Human Capital: OPM Needs to Improve the Design, Management, and Oversight of the Federal Classification System
Published: 2014-07-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Almost since its inception in 1949, questions have been raised about the ability of the GS system—the federal government's classification system for defining and organizing federal positions—to keep pace with the evolving nature of government work. GAO was asked to review the GS classification system.
This report examined: (1) the attributes of a modern, effective classification system and how the GS system compares with the modern systems' attributes; (2) trends in agencies and occupations covered by the GS system and the pay difference for selected alternative systems; and (3) OPM's administration and oversight of the GS system. GAO analyzed personnel data from 1988 to 2013, conducted a literature review, compared legislation to OPