component of 

the demonstration project is the 

performance pay pool which will be 

used to distribute performance pay 

increases. The pay pool helps ensure 

that ratings, shares, and performance 

payouts are distributed consistently and 

fairly among those who are in the pool. 

Once a pay pool is established, 

employees in the pay pool who receive 

a performance rating of ‘‘Fully 

Successful’’ or higher are eligible for a 

performance payout. Employees in the 

pay pool whose performance ratings are 

below ‘‘Fully Successful’’ will not be 

eligible to receive an increase. 

In designing the pay pools, several 

factors will be taken into consideration. 

While there is no formula in place to 

determine the size and composition of 

a pay pool, there are some general 

guidelines and benchmarks that FSIS 

considered in determining the best 

approach for the agency to take when 

designing pay pools. A pay pool that is 

too large can be cumbersome to manage. 

FSIS will provide guidance on the 

structure and administration of the pay 

pools in the FSIS Demonstration Project 

Policies and Procedures Handbook. 

In terms of funding the pay pools, 

funds that would otherwise have been 

paid to demonstration project 

employees for the annual GS pay 

adjustment, within-grade increases, and 

quality step increases will be used to 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5047 

fund the pay pools. Since FSIS 

historically allocates monies to the 

salary budget on an annual basis for 

each of these increases, it is anticipated 

that FSIS will have sufficient funds for 

the pay pools. Since these increases 

have been historically paid to FSIS 

employees, the funding for these 

increases will continue under the 

demonstration project; however, the 

funds will be distributed differently in 

the form of performance pay increases. 

With respect to the concern regarding 

the possible disparity of funds in the 

pools of differing sizes and the potential 

for employees to be inequitably 

rewarded, FSIS notes that it will use the 

same percentage factor for all pay pools. 

Thus, the pay increase is a function of 

the rating and the share distribution 

within the pool. The higher the rating, 

the more shares an employee will 

receive. For example, those rated 

‘‘Outstanding’’ receive 9 shares, 

‘‘Superior’’ receive 6 shares, and ‘‘Fully 

Successful’’ receive 4 shares. No shares 

are given to those with less than a 

‘‘Fully Successful’’ rating. However, this 

does not imply a forced distribution of 

ratings, which is not allowed under this 

project. To help facilitate a fair rating 

distribution under a pay-forperformance system, it will be 

extremely important for ratings to be 

well-supported by documentation and 

specific results, and for standards to be 

clear and measure what is important in 

the job and what it takes to exceed a 

performance element. Ensuring ratings 

are fair and consistent across program 

areas and that the agency is able to 

support meaningful levels of 

performance payouts to its top 

performers is a key tenet of the 

demonstration project. FSIS will run 

mock pay pools and provide training 

and the required tools to managers and 

employees detailing their 

responsibilities in this process. 

FSIS recognizes that clarification on 

locality pay is required in response to 

the points raised by commenters on how 

locality pay increases are handled for 

employees receiving a less than ‘‘Fully 

Successful’’ performance rating. 

Locality pay is added to the employee’s 

base pay and serves as a means to 

equalize pay between the Federal and 

the private sector markets in a given 

area. It is not a cost of living increase 

(COLA) as some may perceive. FSIS 

believes that in order to fully test a payfor-performance system and promote a 

performance culture, all pay increases 

should be tied to performance and that 

employees who fail to meet the basic 

requirements of their job and receive a 

Level 2 (Marginal) or Level 1 

(Unacceptable) rating should not receive 

a pay increase, including a pay increase 

resulting from a locality pay increase. 

Employees will not lose pay but rather 

will not receive a pay increase. That is, 

the employee’s base salary will be 

reduced to offset any locality pay 

increase. However, it is recognized that 

employees may improve their 

performance before the end of the next 

appraisal period as a result of the 

successful completion of a formal 

improvement plan. Therefore, if 

performance improves to the ‘‘Fully 

Successful’’ or higher level, the 

employee is entitled to the same 

percentage of basic pay increase 

resulting from the annual general pay 

increase that the employee would have 

been guaranteed to receive if rated 

‘‘Fully Successful’’ at the time the 

performance payout was denied. This 

pay increase will be applied 

prospectively. FSIS has clarified the 

language in this Federal Register Notice 

to emphasize that the employee is not 

eligible for a performance payout based 

on share distribution until the next 

January and the adjustment is not 

retroactive. 

With respect to how pay will be 

handled for employees who are at the 

maximum rate of the pay band, FSIS 

considered various options. Since a pay 

increase is most advantageous to the 

employee, it was decided these 

increases would be reserved for those 

employees who receive an 

‘‘Outstanding’’ rating. The plan has a 

provision which extends the maximum 

rate of a pay band up to 5 percent for 

employees rated ‘‘Outstanding’’ so that 

the top performers who are at the 

normal maximum rate of the band may 

receive a performance pay increase. 

Those employees rated ‘‘Superior’’ or 

‘‘Fully Successful’’ who are at the 

normal maximum rate of the band will 

receive the performance payout as a 

lump-sum payment. (Employees rated 

‘‘Outstanding who are at the maximum 

rate of the 5 percent band extension also 

will receive the performance payout as 

a lump-sum payment.) Therefore, funds 

will not be reallocated within the pay 

pool as one commenter questioned, and 

all pay pool funds will be distributed 

based on the shares allocated to those 

with performance ratings of ‘‘Fully 

Successful’’ or higher. 

FSIS did not adopt the suggestion to 

provide the option for diverting 

additional employee earnings into a 

retirement account. This can already be 

initiated by an employee through 

contributions to the Thrift Savings Plan, 

in addition to the automatic biweekly 

contributions made to their retirement 

account. 

In response to concerns that there is 

a need to recognize seniority and time 

spent on the job with automatic 

increases, FSIS believes that length of 

service is not as critical as the 

employee’s performance and their 

contribution to the mission of the 

agency. FSIS wants to encourage a 

performance culture and a high 

performing organization that recognizes 

and compensates employees for their 

accomplishments rather than how long 

they have been in a position. Certainly 

with longevity comes valuable 

experience and institutional knowledge. 

FSIS acknowledges that it has many 

experienced employees who have made 

significant contributions over many 

years with the agency. The 

demonstration project is designed to 

recognize and retain these experienced 

high performers by providing more 

meaningful increases. Under a pay-forperformance system, FSIS does not 

believe that pay increases should be 

based solely on seniority nor should 

they be automatic or equivalent, 

particularly if an employee is 

performing at a less than ‘‘Fully 

Successful’’ level. This is contrary to the 

goals of the project. 

It should be noted that in some 

instances those long-term employees 

who are good performers and are 

currently at higher steps in their GS 

grades will actually see greater benefits 

under the demonstration project. The 

demonstration project eliminates the GS 

system requirement of waiting periods 

for receiving a pay increase. 

Specifically, under the demonstration 

project, employees who receive a rating 

of ‘‘Fully Successful’’ or higher will 

receive an annual performance pay 

increase until they reach the applicable 

maximum rate. In essence, employees 

with longevity may receive pay 

increases sooner than they would under 

the GS system with-grade increase 

waiting period requirements. In 

addition, employees who receive an 

‘‘Outstanding’’ rating and are at the 

band maximum may have the top of the 

pay band extended by up to 5 percent 

in order to receive a pay increase above 

the normal band maximum. In the GS 

system, employees at step 10 of their 

grade are no longer able to receive 

further pay increases at their grade 

level. FSIS wants to attract and retain a 

strong workforce and improve 

workforce performance. 

(c) Staffing 

Comments: Most of staffing comments 

concerned the impact of employee 

conversion to pay banding on preexisting promotion potential as a result 

of having successfully competed for a 


sroberts on PROD1PC70 with NOTICES
5048 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

‘‘career ladder’’ position. Commenters 

also expressed concerns that employees 

who convert into the demonstration 

project and have already served a period 

of time in their grade might have to 

begin a new 52-week waiting period to 

qualify for a band promotion. 

There were also questions about being 

confined to a band with little room for 

advancement and promotion within or 

to a higher band. Some believe that the 

move to a demonstration project will 

not have a benefit on recruitment or 

retention of employees. One commenter 

expressed the opinion that the 

demonstration project, particularly with 

its recruitment features, will be a 

discriminatory system toward current 

employees if new hires are placed at a 

higher salary than current employees. In 

addition, an employee group 

commented that the demonstration 

project should be patterned after the 

U.S. Department of Veterans Affairs 

(VA) title 38 pay system, which 

incorporates longevity pay and special 

pay for public health medical 

professionals. 

There was a question concerning 

whether the demonstration project 

would cover intermittent veterinary 

medical officers since they do not 

receive performance ratings. Other 

comments concerned pay setting upon 

conversion back to the GS in the event 

that the demonstration project is not 

made permanent. It was suggested that 

FSIS track employee salaries and set GS 

pay based on what employees would 

have received if they had remained 

under the GS. 

Response: Clearly, the feature of the 

plan that generated a high number of 

comments concerned career ladders and 

promotions, warranting some 

clarification to those sections of the 

notice. There will continue to be ‘‘career 

ladders’’ under FSIS’ pay banding 

system, although instead of grade 

intervals, there will be band intervals. A 

‘‘laddered’’ position is simply a position 

advertised during recruitment at a 

certain level of full performance that is 

filled through selection and 

appointment at a lower pay band. 

Under the demonstration project plan, 

FSIS will have authority to 

‘‘grandfather’’ employees who become 

covered by the demonstration project at 

the time it initially takes effect and who 

have not reached their full promotion 

potential at that time. On an annual 

basis (until full promotion potential is 

reached), FSIS will compare each 

‘‘grandfathered’’ employee’s base rate 

entitlement under the demonstration 

project to the projected base rate they 

would have received under the GS 

system (taking into account general 

increases, regular within-grade 

increases, and career-ladder promotion 

increases). If the projected GS base rate 

is higher than the base rate determined 

under the normal demonstration project 

rules, and if the employee meets any 

additional required conditions 

established by FSIS, the employee will 

receive a special pay adjustment so that 

his or her payable base rate does not fall 

below the projected GS base rate. In 

other words, the projected GS base rate 

that would have been in effect on the 

specified annual date (as determined by 

FSIS) acts as a floor rate for the next 12 

months. Even though the floor rate may 

be the payable rate, FSIS will continue 

to maintain the employee’s normal base 

rate entitlement under the 

demonstration project as an alternative 

entitlement. While the ‘‘grandfathering’’ 

benefit is in effect, the normal base rate 

entitlement will be determined without 

regard to any GS floor rate that may be 

payable—that is, the GS floor rate is not 

used in applying pay adjustments under 

the demonstration project but is simply 

a separate entitlement or minimum 

guarantee for qualified employees. The 

‘‘grandfathered’’ employee’s normal 

base rate entitlement under the 

demonstration project will become 

payable if it exceeds the GS floor rate. 

This ‘‘grandfathering’’ benefit will cease 

to be applicable when the employee 

reaches his or her full promotion 

potential (as further described in the 

following paragraph). At that point, if 

the base rate established under this 

‘‘grandfathering’’ authority is higher 

than the normal base rate established 

under the demonstration project, the 

base rate under the ‘‘grandfathering’’ 

authority will be converted into the 

employee’s official base rate under the 

demonstration project. 

‘‘Full promotion potential’’ is a 

traditional position classification and 

personnel staffing concept that will 

continue to have validity under FSIS’ 

demonstration project, and it means the 

highest grade, or pay band, of a careerladder position for which an incumbent 

previously competed under the 

Government’s Merit System Principles 

and an agency’s merit promotion plan. 

Once an FSIS employee who converted 

to pay banding under this 

demonstration project receives an inband pay increase or promotion that 

takes him or her to a pay level 

equivalent to the highest GS grade in the 

formerly applicable career ladder, the 

employee will be considered to have 

reached his or her full performance 

potential and the ‘‘grandfather’’ 

provision will cease to apply. Future inband pay increases for such an 

employee would then be based solely on 

performance, consistent with other 

employees. Of course, just as a GS 

employee is not guaranteed a careerladder promotion without the 

supervisor’s certification, the 

promotions and special ‘‘grandfathered’’ 

in-band increases for demonstration 

project employees will not be 

guaranteed, and they will be issued new 

performance plans with each pay 

increase. Additional terms and 

conditions of this ‘‘grandfathering’’ 

benefit will be published in the FSIS 

Demonstration Project Policies and 

Procedures Handbook that will 

implement this project plan. 

In terms of meeting the proposed 52- 

week time in band requirement for 

promotion to the next higher band, FSIS 

has reevaluated this provision in light of 

the final rule issued on November 7, 

2008, which eliminated the time-ingrade requirements. Promotions to the 

next higher band will be determined 

based on meeting the qualifications 

requirements for promotion to the next 

higher band and will not require 

employees to serve 52 weeks in the 

band if qualifications are met. Policies 

will be further defined in the FSIS 

Demonstration Project Policies and 

Procedures Handbook to ensure fair and 

consistent promotion decisions 

throughout FSIS. 

FSIS disagrees with the comment that 

being placed into a pay band provides 

little room for advancement and 

promotion. Pay bands replace grades 

and in most cases simply provide a 

broader range of pay than a single grade 

currently does. As with grades, 

employees are not confined to one band 

and being in a band does not prevent 

employees from applying for 

promotional opportunities to a higher 

band or to a different career path with 

higher band potential. Promotions will 

continue to exist under the 

demonstration project. Bands offer 

greater pay potential to employees and 

are not designed to limit career 

advancement. Promotions will continue 

to be based on performance and 

promotional criteria that are established 

for the position. FSIS will continue to 

uphold Merit System Principles (and 

other personnel authorities) and will 

work to avoid Prohibited Personnel 

Practices as it currently does under the 

GS system. That will not change. 

Recruitment and retention of a skilled 

workforce is important to FSIS and was 

one of the reasons FSIS decided to 

pursue a demonstration project to test a 

pay-for-performance system. The 

demonstration project better positions 

FSIS to be more competitive with other 

Federal Government agencies and the 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5049 

private sector when recruiting new 

hires. Pay setting flexibilities allow FSIS 

to bring new hires to the agency at any 

point within the pay band based on the 

credentials and experience they bring to 

the agency. Pay for performance will 

also provide managers with the ability 

to fairly compensate current employees 

based on their performance and also 

help to align agency salaries with those 

in the more competitive labor markets. 

Employees who are rated at higher 

levels will receive larger payouts than 

employees rated at lower levels. Higher 

pay increases based on performance 

facilitates a performance culture and 

produces a high performing 

organization that achieves results. When 

designing the demonstration project, the 

recruitment and retention of employees 

in the FSIS public health veterinary 

occupation, which has experienced 

shortages in the last eight to ten years, 

was of particular concern. With respect 

to implementing a system which 

includes provisions for special pay and 

longevity pay, FSIS closely studied the 

features of the VA system. Because the 

focus of the demonstration project is to 

test pay-for-performance in a public 

health environment, FSIS is moving 

away from the current system’s focus on 

longevity as the basis for all pay 

increases. FSIS felt that instituting 

longevity pay would be contrary to the 

purpose of the project. In terms of 

special pay, FSIS is exploring several 

options, including the use of retention 

incentives that are already in existence 

under title 5. For example, a group 

retention incentive could be authorized 

for public health veterinarians who have 

certain board certifications that are of 

significant value to the FSIS mission 

when such veterinarians are likely to 

leave the Federal service because the 

board certifications improve their 

marketability in the private sector. Over 

the life of the project, FSIS also may 

request that OPM establish a new 

staffing supplement for a category of 

FSIS employees for which there are 

staffing difficulties. 

FSIS does not agree with the 

suggestion that employees’ salaries 

should be tracked in order to set GS pay 

based on what employees would have 

received if they had remained under the 

GS. The project plan gives FSIS 

authority to establish the rules 

governing pay setting for employees 

who convert out of the demonstration 

project and move to a GS position. 

Those technical conversion-out rules 

will be provided in the FSIS 

Demonstration Project Policies and 

Procedures Handbook and will be 

forwarded to other Federal agencies 

should an FSIS employee move to a GS 

position in another agency. In general, 

demonstration project employees 

moving to a GS position, whether 

during the project or at its conclusion, 

will be converted to a GS-equivalent 

grade and rate before they leave the 

demonstration project and thus will be 

treated as GS employees under GS pay 

administration rules when setting pay in 

their new GS position. Employees will 

not lose pay upon conversion to the GS 

system should the demonstration 

project end. Employees may actually 

progress faster than they would have 

under the GS system because under a 

pay banding system rate ranges are 

generally broader, performance pay 

increases may be earned each year, pay 

increases may be given above the pay 

band maximum for Outstanding 

performers, and pay setting flexibilities 

may provide for higher entry rates. 

With respect to the question regarding 

whether intermittent veterinary medical 

officers will participate in the 

demonstration project, FSIS decided to 

exclude these employees from the 

project because they are excluded from 

the performance management plan and 

do not have regular performance 

appraisals. 

(d) Management Accountability 

Comments: Perhaps no other topic 

generated so many comments as the 

topic of supervisory accountability. 

Most of the comments concerned the 

objectivity and consistency of 

performance appraisals and the recourse 

employees will have should they desire 

to appeal their performance ratings. A 

number of commenters expressed 

concern over fairness of performance 

ratings and supervisory caprice or 

favoritism in appraising employee 

performance. Some concerns were 

raised about performance appraisals not 

being completed on time during a rating 

cycle and the level of paperwork 

required by supervisors when an 

employee receives a ‘‘Superior’’ or 

‘‘Outstanding’’ rating. A suggestion was 

made to add a provision to the 

regulation to permit employees to rate 

their supervisors. 

Response: FSIS agrees with 

commenters that the performance 

management rating system must be fair 

and equitable. FSIS also agrees with 

commenters who state that employees 

should be rewarded based on their 

performance. The demonstration project 

has developed a series of safeguards and 

checks and balances to help ensure that 

the process is fair and consistent within 

organizational units. 

One of the safeguards is the way the 

pay pool process has been structured 

which provides an added level of 

accountability and checks and balances 

to ensure that the ratings and supporting 

documentation are consistent across the 

pay pool. Employee accomplishment 

reports prepared by the employee, and 

supervisory rating justifications 

prepared by the rating supervisor, play 

a significant part in ensuring a fair and 

equitable performance management 

rating system. An accomplishment 

report will serve as a critical document 

in describing the employee’s 

performance in accomplishing the 

agency’s mission during the rating 

cycle. Employee ratings will be based on 

performance standards that have been 

established for the employee’s position. 

Ratings will not compare one employee 

against another employee. 

The demonstration project has been 

designed with a series of reviews to 

ensure employees are rated according to 

their level of performance. A first-level 

supervisor reviews an employee’s 

accomplishment report and 

performance standards, in conjunction 

with other performance criteria, and 

provides a rating for an employee. 

Supervisors will be held accountable for 

the ratings they recommend for 

employees. The rating will be reviewed 

by a second-level supervisor and then 

the rating will be presented to the pay 

pool panel, consisting of FSIS 

management officials, who will evaluate 

and reconcile, if necessary, an 

organization’s performance ratings. The 

pay pool panel will make the final 

decision on the performance ratings. 

Employees who receive a rating of 

‘‘Fully Successful’’ or higher are entitled 

to a performance payout. Employees 

whose performance is less than ‘‘Fully 

Successful’’ are not and will receive 

written notification, as well as have the 

right to request reconsideration of the 

rating. To support fairness and 

transparency for the program, 

employees have an opportunity to 

request reconsideration of rating by a 

management official other than the 

rating official. 

Supervisors will also be under the 

demonstration project and will be held 

accountable for meeting the supervisory 

requirements of their position. One such 

requirement is the completion of 

performance appraisals within the 

designated timeframe for their 

employees and all associated paperwork 

that accompanies the appraisal. 

Disciplinary action can be taken if 

supervisors fail to meet the 

requirements of their positions, which 

includes performance management. 

FSIS did not add a provision to the 

project notice to permit employees to 

rate their supervisors. Under present 


sroberts on PROD1PC70 with NOTICES
5050 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

guidelines, feedback can be obtained in 

a variety of ways, to include employee 

feedback, surveys, etc.; therefore, a 

change is not necessary. FSIS 

encourages utilizing various feedback 

mechanisms available to assess 

management performance. 

(e) Performance Management 

Comments: Most of the comments 

received on performance management 

concerned the establishment of clear, 

measurable, and realistic performance 

standards to which employees would be 

rated. Most who commented felt that 

without good standards, a pay-forperformance system that is fair and 

equitable would be difficult to achieve. 

One commenter stated that FSIS had not 

met OPM-established performance 

management system requirements (i.e., 

objective and measurable performance 

standards) and therefore questioned 

FSIS readiness for the demonstration 

project. Some commenters stated morale 

and teamwork will suffer and there will 

be a disincentive for employees to work 

together as teams because there may be 

competition among staff members for a 

limited amount of funds that are in the 

pay pool. Commenters expressed 

concern that employees rated against 

each other would create situations to 

improve individual performance at the 

expense of others. There were a couple 

of commenters who welcomed the payfor-performance system as a means to be 

compensated for their high level of 

performance. 

One commenter stated that a method, 

the In-Plant Performance System (IPPS), 

is not being used to measure 

performance. Commenters also 

expressed the importance of ensuring 

the availability of comprehensive and 

adequate training for employees, 

supervisors, and managers on all the 

various components of the 

demonstration project. 

Response: FSIS agrees that clear, 

measurable performance standards are 

critical to the success of the 

demonstration project and has steadily 

worked on the requirements of the 

President’s Management Agenda 

Scorecard and met OPM’s requirements 

for an improved performance 

management system. During 2006, FSIS 

completed OPM’s Performance 

Appraisal Assessment Tool (PAAT), 

covering ten major areas of focus on 

performance management, and was the 

first to receive a passing score within 

USDA. FSIS, more recently, completed 

a partial PAAT assessment and 

demonstrated that employee 

performance plans were strategically 

aligned, contained balanced credible 

measures, were results focused, and 

adequately distinguished between levels 

of performance. In this assessment, FSIS 

received a perfect score. FSIS continues 

to be a USDA and Federal agency leader 

in making improvements to the 

performance management system, 

similar to its leadership role in pursuit 

of additional human resources 

authorities. FSIS feels it is wellpositioned to move forward with the 

demonstration project and, in fact, has 

met the requirements to do so. 

Other important efforts also underway 

involve training. As outlined in the 

May 9, 2008 Federal Register Notice, 

FSIS is providing training to all 

participating employees, supervisors, 

and managers before the project is 

implemented and throughout the fiveyear life of the project. Supervisors and 

managers continue to receive extensive 

training in setting and communicating 

performance expectations, monitoring 

performance, and providing timely 

feedback. They will also receive training 

on the mechanics of the performance 

management system. Supervisors and 

managers will be held accountable for 

the effective management of the 

performance of the employees they 

supervise through performance 

expectations and appraisals of their own 

performance in this regard. 

FSIS is also providing training in 

effective accomplishment writing for all 

employees before and throughout the 

life of the demonstration project. 

Classroom workshops, desk guides, CDs, 

and net conferencing tools will be 

utilized to provide employees with 

multiple training methods to reach out 

to the agency’s physically dispersed 

workforce. 

Performance management training has 

been and will continue to be offered to 

employees and supervisors. Employees 

are encouraged to ask questions about 

the standards and to ensure that the 

standards that have been established are 

compatible with their responsibilities. 

Perhaps the biggest challenge the 

agency faces is earning and keeping the 

trust of its employees during this time 

of profound change, while ensuring that 

the demonstration project is not 

perceived as a disincentive. The 

demonstration project is not designed to 

pit employees against each other. 

Employees will be evaluated against 

their established performance standards 

and will not be evaluated and compared 

against the performance of other 

employees in the work unit. The 

effectiveness of every employee is 

enhanced by his or her ability to work 

effectively with others which in turn 

can ultimately impact his or her level of 

performance. There are generic elements 

identified in FSIS’ Performance 

Management Plan that are used to 

evaluate an employee’s interpersonal 

skills, including Customer Service, 

Teamwork, and a mandatory Personal 

Contacts element which can be used to 

promote teamwork and evaluate an 

employee’s effectiveness in working 

with others. Certainly, FSIS will 

monitor and evaluate the performance 

management process throughout the 

project to ensure there is no adverse 

impact of this nature. 

Supervisors need to evaluate an 

employee’s performance based on the 

standards that have been established 

and must take into consideration all 

aspects of the individual’s performance. 

There are several methods that are to be 

used to monitor and evaluate employee 

performance to include a review of work 

products and other supporting 

documentation and input related to 

work accomplishment, internal/external 

customer feedback, direct observation of 

performance, the employee’s assessment 

of their own performance, etc. The IPPS 

is another tool used by supervisors to 

assess the employee’s knowledge of his 

or her job requirements. IPPS applies to 

non-supervisory in-plant occupations. It 

is designed to provide supervisors with 

a structured process to look at specific 

elements of the job to identify, address, 

and correct areas where there is a need 

for improvement in performance and 

provide feedback to employees. 

According to FSIS Directive 4430.3 

which outlines the policy on the IPPS 

system, supervisors should use IPPS 

data with other data and information 

about an employee’s performance to 

determine the performance rating. 

(f) Employee Relations 

Comments: A few comments in this 

topical area concerned whether 

employees have the right to appeal or 

grieve their performance rating. 

Commenters expressed the point that 

the administrative grievance procedure 

is ineffective as there is a reluctance of 

managers to overturn decisions made by 

supervisors. Some felt that there needs 

to be a credible system of appeal that is 

apart from the current administrative 

grievance process. Commenters also 

expressed concern that FSIS already has 

many grievances and questioned FSIS’ 

consideration of the impact the 

demonstration project would have on 

inspectors in districts where the 

grievance filings are already rather high. 

Response: Under the demonstration 

project, there will be a reconsideration 

process that is separate from other 

appeal processes like the administrative 

grievance process. Employees will have 

the right to request reconsideration of 

their performance rating. These 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5051 

procedures will be outlined in the FSIS 

Demonstration Project Policies and 

Procedures Handbook and will address 

how the process will work. In addition 

to the reconsideration process, 

employees who believe they have been 

treated unfairly have the same legal 

rights and protections under the 

demonstration project as under the GS 

system and also have the right to file a 

formal Equal Employment Opportunity 

(EEO) complaint. 

With respect to the comment on 

grievances and their impact on 

inspection personnel, a decision was 

made to exclude the bargaining unit. 

Therefore, the demonstration project 

will have no effect on inspectors. 

(g) Labor Relations 

Comments: There were a few 

comments related to labor management 

to include a comment concerning the 

involvement of employee groups in the 

planning, development, and 

implementation of this demonstration 

project. There was also a comment that 

FSIS did not communicate the right of 

employees to unionize or give them the 

option to do so. Some members of the 

bargaining unit commented that it is 

hard to receive a higher rating because 

of the nature of their job where they 

work on the line. One commenter noted 

that the majority of the workforce, 

which primarily includes the bargaining 

unit employees, were not included. The 

commenter questioned how FSIS can 

exempt the majority of the workforce 

from the project. 

Response: In the initial design of the 

system, FSIS formed a workgroup that 

was comprised of employees from all 

levels of the organization, several of 

whom were members of the employee 

groups. The draft Federal Register 

Notice issued on May 9, 2008, allowed 

for input and comment from employee 

groups. One group submitted both 

written and oral comments. FSIS values 

the opinions of its employees and 

welcomes input from its employee 

groups. Briefings and subsequent 

discussions were held with the 

leadership of the National Association 

of Federal Veterinarians and the 

Association of Technical and 

Supervisory Personnel employee groups 

to solicit questions and concerns during 

the comment period. With respect to the 

comment on communicating 

information on or providing employees 

with the option to unionize, FSIS notes 

that employees have the right to 

unionize, but it is not a management 

responsibility to communicate 

information on how to do so. As noted 

in other parts of this notice, the decision 

to exclude the bargaining unit was made 

in part due to the fact that no more than 

5,000 employees may participate in a 

demonstration project. Since the 

bargaining unit comprises over 6,000 

employees, FSIS decided to exclude this 

group. Therefore, the demonstration 

project will have no effect on the 

performance ratings, pay, or other 

incentives for bargaining unit 

employees. 

(h) Evaluation 

Comments: A few commenters noted 

the importance of evaluating the 

demonstration project in their 

comments concerning other topical 

areas. A couple of commenters, 

however, specifically addressed the 

topic of evaluation. One commenter 

pointed out that an evaluation of the GS 

system against the demonstration 

project, conducted by non-agency 

officials, would provide a fair and 

accurate assessment of the results. 

Another commenter expressed concern 

that the objectives of the demonstration 

project are not being met under the 

proposed structure. One commenter 

stated that FSIS is presenting the 

positive points and none of the adverse 

issues relating to the demonstration 

project. 

Response: FSIS agrees that the 

evaluation portion of the Public Health 

Human Resources System (PHHRS) is a 

critical means of determining the impact 

on improving human resources 

management. Evaluation, a legal 

requirement of a demonstration project, 

will take place throughout the five-year 

demonstration project period. It will be 

conducted by an independent evaluator 

to assess whether the flexibilities of the 

proposed system will help FSIS better 

attract and retain employees, or whether 

FSIS would realize the same results had 

a change from the GS system to PHHRS 

not been made. 

Over the five-year period, surveys, 

focus groups, and structured interviews 

with FSIS employees will be conducted 

as part of the evaluation process. FSIS 

will work with OPM to address issues 

that arise, especially any adverse impact 

issues that are identified during the 

evaluation period, and will apprise 

employees of any warranted changes or 

revisions. To ensure the goals and 

objectives of the demonstration project 

are being realized, FSIS has made some 

changes to its initial proposal of the 

demonstration project which can be 

found in section 4, ‘‘Changes to 

Demonstration Project Plan,’’ of this 

notice. 

(i) Other 

Comments: There were some general 

comments and observations that do not 

specifically relate to the FSIS 

demonstration project and therefore are 

not covered in this section. The 

comments in this category relate to a 

variety of topics that do not specifically 

fall under any of the other topical areas. 

These comments relate to timing of 

implementation especially during the 

election year; communication efforts 

and the lack of specificity in operational 

and implementation procedures; 

administrative burden; workload 

distribution; the option of employees 

voting to participate in the project; and 

the impact on retirement. 

Response: All of these comments 

warrant a response. FSIS does not see 

the benefit of waiting to implement the 

demonstration project. By design, the 

demonstration project is an experiment 

and needs to be tried and tested over a 

five-year period of time. Delaying the 

project would not yield any benefits. 

Many things are supposed and 

anticipated, but few things are known 

for sure in advance. They need to be 

tried and tested. 

It is understandable that some 

commenters found FSIS’ proposed 

project plan vague and unclear in parts. 

FSIS’ demonstration project plan, in 

both its proposed and final incarnations, 

is designed to mainly answer the 

‘‘what’’ of a matter, not the ‘‘how.’’ This 

is why there have been many references 

in these responses, as well as in the text 

of the project plan, to the FSIS 

Demonstration Project Policies and 

Procedures Handbook, which will 

contain more details about the project’s 

operating procedures. But this response 

is not to dodge the issues. Most of the 

comments received during the public 

comment period have been invaluable 

in guiding FSIS’ development of its 

companion policies and procedures. By 

design, a demonstration project is an 

experiment. There is more than one way 

to execute and effect almost any feature 

of this experiment, and though 

modeling previous successful 

experiments and viable alternative 

personnel systems can be extremely 

useful, there are still mechanical 

subtleties and finer points of 

interpretation in matters of pay banding, 

staffing, and pay with which FSIS must 

come to terms. Having said this, it can 

be said that after many months of 

rigorous development and refinement, 

FSIS has gained competence and 

sureness about how to effectively 

execute the innumerable features and 

applications of this project. FSIS is 

developing guidelines and conducting 

training to aid managers, employees, 

and the human resources office in 

implementing the operational features 

of the project. It will be some time 


sroberts on PROD1PC70 with NOTICES
5052 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

following project implementation and 

employee conversion before FSIS is 

proficient in most demonstration project 

matters, though FSIS is taking great 

pains and care to ensure that start up 

and transition are implemented as 

smoothly as possible. 

For a period of time beginning prior 

to the publication of the Federal 

Register Notice on May 9, 2008, to 

present, FSIS has followed a process of 

informing employees of the 

demonstration project through the 

employee newsletters and e-mails. A 30- 

day comment period followed the 

publication of the Notice, and OPM held 

a public hearing at the USDA 

Headquarters in June 2008 where 

individuals could comment on the 

system. FSIS has set up a mailbox on its 

intranet site for employees to submit 

questions and comments. In addition, 

agency publications, both in written and 

electronic format, have been regularly 

used to apprise employees of the status 

of the demonstration project and to 

provide answers to commonly asked 

questions and other pertinent 

information. Presentations were 

conducted for employees at headquarter 

and field locations and at various 

agency meetings and conferences. 

Throughout the life of the project, FSIS 

will continue to regularly inform 

employees of the status of the project 

and provide opportunities for employee 

comments. 

FSIS does not intend to increase staff 

to handle the administrative workload 

under the demonstration project. 

Automation of several administration 

processes associated with the features of 

the project is being considered. 

With respect to workload burden for 

supervisors, the responsibilities for 

managing employee performance are 

leadership responsibilities inherent in 

all managerial and supervisory jobs. 

These responsibilities are the same 

whether under a demonstration project 

or the current system. By setting goals 

and expectations for employees up front 

through the performance management 

process and communicating throughout 

the year, organizational performance 

can be improved and workload less 

burdensome. FSIS recognizes that for 

pay pool managers and others 

participating in that process, there will 

be additional responsibilities. However, 

with automated processes and training, 

FSIS will work diligently to prepare for 

a smooth transition which should 

facilitate the process. 

FSIS does not agree that employees 

should vote on participating in the 

demonstration project. Because FSIS is 

experimenting with a pay banding and 

pay for performance system that, were it 

to be successful, would replace entire 

segments of the GS workforce, allowing 

employees to vote would be impractical, 

and more compelling, not in the best 

interest of efficient Government. 

FSIS is not proposing to experiment 

with retirement benefits and laws, 

which cannot be waived under the 

demonstration project authority. 

Therefore, we disagree that the 

demonstration project will adversely 

impact employees under the Federal 

Employees Retirement System. 

Employment rules are often changed 

during the average career of a Federal 

employee to include provisions for 

additional flexibilities and 

modernization of the Civil Service 

system. 

4. Changes to Demonstration Project 

Plan 

What follows is a list enumerating the 

changes to FSIS’ demonstration project 

and textual changes to the project plan. 

The changes are clarifying in nature and 

are not substantial or major. The page 

numbers referenced are those found in 

the May 9, 2008, Federal Register 

Notice. Some of the changes have been 

described in the preceding responses to 

specific comments. Other changes 

provide additional detail and 

clarification or correct technical 

problems. 

(1) Page 26437: The Table of Contents 

is revised to reflect the addition of four 

new sections—VIII.A., Overview; 

VIII.B., Evaluation Models; VIII.C., 

Evaluation; and VIII.D., Method of Data 

Collection. 

(2) Page 26437: Section I, Executive 

Summary, is rewritten to reflect FSIS’ 

final project goals. 

(3) Page 26438: Section II.A., Purpose, 

is revised to ensure consistency with the 

Executive Summary. 

(4) Page 26439: Section II.D., 

Participating Organizations, is revised to 

exclude intermittent veterinary medical 

officers and to reflect a name change 

from Technical Service Center to Policy 

Development Division. 

(5) Page 26439: Section II.E., 

Participating Employees, is revised to 

exclude intermittent veterinary medical 

officers. 

(6) Page 26440: January 2008 data are 

superseded with September 2008 data 

in the table, ‘‘Covered Employees by 

Occupational Series and Grade.’’ 

(7) Page 26441: The description for 

the Administrative, Professional, and 

Scientific career path was modified, 

consistent with the FSIS response 

herein under the subsection for career 

paths and pay bands. 

(8) Page 26443: Section III.A.9, Rate of 

Basic Pay Upon Promotion, is clarified. 

(9) Page 26447: Section III.C.4, 

Employees Who Cannot Receive a 

Performance Pay Increase, is clarified. 

(10) Page 26447: Section III.E.3, 

Promotions removes the time-in-band 

requirement. 

(11) Page 26449: Section VIII, Project 

Evaluation, is rewritten to provide more 

detail on the evaluation framework and 

assessment criteria. 

(12) Page 26449: Under section X, 

Waiver of Laws and Regulations 

Required, the chapter 51 waiver is 

revised to correct an error. 

U.S. Office of Personnel Management. 

Michael W. Hager, 

Acting Director. 

Table of Contents 

I. Executive Summary 

II. Introduction 

A. Purpose 

B. Rationale for a New System 

C. Changes Required/Expected Benefits 

D. Participating Organizations 

E. Participating Employees 

F. Labor Participation 

G. Project Design 

III. Personnel System Changes 

A. Pay Banding Classification and Pay 

System 

1. Establishment of Career Paths and Pay 

Bands 

2. Position Classification 

3. Delegation of Classification Authority 

4. Classification Appeals 

5. Elimination of Fixed Steps 

6. Rate Range 

7. Locality Pay 

8. Rate of Basic Pay Upon Initial 

Appointment 

9. Rate of Basic Pay Upon Promotion 

10. Rate of Basic Pay in Noncompetitive 

Lateral Actions 

11. Other Pay Administration Provisions 

12. Staffing Supplements 

13. Status as GS Employees 

B. Performance Appraisal System 

1. Program Requirements 

2. Supervisory Accountability 

3. Reconsideration of Ratings 

C. Performance-Based Payouts and Awards 

1. Performance Shares 

2. Performance Pay Pools 

3. Performance-Based Payout 

4. Employees Who Cannot Receive a 

Performance Payout 

5. Performance Awards 

D. Developmental Pay Increases 

E. Staffing 

1. Minimum Qualification Requirements 

2. Flexible Pay Setting for New Hires 

3. Promotions 

F. Reduction-in-Force 

IV. Training 

V. Conversion 

A. Conversion to the Demonstration Project 

B. Conversion to the General Schedule 

VI. Project Modification 

VII. Project Duration 

VIII. Project Evaluation 

A. Overview 

B. Evaluation Models 

C. Evaluation 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5053 

D. Method of Data Collection 

IX. Costs 

A. Buy-in Costs 

B. Recurring Costs 

X. Waiver of Laws and Regulations Required 

A. Title 5, United States Code 

B. Title 5, Code of Federal Regulations 

I. Executive Summary 

This project was designed by the U.S. 

Department of Agriculture (USDA), 

including the Food Safety and 

Inspection Service (FSIS), with 

participation of and review by the U.S. 

Office of Personnel Management (OPM). 

The goals of the demonstration project 

are to— 

(1) Simplify the current classification 

system for greater flexibility in 

classifying work and paying employees; 

(2) improve hiring by allowing FSIS to 

compete more effectively for high 

quality employees through the judicious 

use of higher entry salaries; 

(3) reaffirm the performance 

management and rewards system for 

improving individual and 

organizational performance; 

(4) eliminate automatic pay increases 

(i.e. annual adjustments that normally 

take effect the first day of the first pay 

period beginning on or after January 1) 

by making pay increases performance 

sensitive, so that only Fully Successful 

and higher performers will receive 

payouts and the best performers will 

receive the largest payouts; 

(5) test the effectiveness of multigrade pay bands in recruiting, 

advancing, and retaining employees; 

(6) improve the retention of highperforming employees in developmental 

positions by testing the use of 

developmental pay increases to 

recognize the faster progression that can 

occur in these positions. 

The demonstration project will 

modify the General Schedule (GS) 

classification and pay system by 

identifying several broad career paths, 

establishing pay bands which may cover 

more than one grade in each career path, 

eliminating longevity-based step 

progression, and providing for annual 

performance payouts based on 

performance. The proposed project will 

test (1) the effectiveness of multi-grade 

pay bands in recruiting, advancing, and 

retaining employees, and in reducing 

the processing time and paperwork 

traditionally associated with classifying 

positions at multiple grade levels and 

(2) the application of meaningful 

distinctions in levels of performance to 

the allocation of annual payouts. The 

project is scheduled for 5 years. 

However, with OPM’s concurrence, the 

project may be extended if further 

testing and evaluation are warranted or 

may be terminated before the expiration 

of the 5-year period. 

The project will test whether a 

results-based, competency-linked payfor-performance system can be 

successful in USDA. Previous 

alternative pay systems that used 

competency models (e.g., the 

Government Accountability Office 

(GAO) compensation system and the 

Department of Defense (DOD) 

Acquisition Workforce Demonstration 

Project) did not focus on missions or 

occupations related to public health or 

food defense. Moreover, the workforce 

covered by the demonstration project is 

predominantly supervisory (about 40%), 

and it is important to establish effective 

pay-for-performance policies and 

procedures for supervisory positions 

before extending such systems to large 

numbers of line worker positions 

throughout the Federal Government. 

Finally, a substantial number of the 

covered employees (approximately 30 

percent) have working conditions that 

are dramatically different from other 

white-collar workers (e.g., shift-oriented 

work in slaughter or meat processing 

facilities), including the requirement for 

substantial amounts of regularlyscheduled and intermittent overtime. 

II. Introduction 

A. Purpose 

The purpose of the project is to test 

whether a results-based, competencylinked, pay-for-performance system and 

related innovations will produce 

successful results in a public health 

regulatory environment and occupations 

associated with public health and food 

defense. 

B. Rationale for a New System 

The USDA Strategic Human Capital 

Plan and the President’s Management 

Agenda require FSIS to manage human 

capital in the 21st century very 

aggressively. FSIS must achieve 

comprehensive human capital goals for 

strategic workforce planning, learning 

and workforce development, 

recruitment and retention, and 

evolution of a highly effective 

performance culture. 

The FSIS Strategic Plan calls for 

continued transformation of the existing 

workforce, which was recruited and 

trained during a time when food safety 

was considered a conventional 

inspection program governed by 

legislation such as the Federal Meat 

Inspection Act of 1906, the Poultry 

Products Inspection Act of 1957, the 

Wholesome Meat Act of 1967, the 

Wholesome Poultry Products Inspection 

Act of 1968, and the Egg Products 

Inspection Act of 1970. This legislation 

was enacted when food industry 

practices were characterized by carcassby-carcass organoleptic inspection. To 

carry out its public health regulatory 

missions today, FSIS must assure 

science-based development and 

execution of policy and must also 

emphasize risk-oriented assessment, 

planning, analysis, inspection, and 

management activities. Also, FSIS must 

recruit, develop, retain, and accomplish 

life-cycle management for a workforce 

that is educated and skilled in public 

health, food defense, food safety, public 

education, and emergency-response 

systems, programs, practices, and 

technologies. In addition to inspecting 

poultry and meat, animals, poultry and 

meat products, and processed egg 

products, FSIS must accomplish a 

growing list of advanced public health 

functions to include conducting risk 

assessments to identify and evaluate the 

potential human health outcomes from 

the consumption of meat, poultry, and 

processed egg products. 

At best, the personnel system that 

currently covers USDA and FSIS 

employees is based on 20th century 

assumptions about the nature of public 

service. Although the current Federal 

personnel management system is based 

on important core principles, those 

principles operate in an inflexible, onesize-fits-all system of defining work, 

hiring staff, managing people, assessing 

and rewarding performance, and 

advancing personnel. These inherent 

weaknesses make support of the FSIS 

mission complex, costly, and, 

ultimately, risky from the standpoint of 

public health. Currently, pay and the 

movement of personnel are pegged to 

outdated, narrowly-defined work 

definitions, hiring processes are 

cumbersome and high performers and 

low performers are generally paid alike. 

These systemic inefficiencies detract 

from the potential effectiveness of the 

public health workforce. 

The challenges facing USDA and FSIS 

today to assure and improve the public 

health from farm to table require a 

workforce transformation. FSIS 

employees are being asked to assume 

new and different responsibilities, take 

more initiative, and be more innovative, 

agile, and accountable than ever before. 

It is critical that USDA and FSIS 

support the entire public health 

workforce with modern systems, 

particularly a human resources 

management system that supports and 

protects their critical role in public 

health, food safety, and food security. 


sroberts on PROD1PC70 with NOTICES
5054 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

C. Changes Required/Expected Benefits 

The innovations of the project and 

their objectives are summarized below. 

1. Pay Banding and Classification 

Occupational groups will be placed in 

appropriate career paths, pay bands will 

replace grades, and agency pay band 

standards will replace OPM position 

classification standards. The 

classification system will be automated 

as much as possible through intranetbased classification tools, and authority 

will be delegated to line managers (at 

least one level below the Deputy 

Assistant Administrator level). 

These changes are intended to 

simplify and speed up the classification 

process, make the process more 

serviceable and understandable, 

improve the effectiveness of 

classification decision-making and 

accountability, and facilitate pay for 

performance. 

Pay bands, which generally 

correspond to multiple grade levels, 

provide larger classification targets that 

can be defined by shorter, simpler, and 

more understandable classification 

standards. This simpler system will be 

easier to automate, will require fewer 

resources to operate, and will facilitate 

delegation to line managers. 

By providing broader and more 

flexible pay ranges for setting entry pay, 

pay banding will provide hiring officials 

with an important tool for attracting 

high-quality candidates and thus 

contribute to the objective of increasing 

the quality of new hires. 

By providing more flexible pay 

progression based on performance, pay 

banding will give managers the ability 

to increase the pay of good performers 

to higher and more competitive levels, 

thus improving the retention of good 

performers. At the same time, the 

potential for higher pay increases for 

good performance, supported by the 

broader pay ranges of a pay banding 

system, will contribute to the objective 

of improving organizational and 

individual performance. 

2. Staffing 

Additional staffing tools will include 

such elements as flexible entry salaries, 

staffing supplements for employees in 

the applicable special rate categories, 

developmental pay increases, and more 

flexible pay increases associated with 

promotion. 

These changes are intended to attract 

high-quality candidates and increase the 

retention of good performers. Flexible 

pay-setting for new hires is a recruiting 

tool that gives hiring officials greater 

flexibility to offer more competitive 

salaries to high-quality candidates, 

addressing the objective of improving 

the quality of new hires. This will be 

used in conjunction with existing 

recruitment and retention incentives 

under title 5. 

3. Pay 

The most important change in pay 

administration is the introduction of a 

pay-for-performance system. The payfor-performance system will support 

several objectives. It will strengthen the 

organization’s performance culture. It 

will promote fairness through the 

results-based, competency-linked, 

performance rating process. It will 

provide a motivational tool as well as a 

retention tool. As a motivational tool, 

the promise of higher pay increases for 

good performance encourages high 

achievement. As a retention tool, a payfor-performance system allows the 

organization to quickly move the 

salaries of good performers to levels that 

are more competitive in the labor 

market. The promise of higher pay 

increases for good performance will 

encourage achievement and promote the 

objective of improved individual and 

organizational performance. 

Under the pay-for-performance 

system, employee performance ratings 

will govern individual pay progression 

within pay bands. Any general increase 

in GS rates of basic pay approved by 

Congress and the President will be 

applied only to the FSIS band ranges 

(i.e., band minimums and maximums). 

Demonstration project employees will 

receive pay increases based on their 

rating of record. Funds currently 

applied to within-grade increases, 

quality step increases, and the annual 

GS pay adjustment will be used to grant 

these performance-based pay increases. 

Employees rated below Fully Successful 

will not receive any basic pay increase, 

nor will they receive pay increases 

when locality pay percentages are 

increased. (See section III.C.) 

In addition, employees in 

developmental positions may receive 

additional pay increases. Funds used for 

career-ladder promotions from one 

grade to a higher grade will initially be 

used to fund these developmental pay 

increases. These pay increases may be 

granted to an employee to recognize the 

faster progression that can occur in a 

developmental position. This pay 

flexibility addresses the objective of 

improving retention by raising the pay 

of high-performing employees while 

also supporting the objective of 

preserving merit system principles (e.g., 

equal pay for work of equal value). (See 

section III.D.) 

4. Performance Appraisal 

The demonstration project will 

continue to use the current FSIS 

appraisal program including the current 

five-level rating process, which 

incorporates competencies into the 

performance standards. (The five-level 

rating system has the following levels: 

1—Unacceptable, 2—Marginal, 3—Fully 

Successful, 4—Superior, and 5— 

Outstanding.) The performance 

appraisal process is intended to (1) 

promote good performance; (2) 

encourage a continuing dialogue 

between supervisors and employees on 

organizational objectives, supervisory 

expectations, employee performance, 

employee needs for assistance and 

guidance, and employee development; 

and (3) provide a basis for performancerelated decisions in employee 

development, pay, rewards, assignment, 

promotion, and retention. The program 

will more effectively communicate to 

employees how they are performing, the 

rewards of good performance, and the 

consequences of poor performance. 

5. Pay for Performance 

The most important feature of the 

demonstration project is that it links the 

employee’s rating of record to shares of 

a performance pay pool. Performancebased pay increases give an operating 

unit the ability to raise the pay of good 

performers more rapidly, thus 

improving retention of good performers. 

Performance pay is distributed to 

employees either in the form of 

increases in base pay or, when the 

employee reaches a band maximum (or 

is on retained pay), in the form of a 

performance bonus. The number and 

type of performance pay pools will be 

described in implementing guidance, 

but performance ratings will be linked 

to performance pay shares so that 

employees who earn a level five rating 

(the highest) will earn the greatest 

number of performance pay shares, 

employees who earn a level four rating 

will earn a smaller number of shares, 

and employees who earn a level three 

rating will earn the fewest number of 

performance shares. Employees rated 

below level three will not be eligible for 

performance pay increases. 

6. Performance Awards 

Existing programs for both nonmonetary and monetary recognition will 

remain under the plan in accordance 

with chapter 45 of title 5, United States 

Code. 

Awards address two objectives. First, 

rewarding achievement will make high 

achievers more likely to remain, thus 

improving retention of the best 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5055 

performers. Second, the potential for 

awards for achievement will encourage 

improved individual performance. 

Although FSIS is not testing any new 

procedures under the demonstration 

project authority in chapter 47 of title 5, 

awards are a key part of a performance 

pay system and therefore noted here to 

clarify their use and provide a full 

picture of the project plan. 

7. Line Management Authority 

The program areas will delegate 

greater authority and accountability to 

line managers. This delegation is 

intended to improve the effectiveness of 

human resources management by 

strengthening the role of line managers 

as the human resources managers of 

their units. The project will be managed 

by the FSIS Demonstration Project 

Management Board (DPMB), composed 

of representatives from each operating 

unit (program area) and chaired by the 

Assistant Administrator for the Office of 

Management. 

D. Participating Organizations 

The Department proposed that FSIS 

be the only agency participating in this 

project. The Department and FSIS have 

determined that employees in all 

program areas in the agency, including 

headquarters and field employees, will 

participate, except that all bargainingunit members will be excluded. 

Including all bargaining unit members 

would cause the project to exceed the 

5,000 limit on the number of 

participating employees. Included in the 

project are all non-bargaining unit 

employees located in meat and poultry 

plants throughout the United States 

(excluding intermittent food inspection 

personnel (GS–1863) and intermittent 

veterinarian personnel (GS–701) 

appointed under Schedule A 

213.3113(1)(3) and Schedule C 

employees), 15 District Offices, 3 Field 

Laboratories, a Policy Development 

Division in Omaha, NE, a Financial 

Processing Center in Des Moines, IA, a 

Human Resources Field Office in 

Minneapolis, MN, as well as all 

Headquarters program offices. Each of 

these units is committed to operating a 

credible, robust performance appraisal 

program aligned to the organization’s 

strategic goals and objectives. These 

organizations have demonstrated this 

commitment during the past two years, 

as FSIS implemented a comprehensive 

performance management training 

program within the agency. 

E. Participating Employees 

The demonstration project covers all 

General Schedule employees (with pay 

plan codes GS and GM) in nonbargaining unit positions. The excluded 

bargaining unit positions are 

nonsupervisory positions in the food 

technology (GS–1382), food inspection 

(GS–1863), and consumer safety 

inspection (GS–1862) series and nonbargaining food inspection (GS–1863) 

and veterinary (GS–701) employees 

appointed under Schedule A 

213.3113(1)(3). 

Also excluded from coverage of this 

project are all Senior Executive Service 

(SES), Senior Level (SL), and Federal 

Wage System (WG) employees, and all 

Schedule C employees. 

Table 1 shows the number of 

employees subject to coverage under 

this project by occupational series and 

grade. The OPM occupational series will 

be retained for all covered positions. 

BILLING CODE 6325–43–P 


sroberts on PROD1PC70 with NOTICES
5056 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 


sroberts on PROD1PC70 with NOTICESEN28JA09.000</GPH>
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5057 

BILLING CODE 6325–43–C 

F. Labor Participation 

No bargarining unit employees are 

covered in this project. 

G. Project Design 

The project methodology is to 

introduce into all FSIS program areas 

(for covered positions) certain 

innovations in human resources 

management, and to evaluate over time 

the effects of those innovations on the 

ability of the program areas to manage 

their human resources. The 

methodology includes the following 

steps: 

1. Selection of Innovations: The 

Department and FSIS have determined 

that particular pay banding and 

performance-based pay progression 

innovations that are linked to a 

framework of core competencies should 

be included in the project. These 

innovations, and the procedures 

associated with them, are described 

below under Pay Banding Classification 

and Pay System, Performance Appraisal 

System, Performance-based Payouts and 

Awards, Developmental Pay Increases, 

Staffing, and Reduction-in-Force (See 

Section III, A through F). 

2. Selection of Program Areas: The 

Department and FSIS have selected all 

program areas of the agency for 

inclusion in the project since the total 

number of non-bargaining unit 

employees is approximately 2,900 (parttime, and full-time) and falls within the 


sroberts on PROD1PC70 with NOTICESEN28JA09.001</GPH>
5058 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

maximum of 5,000 allowed for a 

demonstration project. 

3. Goals and Objectives: The specific 

project objectives are listed under the 

Supplementary Information and 

Executive Summary and are directly 

related to the issues identified under 

Section II. B, Problems with the Present 

System. 

4. Partnership: The Department and 

FSIS have limited the covered 

workforce to non-bargaining unit 

positions. Therefore, input from labor 

representatives is not required. 

However, consistent with the policy of 

the agency Administrator, FSIS will 

seek input from two employee 

associations whose membership 

overlaps with the covered workforce. 

5. Baseline Evaluation: To provide a 

basis of comparison between employee 

opinions of the current system and their 

future opinions of the project system, 

each employee in the covered program 

areas will be asked to complete an 

opinion questionnaire comparable to the 

Federal Human Capital Survey prior to 

implementation of the project. To 

establish a baseline for cost analysis, 

each operating unit will be required to 

analyze its personnel costs during fiscal 

years 2005, 2006, and 2007. 

6. Training: The agency and the 

program areas will provide training to 

managers, employees, and human 

resources staff prior to implementation 

of the project and will provide 

additional training to managers on the 

pay-for-performance system prior to the 

end of the first performance cycle. (See 

Section IV, Training.) 

7. Implementation: To ensure a 

smooth implementation, the agency will 

emphasize top management support; the 

development of detailed operating 

procedures and implementing directives 

prior to implementation; thorough 

training of managers, employees, and 

human resources staff; step-by-step 

implementation planning; adequate 

backup systems, particularly in 

automated personnel and payroll 

systems; and sufficient operating 

resources. 

8. Program Evaluation: The 

Department and FSIS will arrange for 

periodic evaluation of the project under 

an OPM-approved evaluation plan. (See 

Section VIII, Project Evaluation.) The 

evaluation will be designed to 

determine whether the innovations are 

achieving project goals and objectives 

and are operating within acceptable cost 

limits. (See Section IX, Costs.) 

III. Personnel System Changes 

A. Pay Banding Classification and Pay 

System 

1. Establishment of Career Paths and 

Pay Bands 

In coordination with OPM, FSIS may 

establish, and adjust over time, career 

paths that group one or more 

occupational categories together and 

provide a common pay banding 

structure (i.e., a set of work levels and 

rate ranges) for occupations within a 

given career path. Initially, FSIS intends 

to establish four career paths as follows: 

(a) Administrative, Professional, and 

Scientific, [AP]: Policy, staff, line, 

supervisory, and managerial positions 

in science, veterinary medicine, 

consumer safety, food technology, 

mathematics, accounting, and other 

comparable occupations with a positive 

education requirement. Examples of 

occupational series are 0403— 

Microbiology, 0510—Accounting, 

0696—Consumer Safety, 0701— 

Veterinary Medical Science, and 1301— 

General Physical Science. In addition, 

this career path will include policy, 

staff, line, supervisory, and managerial 

positions in such fields as finance, 

procurement, human resources 

management, public information, 

management and program analysis, 

compliance investigation, and other 

two-grade interval occupations that do 

not maintain a positive education 

requirement. Examples of these 

occupational series are 0201—Human 

Resources Management, 0343— 

Management and Program Analysis, 

1035—Public Affairs, and 1801— 

Compliance Officer. 

(b) Supervisory Inspection [AI]: 

Supervisory positions that direct the 

work of inspectors at an import 

warehouse, a plant, or in a circuit of 

plants within a geographic area. These 

positions are 1862—Supervisory 

Consumer Safety Inspectors. 

(c) Scientific and Technical Support 

[AS]: Line positions, predominantly in 

agency laboratories, which support 

professional and scientific operations. 

Examples include 0404—Biological 

Science Technician, 1311—Physical 

Science Technician, and similar 

traditional one-grade interval technician 

support occupations in agency 

laboratories. 

(d) Management Support [AO]: 

Nonsupervisory and supervisory clerical 

and assistant positions that support 

positions not fitting the definition of 

any other career paths. Examples 

include 203—Human Resources 

Assistant, 318—Secretary, 326—Office 

Automation Assistant, 344— 

Management Assistant, and similar 

traditional one-grade interval technician 

and administrative support occupations. 

Each career path will be subdivided 

into pay bands. Each pay band will 

correspond to one or more GS grades. 

Pay bands provide larger classification 

targets that can be defined by shorter, 

simpler, and more understandable 

classification standards. In coordination 

with OPM, FSIS may establish, and 

adjust over time, a career path’s pay 

band structure. Initially, the pay bands 

within each career path and their 

relationship to GS grades will be as 

follows: 

TABLE 2—SAMPLE PAY BANDS UNDER PHHRS 

Career path Pay Band 1 Pay Band 2 Pay Band 3 Pay Band 4 Pay Band 5 Pay Band 6 

Administrative, Professional, and 

Scientific (AP).

GS–1/4 (Student Trainee).GS–5/7 Trainee GS–9/11 Intermediate.GS–12/13* Full 

Performance.

GS–14 Expert .. GS–15 Senior 

Expert. 

Pay Band 5S Pay Band 6S 

GS–13/14 Supervisor.GS–15 Manager. 

Supervisory Inspection (AI) ........ .......................... .......................... GS–8/9 Supervisory Inspectors.GS–10/11 Senior Supervisors.

Scientific & Technical (AS) ........ GS–1/4 (Aide) .. GS–5/6/7 Entry GS–8/9 Independent.GS–10/11 Expert & Supervisory.


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5059 

TABLE 2—SAMPLE PAY BANDS UNDER PHHRS—Continued 

Career path Pay Band 1 Pay Band 2 Pay Band 3 Pay Band 4 Pay Band 5 Pay Band 6 

Management Support (AO) ........ GS–1/4 Clerical 

(Entry).

GS–5/6/7 Assistant or 

Clerical Supervisor.

GS–8/9/10 Senior or Lead 

Assistant, and 

Supervisor.

* Also includes supervisory positions where the band-controlling work is actually personally performed non-supervisory work. 

The final pay banding architecture 

will be described in implementing 

guidance. FSIS will coordinate changes 

in career paths or pay banding 

structures with OPM. After coordination 

with OPM, FSIS will give affected 

employees advance notice and an 

opportunity to comment before effecting 

a change with respect to career paths or 

pay banding structure. 

2. Position Classification 

Occupational groups will be placed in 

career paths, pay bands will replace 

grades, and FSIS pay band standards 

will replace OPM position classification 

standards. The General Schedule 

occupational series will be retained. 

Each classification standard will 

describe the threshold of work 

encompassed by each pay band based 

on general duties and responsibilities, 

knowledge, skills, and abilities. FSIS 

will establish classification standards in 

consultation with OPM. Positions must 

meet or exceed the threshold to be 

classified into a pay band. These bases 

complement each other at each pay 

band in a career path and may not be 

separated in classifying a position. OPM 

classification standards will not be used 

directly, but may be used indirectly to 

establish competency criteria that 

distinguish pay bands or pay levels 

within a key career path. 

3. Delegation of Classification Authority 

The agency has delegated 

classification authority to SES and GS– 

15 executives and managers since July 

2004. The delegated classification 

authority (DCA) provisions of this 

project continue this initiative and 

increase the number of managers who 

receive classification authority. 

Managers must successfully complete 

DCA training before classification 

authority may be exercised. The 

delegation of classification authority 

will be facilitated by the expansion of 

an intranet-based Position Description 

Library, which will include standard 

descriptions of all key positions in all 

career paths and pay bands. Line 

managers will utilize this intranet-based 

Position Description Library to select or 

classify most positions. These changes 

are intended to simplify and speed up 

the classification process, make the 

process more serviceable and 

understandable, improve the 

effectiveness of classification decisionmaking and accountability, and 

facilitate pay for performance. 

Implementing guidance will describe 

the modified DCA policies and 

procedures. 

4. Classification Appeals 

An employee covered by the FSIS 

Demonstration Project may appeal the 

occupational series, official title, or pay 

band of his or her position at any time 

to the agency, Department, or directly to 

OPM consistent with procedures 

currently prescribed under 5 CFR part 

511, subpart F. Implementing guidance 

will describe the classification appeals 

process. 

5. Elimination of Fixed Steps 

Employees will be converted from the 

existing 15-grade GS position 

classification and pay system 

established under 5 U.S.C. chapter 51 

and chapter 53, subchapter III, to the 

new pay banding system. The 10 fixed 

steps of each GS grade will not apply to 

employees participating in the 

demonstration project. The fixed-step 

system operates primarily to reward 

longevity. A pay banding pay system is 

an important element of any effort to 

make pay more performance-sensitive. 

No employee’s pay will be reduced 

solely as a result of becoming covered 

by the demonstration project. (See 

section V.A.) However, demonstration 

project employees will no longer receive 

longevity-based, within-grade pay 

increases at prescribed intervals. 

Instead, they will be granted annual 

performance increases and bonuses as 

described in section III.C below. 

6. Rate Range 

The normal minimum and maximum 

rates of the rate range for each pay band 

will equal the applicable step 1 rate and 

step 10 rate, respectively, for the lowest 

and highest GS grades that are included 

in the pay band. The normal minimum 

and maximum rates of each band will be 

increased at the time of a general pay 

increase under 5 U.S.C. 5303 so they 

equal the new minimum and maximum 

rates of the grades corresponding to the 

band. 

The minimum rate of the pay band is 

extended 5 percent below the normal 

minimum for employees with a rating of 

record below Fully Successful. Such an 

employee’s rate of basic pay may fall 

below the normal pay band minimum 

when the minimum rate increases as a 

result of a pay band adjustment, but the 

employee cannot receive a pay increase 

because the employee’s rating of record 

is below Fully Successful, as described 

in section III.C. 4. 

The maximum rate of each pay band 

is extended 5 percent above the normal 

maximum for all employees with a 

rating of record at the highest level 

(currently called ‘‘Outstanding’’ in 

FSIS). This feature will help to ensure 

that the range of available pay rates will 

be adequate to recognize truly 

outstanding performance. The upper 

range extension is reserved for 

employees with an Outstanding rating. 

If an employee in the upper range 

extension is rated below the 

Outstanding level, special provisions 

apply, as described in section III.A.11. 

7. Locality Pay 

Locality-based comparability 

payments under 5 U.S.C. 5304 will be 

paid on top of the rate of basic pay in 

the same manner as those payments 

apply to GS employees (except as 

otherwise provided in this plan). 

Staffing supplements may apply as 

described in section III.A.12. When a 

locality-based comparability payment 

established under 5 U.S.C. 5304 is 

increased, a demonstration project 

employee whose most recent rating of 

record is Fully Successful or higher is 

entitled to the increased locality 

payment. 

A demonstration project employee 

whose most recent rating of record is 

below Fully Successful is entitled to the 

increased locality payment, but his or 

her underlying rate of basic pay will be 

reduced in a manner that ensures the 

employee’s total rate of pay does not 

increase. This reduction is necessary to 

ensure, in an administratively feasible 

way, that an employee rated less than 

Fully Successful will not receive a pay 

increase. It does not constitute a 


sroberts on PROD1PC70 with NOTICES
5060 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

reduction in pay for purposes of 

applying the adverse action procedures 

in chapter 75 of title 5, United States 

Code. (Exception: An employee’s rate of 

basic pay may not be reduced under this 

paragraph to the extent that the 

reduction would cause an employee’s 

rate to fall more than 5 percent below 

the normal range minimum.) 

A locality rate cap 5 percent higher 

than the normal EX–IV cap is 

established to accommodate those 

Outstanding performers in the 5 percent 

upper rate range extension. This higher 

cap will apply only to employees 

receiving a rate within the upper range 

extension. If the locality rate for an 

employee at the normal band maximum 

is affected by the EX–IV cap, resulting 

in an ‘‘effective locality pay percentage’’ 

that is less than the regular locality pay 

percentage, the locality rate for an 

employee in the upper rate range 

extension of the same band will be 

computed using that same effective 

locality pay percentage. (For example, if 

the regular locality pay percentage is 30 

percent, but the EX–IV cap causes the 

amount of locality pay actually received 

by an employee at the normal band 

maximum to be 20 percent, that 

effective locality pay percentage of 20 

percent would be used to compute 

locality pay for an employee in the 

upper range extension of the same 

band.) 

8. Rate of Basic Pay Upon Initial 

Appointment 

Upon appointment to a demonstration 

project position under Delegated 

Examining, Direct-Hire Authorization, 

or other authority primarily designed for 

initial entry into the Federal service 

(e.g., Veterans Employment Opportunity 

Act, 30% Disabled Veteran 

Appointment), an appointee’s rate of 

basic pay may be set at any rate within 

the normal pay band range. In 

exercising this flexibility, FSIS will 

consider the appointee’s qualifications, 

competing job offers, FSIS’s need for the 

appointee’s talents, the availability of 

other candidates, the appointee’s 

potential contributions to FSIS mission 

accomplishment, and the rates received 

by on-board employees. This flexibility 

will allow FSIS to compete more 

effectively with private industry for the 

best talent available. Implementing 

guidance will provide managers with 

assistance in setting pay to assure fair 

and equitable treatment of a diverse 

workforce. 

9. Rate of Basic Pay Upon Promotion 

Upon promotion to a higher pay band 

within a career path or to a pay band in 

another career path with a higher 

maximum rate, an employee’s rate of 

basic pay will be set at a rate within the 

higher pay band that provides a pay 

increase of 8 percent, unless a greater 

increase is necessary to set pay at the 

normal range minimum. (See section 

III.E.3 for definition of ‘‘promotion.’’) In 

consultation with OPM, FSIS may 

establish exceptions to this policy to 

deal with employees receiving a 

retained rate, employees who are repromoted shortly after demotion, 

employees with exceptional 

performance warranting a larger 

increase with higher-management 

approval, etc. In exercising this 

flexibility, FSIS will consider the 

appointee’s qualifications, competing 

job offers, FSIS’s need for the 

appointee’s talents, and the appointee’s 

potential contributions to FSIS mission 

accomplishment. FSIS may adopt, in 

consultation with OPM, policies 

providing a promotion-equivalent 

increase in appropriate circumstances to 

a Federal employee outside the 

demonstration project who is selected 

for a position covered by the 

demonstration project. 

FSIS employees, who at the time of 

conversion into the demonstration 

project are in a career ladder to a higher 

GS grade (i.e., have not reached the top 

level of that career ladder), will be 

eligible for special in-band pay 

increases under the authority of this 

demonstration project. The in-band pay 

increases will be sufficient to ensure 

that an employee’s base rate under the 

demonstration project is equivalent to 

the base rate which the employee would 

have received had the employee and the 

position remained in the General 

Schedule. Only one in-band increase 

may be received in a 52-week period 

under this ‘‘grandfathering’’ authority. 

In other words, once a year, FSIS will 

compare the normal base rate 

established for the employee under the 

demonstration project with the base rate 

the employee would have been paid 

under the General Schedule pay system. 

The projected General Schedule base 

rate serves as a floor rate that becomes 

payable when it exceeds the normal 

base rate under the demonstration 

project (resulting in a special pay 

increase to reach the floor rate). The 

floor rate will not be used in applying 

future pay adjustments under the 

demonstration project while the 

grandfathering benefit is in effect; 

instead, FSIS will continue to calculate 

the employee’s normal base rate under 

the demonstration project as a 

separately maintained pay entitlement 

that will become payable if it exceeds 

the floor rate.. This ‘‘grandfathering’’ 

benefit will cease to be applicable when 

the employee reaches equivalence with 

the top GS grade of the formerly 

applicable career ladder. At that point, 

if the base rate established under this 

‘‘grandfathering’’ authority is higher 

than the normal base rate established 

under the demonstration project, the 

rate under the ‘‘grandfathering’’ 

authority will be converted into the 

employee’s official base rate under the 

demonstration project. Only current 

FSIS employees who convert at the 

inception of pay banding will be 

afforded this ‘‘grandfathering’’ benefit. 

More specific terms and conditions of 

this benefit will be established by FSIS 

in the FSIS Demonstration Project 

Policies and Procedures Handbook that 

will implement the project plan. 

FSIS may establish special rules for 

computing the promotion increase for 

promotions involving positions covered 

by a staffing supplement that take into 

account the staffing supplement and 

locality pay, subject to guidance 

provided by OPM. 

10. Rate of Basic Pay in Noncompetitive 

Lateral Actions 

Upon non-competitive lateral 

movement (e.g., via transfer or 

reassignment, not conversion of 

position) to a demonstration project 

position from another Federal position, 

an employee’s pay rate (including any 

locality payment or staffing supplement) 

will be set at an amount that is equal 

(after any geographic pay conversion) to 

the employee’s existing pay rate 

(including any locality payment or 

equivalent basic pay supplement), 

subject to the applicable normal range 

maximum. For such an employee 

moving from a position outside the 

demonstration project, FSIS may 

provide an increase in the rate of basic 

pay immediately after movement to 

reflect the prorated value of the 

employee’s next scheduled within-grade 

increase or similar within range 

adjustment under the former pay 

system, consistent with the 

requirements in section V.A. 

11. Other Pay Administration Provisions 

Annual performance-based pay 

increases described in section III.C.3 

will be made to the rate of basic pay. 

These increases are scheduled to be 

made on the same date that the annual 

rate range adjustments normally take 

effect—i.e., the first day of the first pay 

period beginning on or after January 1. 

To be eligible for an annual performance 

pay increase an employee must have a 

rating of record of Fully Successful or 

higher. 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5061 

Annual performance awards 

described in section III.C.5. provide for 

lump-sum cash payments to recognize 

performance and will be made at the 

same time as the annual performance 

pay increase. To be eligible for a 

performance award, an employee must 

have a rating of record of Fully 

Successful or higher. 

Developmental pay increases 

described in Section III.D may be paid 

no more than once during any 52-week 

period, following the mid-year progress 

review. 

The grade retention provisions in 5 

U.S.C. 5362 and 5 CFR part 536 are not 

applicable (i.e., no pay band retention). 

The pay retention rules in 5 U.S.C. 5363 

and 5 CFR part 536 apply to 

demonstration project employees, 

subject to the following exceptions: 

(1) An employee with a rating of 

record below Fully Successful may not 

receive an increase in his or her retained 

rate under the 50-percent adjustment 

rule in 5 U.S.C. 5363(b)(2)(B); 

(2) The cap on retained rates is equal 

to the rate for level IV of the Executive 

Schedule plus 5 percent (instead of the 

EX–IV cap established in 5 CFR 

536.306) in order to accommodate 

employees in the upper range extension 

whose rating of record falls below 

Outstanding; 

(3) An employee in the upper range 

extension who is rated below 

Outstanding will be converted to a 

retained rate before processing any other 

pay action; and 

(4) The range maximum rate used in 

computing retained rate adjustments 

under the 50-percent adjustment rule 

will be the maximum rate of the highest 

applicable rate range (including any 

applicable locality payment or staffing 

supplement) taking into consideration 

an employee’s rating of record. For 

retained rate employees rated 

Outstanding, the increase is 50 percent 

of the dollar change in the applicable 

adjusted rate for the upper range 

extension maximum. (Note that an 

employee rated Outstanding must have 

a retained rate in excess of the upper 

range extension maximum adjusted rate, 

since he or she would otherwise be 

converted to a rate within that range 

extension.) For retained rate employees 

rated below Outstanding, the increase is 

50 percent of the dollar change in the 

applicable adjusted rate for the normal 

band maximum. 

If an employee is receiving a retained 

rate that is less than the applicable 

adjusted maximum rate (including any 

applicable locality payment or staffing 

supplement) for the upper range 

extension for the employee’s band, and 

if that employee receives a rating of 

record of Outstanding, the employee’s 

retained rate will be terminated and 

converted to an equal adjusted rate (base 

rate in upper range extension plus 

applicable locality payment or staffing 

supplement). This conversion must be 

processed before any other pay 

adjustment. 

For a retained rate employee with a 

rating of record of Outstanding, if a 

retained rate increase provided at the 

time of a range adjustment results in the 

retained rate falling below the 

applicable adjusted rate for the upper 

range extension maximum, the 

employee’s retained rate will be 

terminated, and the employee’s pay will 

be set at the maximum rate of the upper 

range extension. 

For a retained rate employee with a 

rating of record of Fully Successful or 

Superior, if a retained rate adjustment 

provided at the time of a range 

adjustment results in the retained rate 

falling below the applicable adjusted 

rate for the normal band maximum, the 

employee’s retained rate will be 

terminated, and the employee’s pay will 

be set at the normal band maximum 

rate. 

For a retained rate employee with a 

rating of record below Fully Successful, 

the retained rate is frozen and not 

subject to adjustment. When such an 

employee’s retained rate falls below the 

applicable adjusted rate for the normal 

band maximum, the employee’s 

retained rate will be terminated, and the 

employee’s pay will be set at an 

adjusted rate equal to the retained rate 

(i.e., the rate is not set at the range 

maximum). 

As required by 5 CFR 536.304(a)(2) 

and 536.305(a)(2), any general pay 

adjustment, including a retained rate 

adjustment as described in the 

preceding paragraphs, must be 

processed before any other 

simultaneous pay action (such as a 

geographic pay conversion). 

When applicable, the saved pay rules 

in 5 U.S.C. 3594 and 5 CFR 359.705 for 

former SES members continue to apply 

to demonstration project employees, 

except that (1) an employee with a 

rating of record below Fully Successful 

may not receive an increase in his or her 

saved rate under 5 U.S.C. 3594(c)(2); 

and (2) the 50-percent adjustment rule 

must be applied in the same manner as 

it is applied for a retained rate under 5 

U.S.C. 5363, subject to the modifications 

described in the preceding paragraphs. 

The rules regarding termination of a 

saved rate when it falls below the 

applicable adjusted maximum rate must 

be parallel to those governing 

termination of a retained rate under 5 

U.S.C. 5363, subject to the modifications 

described in the preceding paragraphs. 

FSIS may adopt supplemental pay 

administration policies governing 

matters not specifically addressed in 

this plan, subject to any OPM guidance. 

In addressing geographic conversions 

and simultaneous pay actions, such 

rules must be consistent with 5 CFR 

531.205 and 5 CFR 531.206, 

respectively. 

12. Staffing Supplements 

An employee who is assigned to an 

occupational series and geographic area 

covered by an OPM-established special 

rates schedule, and who meets any other 

applicable coverage requirements, will 

be entitled to a staffing supplement if 

the maximum adjusted rate for a 

covered position in the GS grades 

corresponding to the employee’s band is 

a special rate that exceeds the 

applicable maximum GS locality rate. 

The staffing supplement is added on top 

of the rate of basic pay in the same 

manner as locality pay. An employee 

will receive the higher of the applicable 

locality payment or staffing supplement. 

For employees being converted into 

the demonstration project, the 

employee’s total pay immediately after 

conversion will be the same as 

immediately before, but a portion of the 

total will be in the form of a staffing 

supplement. Adverse action and pay 

retention provisions will not apply to 

the conversion process as there will be 

no change in the total salary rate. The 

staffing supplement is calculated as 

described below. 

Upon conversion, the demonstration 

base rate will be established by dividing 

the employee’s former GS adjusted rate 

(the higher of special rate or locality 

rate) by the staffing factor. The staffing 

factor will be determined by dividing 

the maximum special rate for the 

banded grades by the GS base rate 

corresponding to that special rate (step 

10 GS base rate for the same grade as the 

special rate). The employee’s 

demonstration staffing supplement is 

derived by multiplying the 

demonstration base rate by the staffing 

factor minus one. Therefore, the 

employee’s final demonstration special 

staffing rate equals the demonstration 

base rate plus the special staffing 

supplement; this amount will equal the 

employee’s former GS adjusted rate. 

Simplified, the formula is this: 

Staffing factor = (Maximum special rate for 

banded grades)/(GS base rate 

corresponding to that special rate) 

Demonstration base rate = (Former GS 

adjusted rate [special or locality rate])/ 

(Staffing factor) 

Staffing supplement = demonstration base 


sroberts on PROD1PC70 with NOTICES
5062 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

rate × (staffing factor¥1) 

Salary upon conversion = demonstration base 

rate + staffing supplement [sum will 

equal existing rate] 

If a special rate employee is converted 

to a band where the maximum GS 

adjusted rate for the banded grades is a 

locality rate, when the employee is 

converted into the demonstration 

project, the demonstration base rate is 

derived by dividing the employee’s 

former special rate by the applicable 

locality pay factor (for example, in the 

Washington-Baltimore area, the locality 

pay factor is 1.2089 in 2008). The 

employee’s demonstration localityadjusted rate will equal the employee’s 

former GS adjusted rate. 

Any GS or special rate schedule 

adjustment will require recomputation 

of the staffing supplement. Employees 

receiving a staffing supplement remain 

entitled to an underlying locality rate, 

which may over time supersede the 

need for a staffing supplement. If OPM 

discontinues or decreases a special rate 

schedule, pay retention provisions will 

be applied, as appropriate. Upon 

geographic movement, an employee 

who receives the special staffing 

supplement will have his or her 

entitlement to a staffing supplement 

redetermined; any resulting reduction in 

the supplement will not be considered 

an adverse action or a basis for pay 

retention. 

When a staffing supplement is 

increased, a demonstration project 

employee whose rating of record is 

below Fully Successful is entitled to the 

increased supplement, but his or her 

underlying rate of basic pay will be 

reduced in a manner that ensures the 

employee’s total rate of pay does not 

increase. Such a reduction does not 

constitute a reduction in pay for 

purposes of applying the adverse action 

procedures in chapter 75 of title 5, 

United States Code. (Exception: An 

employee’s rate of basic pay may not be 

reduced under this paragraph to the 

extent that the reduction would cause 

an employee’s rate to fall more than 5 

percent below the normal range 

minimum.) 

Established salary including the 

staffing supplement will be considered 

basic pay for the same purposes as a 

special rate under 5 CFR 530.308—e.g., 

for purposes of retirement, life 

insurance, premium pay, severance pay, 

and advances in pay. It will also be used 

to compute workers’ compensation 

payments and lump-sum payments for 

accrued and accumulated annual leave. 

Adjusted rates that include a staffing 

supplement are subject to an Executive 

Schedule Level IV (EX–IV) cap, except 

that an adjusted rate cap 5 percent 

higher than the EX–IV rate is 

established exclusively for Outstandingrated employees in the upper range 

extension. If the adjusted rate for an 

employee at the normal band maximum 

is affected by the EX–IV cap, resulting 

in an ‘‘effective staffing supplement 

percentage’’ that is less than the regular 

staffing supplement percentage, the 

adjusted rate for an employee in the 

upper rate range extension of the same 

band and in the same staffing 

supplement category will be computed 

using that same effective staffing 

supplement percentage. (For example, if 

the regular staffing supplement 

percentage is 35 percent, but the EX–IV 

cap causes the amount of the staffing 

supplement actually received by an 

employee at the normal band maximum 

to be 20 percent, that effective staffing 

supplement percentage of 20 percent 

would be used to compute the staffing 

supplement for an employee in the 

upper range extension of the same 

band.) 

OPM may approve staffing 

supplements for categories of employees 

within the demonstration project who 

are not in approved special rate 

categories for GS employees, consistent 

with the provisions in 5 U.S.C. 5305(a) 

and (b). 

13. Status as GS Employees 

Notwithstanding the waiver of laws 

governing the GS classification and pay 

system, demonstration project 

employees will be considered to be GS 

employees in applying other laws, 

regulations, and policies, except as 

otherwise provided in this plan. For 

example, demonstration project 

employees will remain eligible for 

locality pay under 5 U.S.C. 5304 

(subject to exceptions described in this 

plan), hazardous duty differentials 

under 5 U.S.C. 5545(d), and 

recruitment, relocation, and retention 

incentives under 5 U.S.C. 5753–5754. 

Demonstration project employees will 

be covered by the regulations in 5 CFR 

part 300, subpart F, except that ‘‘grade’’ 

will be replaced with ‘‘pay band.’’ 

However, project employees will not be 

covered by the supervisory differential 

provision in 5 U.S.C. 5755. 

A demonstration project employee 

who converts from the project position 

to a GS position without a break in 

service will be considered a GS 

employee for the purpose of applying 

the GS promotion rule under 5 U.S.C. 

5334(b). (See section V.B.) 

B. Performance Appraisal System 

FSIS will use its current performance 

management program under the 

Department of Agriculture appraisal 

system that has been approved by OPM, 

consistent with chapter 43 of title 5, 

United States Code. Throughout the 

duration of the demonstration project, 

the effectiveness of performance 

management within the project will be 

monitored by examining metrics and 

assessments that will be included in the 

demonstration project evaluation plan. 

1. Program Requirements 

The FSIS performance appraisal 

program requires written performance 

plans for each covered employee 

containing the employee’s performance 

elements and standards. The 

performance plan links the performance 

elements and standards for individual 

employees to the organization’s strategic 

goals and objectives. Ongoing feedback 

and dialogue between employees and 

their supervisors regarding performance 

is required. In addition, the program 

provides for, at a minimum, one midyear progress review. 

The FSIS appraisal program, 

including its performance levels and 

standards, provides for making 

meaningful distinctions in performance. 

The program currently uses a five-level 

summary rating pattern to summarize 

performance and three levels to appraise 

performance at the element level. Its 

summary level pattern under 5 CFR 

430.208(d) uses Pattern H with Levels 1, 

2, 3, 4, and 5, which FSIS has labeled 

Unacceptable, Marginal, Fully 

Successful, Superior, and Outstanding, 

respectively. Employees must be 

covered by their performance plan for at 

least 90 days before they can be 

assigned a rating of record. Supervisors 

and managers apply the appraisal 

program in a way that makes 

appropriate differentiations in 

performance. These differentiations 

reflect overall organizational 

performance. Employees receive a 

written performance appraisal (i.e., a 

rating of record) annually. Forced 

distributions of ratings are prohibited. 

Each annual appraisal period will begin 

on October 1 and end on the following 

September 30. Performance appraisals 

will be completed in a timely manner to 

support pay decisions in accordance 

with section III.C. 

Additional guidance on the 

performance appraisal program is 

provided in current FSIS directives. 

Performance appraisal is an 

evolutionary process, and changes may 

be made during the course of the 

demonstration project based on findings 

from our ongoing evaluations and 

reviews. Any changes will be 

communicated to affected employees, 

and they will be given a chance to 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5063 

comment before FSIS implements the 

changes. 

2. Supervisory Accountability 

Supervisors are responsible for 

providing appropriate consequences for 

employee performance by addressing 

poor performance and recognizing 

exceptional performance. The 

performance plans for supervisors and 

managers include the degree to which 

supervisors and managers plan, assess, 

monitor, develop, correct, rate, and 

reward subordinate employees’ 

performance. It is recognized that 

specific training must be provided to 

prepare supervisors and managers to 

exercise these responsibilities. FSIS 

understands that this demonstration 

project will heighten the need for 

continuing supervisory training to 

support the accurate and realistic 

appraisal of performance. 

3. Reconsideration of Ratings 

To support fairness and transparency 

for the program and its consequences, 

employees have an opportunity to 

request reconsideration of a rating of 

record by a management official other 

than the rating official. Such 

reconsiderations must be initiated no 

more than 15 days after the official 

rating of record is assigned, consistent 

with the applicable administrative 

grievance policy. If the reconsideration 

of the appraisal results in a different 

rating of record, the revised rating of 

record will become the basis for the 

employee’s pay increase(s) in 

accordance with section III.C. If the 

adjustment occurs after all pay 

deliberations have been finalized, it 

does not result in a recalculation of 

other employees’ pay increases. 

If, after an opportunity to improve, an 

employee’s performance is still not 

satisfactory, the Rating Official will give 

the employee a rating of Level 1, 

Unacceptable, and must take action to 

reassign or remove the employee, or 

place the employee in a lower pay band, 

in accordance with performance action 

provisions in law and regulation. 

C. Performance-Based Payouts and 

Awards 

1. Performance Shares 

FSIS will establish rating/share 

patterns for each pay pool—that is, the 

relationship between ratings of record 

and numbers of shares. A share 

mechanism will be used (1) to ensure 

that employees with higher ratings of 

record receive greater performance 

payouts than employees with relatively 

lower ratings, and (2) to control costs 

without resorting to a forced 

distribution of ratings, which is 

prohibited. 

FSIS may adjust rating/share patterns 

over time after coordination with OPM, 

and after giving affected employees 

advance notice. A change in the rating/ 

share pattern may be applied in 

computing performance increases based 

on an appraisal period only if it takes 

effect at least 120 days before the end of 

that appraisal period. 

Each employee will be assigned a 

certain number of shares, based on his 

or her rating or record. Initially, the 

number of shares for each rating level 

will be as follows: 9 shares are assigned 

to the Outstanding rating; 6 shares to the 

Superior rating; and 4 shares to the 

Fully Successful rating. No shares may 

be assigned to any rating of record 

below Fully Successful, since no pay 

increase is payable to employees with 

such a rating of record. 

After the ratings of record and shares 

are assigned to employees the value of 

a single share can be calculated. The 

value of each performance share will be 

expressed as a percentage of the rate of 

basic pay. The agency will provide 

training to all project participants to 

assure fair, accurate performance ratings 

and equitable performance payouts. 

2. Performance Pay Pools 

Funds that otherwise would be spent 

on the annual GS pay adjustment, 

within-grade increases (WGI), and 

quality step increases (QSI) for 

demonstration project employees will 

instead be placed into a pay pool, which 

will be used to fund annual 

performance increases. Unlike GS 

employees, participating employees 

whose most recent rating of record is 

below Fully Successful will not receive 

any increase in their rate of basic pay. 

Participating programs will establish 

pay pools for allocating performancebased pay increases. FSIS will 

determine which participating 

employees are covered by any pay pool 

and determine the dollar value of each 

pay pool. In setting the value of the pay 

pool, FSIS will initially allocate an 

amount for performance-based pay 

increases equal to the estimated value of 

the WGIs, QSIs, and the annual GS pay 

adjustments that otherwise would have 

been paid to participating employees. In 

computing the estimated value of WGIs 

and QSIs, FSIS may use estimated 

Governmentwide averages as computed 

by OPM or agency historical averages. 

3. Performance-Based Payout 

FSIS will determine the value of one 

performance share, expressed as a 

percentage of the employee’s rate of 

basic pay, based on the value of the pay 

pool and the distribution of shares 

among pay pool employees. An 

individual employee’s performance 

payout is determined by multiplying the 

determined percentage value of a 

performance share by the number of 

shares assigned to the employee. On the 

first day of the first pay period 

beginning on or after January 1 of each 

year, this amount will be paid as an 

increase in the employee’s rate of basic 

pay, but only to the extent that it does 

not cause the employee’s rate to exceed 

the applicable maximum of the 

employee’s rate range. Notwithstanding 

the preceding sentence, employees in 

the upper range extension rated below 

the highest rating level are subject to 

special rules as described in sections 

III.A.6 and III.A.11. Any portion of an 

employee’s performance payout amount 

that cannot be delivered as a basic pay 

increase will be paid out as a lump-sum 

performance bonus (with no charge to 

the pay pool). This lump-sum payment 

is not basic pay for any purpose and is 

not a cash award under chapter 45 of 

title 5, United States Code. 

An employee with a rating of record 

of Fully Successful or higher may not 

receive a performance payout that is less 

than the percentage value of any 

simultaneous rate range adjustment, 

except for (1) an employee receiving a 

retained rate and (2) an employee in the 

upper range extension with a rating of 

record below Outstanding (Level 5) who 

is converted to a retained rate (as 

provided in section III.A.11.). This 

guaranteed amount will be used in place 

of any lower performance payout 

resulting from the share methodology. 

Any additional costs of using the 

guaranteed amount will be funded 

outside the pay pool. Otherwise, the 

guaranteed amount is applied in the 

same manner as the regular performance 

payout. 

An employee who does not have a 

rating of record for the appraisal period 

most recently completed will be treated 

the same as employees in the same pay 

pool who received the modal rating for 

that period, subject to FSIS proration 

policies. 

FSIS may establish policies on 

prorating the performance-based pay 

increases and/or lump-sum payments 

for an employee who, during the period 

between annual pay adjustments, was 

(1) hired or promoted, (2) in leavewithout-pay status, (3) on a part-time 

work schedule, or (4) in other 

circumstances that make proration 

appropriate. Such proration policies 

will provide each eligible employee 

with the full percentage adjustment 

used to adjust base rate ranges (if any) 

and will prorate any additional amount 


sroberts on PROD1PC70 with NOTICES
5064 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

of the performance pay increase that 

would be applicable to the employee 

but for the proration requirement. 

If any employee’s rating of record that 

is the basis for a performance payout is 

retroactively revised (after the regular 

effective date of performance payouts) 

through a reconsideration or grievance 

process, the employee’s performance 

payout must be retroactively 

recomputed using the share value as 

originally determined. Any such 

retroactive corrections are not funded 

out of the pay pool and do not affect the 

performance payouts provided to other 

employees in the pay pool. In setting the 

size of a future pay pool, management 

will take into account past and 

projected corrections. 

Special provision for employees 

receiving a retained rate: An employee 

receiving a retained rate under 5 U.S.C. 

5363 or 5 U.S.C. 3594 is not eligible for 

a basic pay increase except in 

conjunction with (1) a rate range 

adjustment as described in section 

III.A.11 or (2) a geographic conversion 

under 5 CFR.359.705(e) or 536.303(b), as 

applicable. At the discretion of an 

authorized agency official, a retained 

rate employee may receive the same 

lump-sum payment payable to an 

employee in the same pay pool who is 

at the applicable range maximum and 

who has the same rating of record and 

number of shares. 

Special provisions for employees 

returning to duty after a period of 

service in the uniformed services or in 

receipt of workers’ compensation 

benefits: Special pay-setting provisions 

apply to employees who do not have a 

rating of record to support a pay 

adjustment but who are returning to 

duty status after a period of leavewithout-pay or separation during which 

the employee (1) was serving in the 

uniformed services (as defined in 38 

U.S.C. 4303 and 5 CFR 353.102) with 

legal restoration rights (e.g., 38 U.S.C. 

4316), or (2) was receiving workers’ 

compensation benefits under 5 U.S.C. 

chapter 81, subchapter I. In these cases, 

FSIS will determine the employee’s 

prospective rate of basic pay upon 

return to duty by making performancebased pay increases for the intervening 

period based on the modal rating of 

record for employees in the same pay 

pool. The performance pay increases 

during the intervening period may not 

be prorated based on periods covered by 

this provision. In addition, a 

performance pay increase that is 

effective after the employee’s return to 

duty may not be prorated based on 

periods covered by this provision. A 

lump-sum payment for a period 

including actual service performed after 

the employee’s return to duty must be 

prorated (based on service covered by 

this provision) under the same agency 

proration policies that apply generally 

to periods of leave without pay. 

4. Employees Who Cannot Receive a 

Performance Payout 

Employees with a rating of record 

below Fully Successful are prohibited 

from receiving a performance payout. 

When an employee does not receive a 

performance pay increase because of 

performance below Fully Successful, his 

or her pay rate may fall below the 

normal minimum rate of the pay band, 

since that range minimum may be 

increasing. However, in no case may an 

employee’s rate of basic pay be set more 

than 5 percent below the normal range 

minimum. 

If FSIS later chooses to give such an 

employee a new rating of record of Fully 

Successful or higher before the end of 

the next appraisal period, as a result of 

the successful completion of a formal 

improvement plan, the employee is 

entitled to an increase effective on the 

first day of the first pay period 

beginning on or after the date the new 

rating of record is final. The increase 

must be the same percentage basic pay 

increase resulting from the general pay 

increase that the employee would have 

been guaranteed to receive if he or she 

had been rated Fully Successful at the 

time the performance payout was 

initially denied. This provision only 

applies to the annual general increase 

and is not retroactive. Under no 

circumstances is an employee eligible 

for a performance payout based on share 

distribution until the next January. 

Each employee who does not receive 

an increase in basic pay because his or 

her performance is less than Fully 

Successful will be entitled to be notified 

promptly in writing of that fact. At the 

same time, the employee must be 

informed in writing of the right to 

request that the agency reconsider its 

determination, under the same 

procedures prescribed by OPM 

regarding the determination not to 

provide a within-grade increase under 5 

U.S.C. 5335(c). The Merit Systems 

Protection Board will process any 

appeals under this section in the same 

manner that it processes appeals under 

5 U.S.C. 5335(c). 

See section III.A.7 and section III.A.12 

regarding the recomputation of an 

employee’s rate of basic pay to prevent 

a pay increase resulting from an 

increase in the applicable locality 

payment or staffing supplement. 

5. Performance Awards 

Performance awards may be granted 

to any employee with a rating of record 

at Level 3 (Fully Successful) or higher 

and are given at the end of the 

performance year in conjunction with 

decisions on performance pay increases. 

FSIS will adopt supplemental award 

administration policies not specifically 

covered under the plan to improve 

implementation of existing authorities 

prescribed under chapter 45, title 5, 

United States Code. These performance 

awards are separate from performance 

pay increases. 

D. Developmental Pay Increases 

Employees in developmental 

positions (i.e., positions with promotion 

potential to a higher pay band) may 

receive additional pay increases (in 

addition to the annual performance pay 

increase) as they acquire the 

competencies, skills, and knowledge 

necessary to advance to the full 

performance level of their position. An 

employee in a developmental position 

may be awarded a pay increase within 

his or her pay band that ranges up to 7 

percent of basic pay to recognize the 

faster progression that can occur in a 

developmental position. Employees 

must be performing at the Fully 

Successful level or higher to be eligible 

for a developmental pay increase. 

Developmental pay increases may be 

paid no more than once during a 52- 

week period and following the mid-year 

progress review in accordance with 

implementing guidance. Developmental 

pay increases must be approved by the 

program’s Assistant Administrator or 

his or her designee to ensure equity and 

accountability. The funds previously 

used for career-ladder promotions for 

the GS grade levels will initially be used 

to fund the developmental pay increases 

in the first fiscal year of the program’s 

implementation. In all future fiscal 

years, FSIS will allocate a fixed amount 

of funds within the annual 

appropriation based on the amount 

historically spent on career-ladder 

promotions, and these funds will go into 

a pool for distribution to each FSIS 

program area to cover developmental 

pay increases. 

E. Staffing 

1. Minimum Qualification Requirements 

Application of the OPM Operating 

Manual, Qualification Standards for 

General Schedule Positions, is 

simplified by allowing a candidate to 

qualify for a specific pay band if the 

candidate meets (or exceeds) the 

requirements for the lowest grade 

included in that specific pay band. For 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5065 

example, a candidate for a 403- 

Microbiologist position assigned to Pay 

Band 2 (GS–5 through GS–7) need only 

meet the qualification requirements for 

a GS–0403 Microbiologist position at 

the GS–5 level. 

For FSIS demonstration project 

employees and employees of other 

Federal agencies who are in sufficiently 

similar pay banding systems, the 

common OPM requirement of 1 year of 

experience ‘‘at the next lower grade in 

the normal line of progression for the 

occupation’’ is changed to ‘‘at the next 

lower pay band in the normal line of 

progression for the occupation.’’ 

2. Flexible Pay Setting for New Hires 

Reference paragraph III A.8 regarding 

the rate of basic pay upon initial 

appointment. 

3. Promotions 

A promotion is a change to (1) a 

higher pay band in the same career path 

or (2) a pay band in another career path 

with a higher maximum rate of basic 

pay. To be eligible for promotion, an 

employee must have a current 

performance rating of Fully Successful 

or higher and meet the qualifications 

requirements for promotion to the next 

higher band. There are no time-in-band 

requirements. (See section III.A.9. for 

pay setting upon promotion.) When 

employees are competitively selected 

for a position with promotion potential, 

and are subsequently moved to a higher 

pay band in their career path, the action 

is processed as a non-competitive pay 

band promotion until the full 

performance level of the position is 

reached. 

F. Reduction in Force 

If, during the life of the demonstration 

project, FSIS enters into a reduction in 

force (RIF), the RIF will be conducted in 

accordance with 5 U.S.C. 1302 and 3502 

and 5 CFR part 351, except as follows: 

(a) Each of the career paths in each 

FSIS local commuting area will 

constitute separate competitive areas 

(i.e., separate from the other career 

paths, and separate from the 

competitive areas of other FSIS 

employees); 

(b) FSIS will establish competitive 

levels consisting of all positions in a 

competitive area which are in the same 

pay band and classification series, and 

which are similar enough in duties, 

qualification requirements, pay 

schedules, and working conditions so 

that the incumbent of one position may 

be reassigned to any of the other 

positions in the level without undue 

interruption. Each demonstration 

project competitive level will become a 

Retention List for purposes of 

competition when employees are 

released from their competitive levels, 

displaced by higher-standing 

employees, or placed during the 

exercise of assignment rights. 

(c) Assignment rights will be modified 

by substituting ‘‘one pay band’’ for 

‘‘three grades’’ and ‘‘two pay bands’’ for 

‘‘five grades.’’ 

(d) FSIS will use retention standing 

when it chooses to offer vacant 

positions within the meaning of 5 CFR 

351.704. 

Prior to conducting a RIF, FSIS will 

issue and implement a policy in 

accordance with 5 CFR part 330, subpart 

B, except that the establishment and 

operation of a reemployment priority 

list (RPL) will be designed to assist 

current FSIS competitive service 

demonstration project employees who 

will be separated as a result of a RIF 

and, subsequently, former FSIS 

competitive service demonstration 

project employees who have been 

separated as a result of a RIF, or who 

have fully recovered from a 

compensable injury after more than 1 

year, in their efforts to be reemployed at 

FSIS, by affording them reemployment 

priority over certain outside job 

applicants for FSIS competitive service 

demonstration project vacancies. 

FSIS will develop and adopt 

supplemental RIF administration 

procedures to augment the RIF policies 

stipulated by this plan. 

IV. Training 

Training will be provided to all 

participating employees, supervisors, 

and managers before the project is 

launched and throughout the life of the 

project. It is important that employees 

perceive the performance management 

program as fair and transparent; 

therefore, supervisors and managers will 

be trained extensively in setting and 

communicating performance 

expectations; monitoring performance 

and providing timely feedback; 

developing employee performance and 

addressing poor performance; rating 

employees’ performance based on 

expectations; and involving employees 

in the development and implementation 

of the performance appraisal program. 

Supervisors and managers will be held 

accountable for the effective 

management of the performance of 

employees they supervise through 

performance expectations set for, and 

appraisals made of, their own 

performance in this regard. 

All employees will be trained in the 

performance appraisal process and the 

pay adjustment mechanism. Various 

types of training are being considered, 

including video conferencing, on-line 

tutorials, simulation, and train-thetrainer concepts. 

V. Conversion 

A. Conversion to the Demonstration 

Project 

1. Only General Schedule (pay plan 

codes GS and GM) employees who are 

not in a bargaining unit will be 

converted to this project (excludes nonbargaining unit food inspection (GS– 

1863 and GS–701) employees appointed 

under Schedule A 213.3113(1)(3) and 

Schedule C employees). Employees 

whose positions become covered by the 

demonstration project will convert into 

the career path and pay band covering 

the occupational series and grade of 

their position of record. Employees will 

convert to the demonstration project 

with no change in their total rate of pay 

(including basic pay, plus any 

applicable locality payment, special rate 

supplement or staffing supplement). 

Special conversion rules apply to 

special rate employees as described in 

section III.A.12, Staffing Supplements. 

Any simultaneous pay action that is 

scheduled to take effect under the GS 

pay system on the date of conversion 

must be processed before processing the 

conversion to the pay banding system. 

FSIS implementing policies will 

provide procedures for converting an 

employee on grade retention under 5 

U.S.C. 5362, receiving a retained rate 

under 5 U.S.C. 5363 or a saved rate 

under 5 U.S.C. 3594, or on a temporary 

promotion to the demonstration project. 

2. Immediately after conversion, 

eligible employees will receive an 

increase in basic pay reflecting the 

prorated value of the next scheduled 

WGI. The prorated value is determined 

by calculating the portion of the time in 

step employees have completed towards 

the waiting period for their next WGI. 

This WGI ‘‘buy-in’’ adjustment will not 

be paid to (1) employees who are at the 

step 10 rate for their grade immediately 

before conversion to the demonstration 

project, (2) employees who are receiving 

a retained rate of pay under 5 U.S.C. 

5363 or saved rate under 5 U.S.C. 3594 

immediately before conversion to the 

demonstration project, or (3) employees 

whose rating of record is below Fully 

Successful. 

3. Adverse action provisions under 5 

U.S.C. chapter 75, subchapter II, do not 

apply to reductions in pay upon 

conversion into the demonstration 

project as long as the employee’s total 

rate of pay (including basic pay, plus 

any applicable locality payment, special 

rate supplement, or staffing supplement) 

is not reduced upon conversion. 


sroberts on PROD1PC70 with NOTICES
5066 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

4. The first performance-based pay 

increase under the project’s pay 

adjustment mechanism will be effective 

on the first day of the first pay period 

beginning on or after January 1, 2010. 

5. For employees who enter the 

demonstration project by lateral 

reassignment or transfer (i.e., not by 

conversion of position), FSIS may apply 

parallel pay conversion rules, including 

rules for providing a prorated 

adjustment reflecting time accrued 

toward a GS within-grade increase or 

similar within-range adjustment under 

another pay system. If conversion into 

the demonstration project is 

accompanied by a geographic move, the 

employee’s pay entitlements under the 

former pay system in the new 

geographic area must be determined 

before performing the pay conversion. 

B. Conversion to the General Schedule 

FSIS implementing guidance will 

provide procedures for converting an 

employee’s pay band and pay rate to a 

GS-equivalent grade and rate of pay if 

the employee moves out of the 

demonstration project to a GS position. 

The converted GS-equivalent grade and 

rate of pay will be determined before 

any geographic move, promotion, or 

other simultaneous action that occurs 

simultaneously with conversion back to 

the GS system. The new employing 

organization must use the converted GSequivalent grade and rate of pay in 

applying various pay administration 

rules that govern how pay is set in the 

GS position (e.g., rules for promotion 

and highest previous rate under 5 CFR 

part 531, subpart B, and pay retention 

under 5 CFR part 536). The converted 

GS rate will not be adjusted to match a 

step rate before applying those rules. 

The converted GS grade and rate of pay 

are deemed to have been in effect at the 

time the employee left the 

demonstration project pay banding 

system. The rules for determining the 

converted GS grade for pay 

administration purposes do not apply to 

the determination of an employee’s GSequivalent grade for other purposes, 

such as reduction-in-force or adverse 

action. FSIS will perform the 

computations for employees who 

remain within FSIS and USDA. FSIS 

may perform the computations, as a 

courtesy, for employees who move to 

other Federal agencies. At a minimum, 

FSIS will provide a copy of the 

conversion procedures to gaining 

Federal agencies for their use. If an 

employee moves out of the 

demonstration project to a non-GS 

system, the employee’s pay will be set 

under the pay-setting rules governing 

that system. 

VI. Project Modification 

Demonstration projects require 

modification from time to time as 

experience is gained, results are 

analyzed, and conclusions are reached 

on how the system is working. FSIS may 

modify and adjust features and elements 

of this project plan over time. FSIS will 

coordinate such modifications with 

OPM and gain its approval prior to 

implementing any modification. 

Depending on the nature and extent of 

the modification, OPM may require that 

the modification be published as a 

notice in the Federal Register. 

VII. Project Duration 

The initial implementation period for 

the demonstration project will be 5 

years. However, with OPM’s 

concurrence, the project may be 

extended for additional testing or 

terminated before the expiration of the 

5-year period. 

VIII. Project Evaluation 

A. Overview 

Chapter 47 of title 5, United States 

Code, requires an evaluation of each 

demonstration project, and section 

470.317(b) of title 5, Code of Federal 

Regulations, further specifies a results 

evaluation ‘‘to measure the impact of 

the project results in relation to its 

objectives.’’ A rigorous longitudinal 

evaluation of the project, including a 

baseline evaluation, implementation 

evaluation, progress evaluation, and 

summative evaluation will be 

conducted in accordance with an OPMapproved evaluation plan. Below is a 

summary of the evaluation. 

B. Evaluation Models 

The evaluation plan is guided by four 

distinct models: A context model, an 

intervention impact model, an 

implementation impact model, and an 

overall logic model. Each model serves 

a unique and important purpose in the 

evaluation of the demonstration project. 

Also considered in the development of 

the evaluation plan is OPM guidance 

issued in its Alternative Personnel 

Systems (APS) Objectives-Based 

Assessment Framework Handbook. The 

APS Handbook includes an assessment 

framework which outlines the elements 

and dimensions for assessing 

Preparedness and Progress of alternative 

personnel systems, specifically those 

featuring performance-based pay. The 

Preparedness dimensions will be 

covered in the implementation 

evaluation and Progress elements as part 

of the longitudinal impact evaluation. 

The logic model shown in Figure 1 

integrates information from the context 

model, the intervention impact model, 

and implementation impact model with 

other key information, such as 

contextual factors cited in the FSIS 

2008–2013 Strategic Plan. The logic 

model specifies the relationships among 

program elements (e.g., participants, 

initiatives) and defines program success. 

The logic model provides a detailed 

representation of program inputs, 

program initiatives, intended 

intermediate outcomes, ultimate 

outcomes, unintended outcomes, and 

contextual factors of the demonstration 

project. For example, program inputs 

include the budget, participants of the 

project, as well as HR staff, supervisors, 

and the comparison group. 

Implementation factors such as 

leadership commitment, open 

communication and stakeholder 

involvement, as well as the degree of 

implementation (i.e., the extent to 

which interventions were implemented 

as planned), will be considered as part 

of the implementation evaluation. These 

program inputs are expected to impact 

the program initiatives, including pay 

banding, classification and performance 

management, described in detail earlier. 

The logic model is designed to 

evaluate two levels of organizational 

performance: intermediate and ultimate 

outcomes. The intermediate outcomes, 

the main focus of the evaluation, are 

defined as the results from specific 

personnel system changes. Intermediate 

outcomes may occur at the individual or 

organizational level. The ultimate 

outcomes are determined through 

improved organizational performance, 

improved customer satisfaction, and 

mission accomplishment. Although it is 

not possible to establish a direct causal 

link between changes in the HR 

management system and organizational 

effectiveness, it is hypothesized that the 

program initiatives will contribute to 

improved organizational effectiveness. 

The logic model also illustrates that the 

context within which the demonstration 

project operates during its 5-year period 

is an important consideration in 

interpreting the results obtained. The 

contextual factors, which may occur at 

any stage of the project, are potential 

intervening variables that may affect 

project outcomes positively or 

negatively. Intervening variables can 

facilitate or inhibit the intended 

outcomes, or they can result in 

unintended outcomes. 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5067 

In addition, the evaluation will take 

into account the requirements of section 

1126 of Public Law 108–136 (5 U.S.C. 

4701 note) which states that a pay-forperformance system may not be 

initiated under chapter 47 of title 5, 

United States Code, unless it 

incorporates the following eight 

elements: (1) Adherence to merit 

principles set forth in section 2301 of 

title 5; (2) a fair, credible, and 

transparent employee performance 

appraisal system; (3) a link between 

elements of the pay-for-performance 

system, the employee performance 

appraisal system, and the agency’s 

strategic plan; (4) a means for ensuring 

employee involvement in the design 

and implementation of the system; (5) 

adequate training and retraining for 

supervisors, managers, and employees 

in the implementation and operation of 

the pay-for-performance system; (6) a 

process for ensuring ongoing 

performance feedback and dialogue 

between supervisors, managers, and 

employees throughout the appraisal 

period, and setting timetables for 

review; (7) effective safeguards to ensure 

that the management of the system is 

fair and equitable and based on 

employee performance; and (8) a means 

for ensuring that adequate agency 

resources are allocated for the design, 

implementation, and administration of 

the pay-for-performance system. 

C. Evaluation 

A quasi-experimental design will be 

used for the evaluation of this 

demonstration project. The Animal and 

Plant Health Inspection Services 

(APHIS) will serve as the ‘‘no 

treatment’’ GS comparison group, since 

it is not possible to randomly assign 

individuals to an ‘‘experimental’’ group 

and a ‘‘control’’ group in a 

demonstration project. APHIS is a 

similar organization, with a similar 

occupational mix and working 

conditions. This comparison group will 

be used primarily in the analysis of 

workforce data and employee 

perceptions gathered from employee 

surveys. Longitudinal data from APHIS 

and FSIS will be analyzed and 

compared to determine the overall 

effectiveness of the changes to the FSIS 

personnel system. Pre-post comparisons 

for FSIS, pre-post comparisons for 

APHIS, longitudinal comparisons for 

FSIS, longitudinal comparisons for 

APHIS, and cross-sectional comparisons 

between FSIS and APHIS will identify 

pre-existing baseline differences and 

help determine whether changes over 

time were due to the demonstration 

interventions. 

D. Method of Data Collection 

A multi-method approach to data 

collection and analysis will be used in 

the evaluation. Workforce information 

from OPM’s Central Personnel Data File 

(CPDF) and personnel office records 

will be supplemented with perceptual 

survey data to assess the effectiveness 

and perception of the new system. Data 

from a variety of sources provide more 

than one perspective on the 

effectiveness of demonstration projects. 

In addition, both qualitative and 

quantitative data will be used in 

evaluating outcomes. The following data 

will be collected: (1) Workforce data; (2) 

personnel office data; (3) employee 

attitude surveys; (4) structured 

interviews and focus group data; (5) 

local site historian logs and 

implementation information; and (6) 

core results measures of organizational 

performance. In addition, data collected 

from prior demonstration projects will 


sroberts on PROD1PC70 with NOTICESEN28JA09.002</GPH>
5068 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

provide benchmark data for additional 

comparisons. All data collection 

methods will consider the various 

career paths, pay bands, locations, 

operating units and other important 

distinguishing factors of the 

demonstration project. Each phase of 

the project will involve collecting the 

different types of data and preparing 

reports and interim briefings on the 

results. By using both qualitative and 

quantitative methods in conducting the 

evaluation, as well as benchmark data, 

confidence in the findings will increase 

and a more comprehensive 

understanding of the changes and 

impact will be gained. 

The evaluation effort will consist of 

two main phases covering formative and 

summative evaluation over a 5-year 

period. The formative evaluation phase 

covers baseline data collection prior to 

implementation of the personnel system 

changes as well as the Implementation 

and Progress evaluations. The 

Summative Evaluation will focus on an 

overall assessment of the demonstration 

project after about four years of data 

have been collected to provide sufficient 

time for policy-makers during the fifth 

year to make a decision on broader 

government application, extension of 

the project, or expiration after the 5-year 

period. 

IX. Costs 

A. Buy-in Costs 

Upon conversion to the 

demonstration system many employees 

will receive an increase in basic pay for 

the prorated time in grade towards their 

next within-grade increase. However, 

these costs will be offset by the 

elimination of within-grade step 

increases that otherwise would have 

occurred. 

B. Recurring Costs 

All funding will be provided through 

the organization’s budget. Each project 

program area will maintain 

compensation during the project at the 

level it would have reached under the 

current system. No additional funding 

will be requested specifically for this 

project; all costs will be charged to 

available funds through existing 

appropriations. To ensure appropriate 

carryover of costs from pre-project to 

project years, a base assessment will be 

made using 3 base years: Fiscal Years 

2005, 2006, and 2007. For example, data 

associated with average annual salary, 

pay increases and promotions, turnover, 

and other relevant data will be collected 

to ensure a thorough analysis of costs 

which are impacted by pay banding. 

Budget discipline will be required and 

achieved by imposing specific funding 

principles. Finally, both longitudinal 

and site comparisons will be used to 

ensure that spending remains within 

acceptable limits. 

X. Waiver of Laws and Regulations 

Required 

A. Title 5, United States Code 

Chapter 35, section 3594: Saved pay 

for former members of the Senior 

Executive Service (only to the extent 

necessary to (1) bar employees with a 

rating of record lower than Fully 

Successful from receiving saved rate 

increases under 5 U.S.C. 3594(c)(2); (2) 

provide a saved rate that is less than the 

maximum rate (including any locality 

adjustment or staffing supplement) of 

the upper range extension for an 

employee who receives a rating of 

record of Outstanding will be 

terminated and converted to an equal 

adjusted rate; (3) provide the range 

maximum rate used to compute saved 

rate adjustments is the normal range 

maximum rate (including any locality 

adjustment or staffing supplement) for 

employees with a rating of record below 

Outstanding and the upper range 

maximum rate (including any locality 

adjustment or staffing supplement) for 

an employees with an Outstanding 

rating of record; and (4) provide when 

a frozen saved rate for an employee with 

a rating of record below Fully 

Successful falls below the applicable 

adjusted rate for the normal band 

maximum, the saved rate will be 

terminated and the employee’s pay will 

be set at an adjusted rate equal to the 

saved rate). 

Chapter 51: Classification (except that 

(1) section 5103 is retained and 

modified after ‘‘finally’’ to read ‘‘the 

coverage of positions and employees 

under this modified classification 

system,’’ (2) sections 5111 and 5112 are 

retained with ‘‘grade’’ replaced by ‘‘pay 

bands’’ and (3) for the purpose of 

applying any other laws, regulations, or 

policies that refer to GS employees or to 

chapter 51 of title 5, United States Code, 

the modified classification system 

established under this plan must be 

considered to be a GS classification 

system under chapter 51; this includes, 

but is not limited to, the reference to the 

General Schedule in section 5545(d) 

(relating to hazard pay)). 

Chapter 53, section 5302(1)(A), (8) 

and (9): Definitions (only to the extent 

necessary to provide that employees 

under the demonstration project are not 

considered to be GS employees for the 

purposes of annual adjustments under 

section 5303 or similar provision of law 

governing annual adjustments for 

employees covered by section 5303). 

Chapter 53, section 5303: Annual 

adjustments to pay schedules. 

Chapter 53, section 5304: Localitybased comparability payments (only to 

the extent necessary to (1) provide a 

locality rate may not exceed the rate for 

EX–IV plus 5 percent for employees in 

the upper range extension and (2) apply 

an ‘‘effective’’ locality pay percentage 

for employees in the upper range 

extension under circumstances 

described in the plan). 

Chapter 53, section 5305: Special pay 

authority. 

Chapter 53, subchapter III: General 

Schedule pay rates (except that, for 

purposes of applying any other laws, 

regulations, or policies that refer to GS 

employees or to subchapter III of 

chapter 53 of title 5, United States Code, 

the modified pay system established 

under this plan must be considered to 

be a GS pay system established under 

such subchapter III, except as otherwise 

provided in this plan; this includes, but 

is not limited to, references to the 

General Schedule in section 5304 

(relating to locality pay), section 5545(d) 

(relating to hazard pay), and sections 

5753–5754 (dealing with recruitment, 

relocation, and retention incentives). 

Chapter 53, section 5362: Grade 

retention. 

Chapter 53, section 5363: Pay 

retention (only to the extent necessary 

to (1) Replace ‘‘grade’’ with ‘‘pay band;’’ 

(2) bar employees with a rating of record 

lower than Fully Successful from 

receiving retained rate increases under 5 

U.S.C. 5363(b)(2)(B); (3) provide that 

pay retention provisions do not apply to 

conversions into the demonstration 

project from the General Schedule or 

other pay system, as long as the 

employee’s total pay rate is not reduced; 

(4) provide the pay (including any 

locality adjustment or staffing 

supplement) of an employee in the 

upper range extension who is rated 

below Outstanding will be converted to 

a retained rate before processing any 

other actions; (5) provide a retained rate 

that is less than the maximum rate 

(including any locality adjustment or 

staffing supplement) of the upper range 

extension for an employee who receives 

a rating of record of Outstanding will be 

terminated and converted to an equal 

adjusted rate; (6) provide the range 

maximum rate used to compute retained 

rate adjustments is the normal range 

maximum rate (including any locality 

adjustment or staffing supplement) for 

employees with a rating of record below 

Outstanding and the upper range 

maximum rate (including any locality 

adjustment or staffing supplement) for 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 5069 

an employees with an Outstanding 

rating of record; and (7) provide when 

a retained rate for an employee with a 

rating of record below Fully Successful 

falls below the applicable adjusted rate 

for the normal band maximum, the 

retained rate will be terminated and the 

employee’s pay will be set at an 

adjusted rate equal to the retained rate). 

Chapter 55, section 5542(a): Overtime 

rates (only to the extent necessary to 

provide that the GS–10 minimum 

special rate (if any) for the special rate 

category that would otherwise apply to 

an employee (but for the existence of the 

demonstration project) is deemed to be 

the ‘‘applicable special rate of pay’’ in 

determining the overtime hourly rate 

cap). 

Chapter 55, section 5547: Limitation 

on premium pay (only to the extent 

necessary to provide that an applicable 

staffing supplement is added to the GS– 

15, step 10, rate in lieu of the applicable 

locality payment). 

Chapter 59, section 5941: Cost-ofliving allowances and post differentials 

(only to the extent necessary to provide 

that employees in the demonstration 

project pay system are eligible for 

coverage under section 5941). 

Chapter 75, section 7512(3): Adverse 

actions (only to the extent necessary to 

replace ‘‘grade’’ with ‘‘pay band’’). 

Chapter 75, section 7512(4): Adverse 

actions (only to the extent necessary to 

provide that adverse action provisions 

do not apply to (1) conversions into the 

demonstration project from the General 

Schedule or other pay system, as long as 

the employee’s total rate of pay is not 

reduced and (2) reductions in rates of 

basic pay to offset a locality pay or 

staffing supplement increase as a result 

of receiving a rating of record below 

Fully Successful). 

Note: If any of the provisions of title 5, 

United States Code, listed above are amended 

during the period this demonstration project 

is in effect, FSIS may choose to terminate the 

waiver of one or more such provisions with 

respect to employees participating in the 

project, without formally modifying the 

project itself. FSIS must notify OPM when 

any such waiver is terminated. 

B. Title 5, Code of Federal Regulations 

Part 330, subpart B, section 330.201: 

Establishment and maintenance of 

Reemployment Priority List (RPL) (only 

to the extent necessary to establish and 

maintain a reemployment priority list 

exclusively for FSIS competitive service 

demonstration project employees). 

Part 351, subpart D, section 351.402: 

Competitive area (only to the extent 

necessary to permit the use of career 

paths in conjunction with 

organizational units and geographic 

locations when establishing competitive 

areas). 

Part 351, subpart D, section 351.403: 

Competitive level (only to the extent 

necessary to replace ‘‘same grade’’ with 

‘‘same pay band’’). 

Part 351, subpart G, section 351.701: 

Assignment involving displacement 

(only to the extent necessary to replace 

‘‘three grades’’ with ‘‘one pay band’’ and 

‘‘five grades’’ with ‘‘two pay bands’’). 

Part 359, subpart G, section 359.705: 

Pay (only to the extent necessary to (1) 

bar employees with a rating of record 

lower than Fully Successful from 

receiving a saved rate increase under 5 

CFR 359.705(d)(1)); (2) provide a saved 

rate that is less than the maximum rate 

(including any locality adjustment or 

staffing supplement) of the upper range 

extension for an employee who receives 

a rating of record of Outstanding will be 

terminated and converted to an equal 

adjusted rate; (3) provide the range 

maximum rate used to compute saved 

rate adjustments is the normal range 

maximum rate (including any locality 

adjustment or staffing supplement) for 

employees with a rating of record below 

Outstanding and the upper range 

maximum rate (including any locality 

adjustment or staffing supplement) for 

an employees with an Outstanding 

rating of record; and (4) provide when 

a saved rate for an employee with a 

rating of record below Fully Successful 

falls below the applicable adjusted rate 

for the normal band maximum, the 

saved rate will be terminated and the 

employee’s pay will be set at an 

adjusted rate equal to the saved rate). 

Part 430, subpart B, section 430.203: 

Definitions (only to the extent necessary 

to allow an additional rating of record 

to support a pay decision under section 

III.C.3 or 4 of this project plan). 

Part 511, subpart B: Coverage of the 

General Schedule. 

Part 511, section 511.607: 

Nonappealable issues. 

Part 530, subpart C: Special Rate 

Schedules for Recruitment and 

Retention. 

Part 531, subpart B: Determining Rate 

of Basic Pay. 

Part 531, subpart D: Within-Grade 

Increases. 

Part 531, subpart E: Quality Step 

Increases. 

Part 531, section 531.604: 

Determining an employee’s locality rate 

(only to the extent necessary to apply an 

‘‘effective’’ locality pay percentage for 

employees in the upper range extension 

under circumstances described in the 

plan). 

Part 531, section 531.606: Maximum 

limits on locality rates (only to the 

extent necessary to provide a locality 

rate may not exceed the rate for EX–IV 

plus 5 percent for employees in the 

upper range extension). 

Part 536, subpart B: Grade Retention. 

Part 536, subpart C: Pay Retention 

(only to the extent necessary to (1) 

replace ‘‘grade’’ with ‘‘pay band;’’ (2) 

bar employees with a rating of record 

lower than Fully Successful from 

receiving retained rate increases under 5 

CFR 536.305; (3) provide that pay 

retention provisions do not apply to 

conversions into the demonstration 

project from the General Schedule or 

other pay system, as long as the 

employee’s total pay rate is not 

reduced); (4) provide that a retained rate 

may not exceed the rate for EX–IV plus 

5 percent; (5) provide the pay (including 

any locality adjustment or staffing 

supplement) of an employee in the 

upper range extension who is rated 

below Outstanding will be converted to 

a retained rate before processing any 

other actions; (6) provide a retained rate 

that is less than the maximum rate 

(including any locality adjustment or 

staffing supplement) of the upper range 

extension for an employee who receives 

a rating of record of Outstanding will be 

terminated and converted to an equal 

adjusted rate; (7) provide the range 

maximum rate used to compute retained 

rate adjustments is the normal range 

maximum rate (including any locality 

adjustment or staffing supplement) for 

employees with a rating of record below 

Outstanding and the upper range 

maximum rate (including any locality 

adjustment or staffing supplement) for 

an employees with an Outstanding 

rating of record; and (8) provide when 

a retained rate for an employee with a 

rating of record below Fully Successful 

falls below the applicable adjusted rate 

for the normal band maximum, the 

retained rate will be terminated and the 

employee’s pay will be set at an 

adjusted rate equal to the retained rate). 

Part 550, sections 550.106–107: 

Biweekly and annual maximum 

earnings limitation (only to the extent 

necessary to provide that an applicable 

staffing supplement is added to the GS– 

15, step 10, rate in lieu of the applicable 

locality payment). 

Part 550, section 550.113(a): 

Computation of overtime pay (only to 

the extent necessary to provide that the 

GS–10 minimum special rate (if any) for 

the special rate category that would 

otherwise apply to an employee (but for 

the existence of the demonstration 

project) is deemed to be the ‘‘applicable 

special rate of pay’’ in determining the 

overtime hourly rate cap). 

Part 550, section 550.703: Definitions 

(to the extent necessary to modify 

paragraph (c)(4) of the definition of 


sroberts on PROD1PC70 with NOTICES
5070 Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / Notices 

‘‘reasonable offer’’ by replacing ‘‘two 

grade or pay levels’’ with ‘‘one pay band 

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

‘‘pay band level’’). 

Part 591, subpart B, section 591.204: 

Cost-of-living allowances and post 

differentials (only to the extent 

necessary to provide that the 

demonstration project pay system is a 

qualifying pay plan). 

Part 752, section 752.401(a)(3): 

Adverse actions (only to the extent 

necessary to replace ‘‘grade’’ with ‘‘pay 

band’’). 

Part 752, section 752.401(a)(4): 

Adverse actions (only to the extent 

necessary to provide that adverse action 

provisions do not apply to (1) 

conversions into the demonstration 

project from the General Schedule or 

other pay system, as long as the 

employee’s total rate of pay is not 

reduced and (2) reductions in rates of 

basic pay to offset a locality pay or 

staffing supplement rate increase as a 

result of receiving a rating of record 

below Fully Successful). 

Note: If any of the provisions of title 5, 

Code of Federal Regulations, listed above are 

revised during the period this demonstration 

project is in effect, FSIS may choose to 

terminate the waiver of one or more such 

provisions with respect to employees 

participating in the project, without formally 

modifying the project itself. FSIS must notify 

OPM when any such waiver is terminated. 

[FR Doc. E9–1641 Filed 1–27–09; 8:45 am] 

BILLING CODE 6325–43–P 


sroberts on PROD1PC70 with NOTICES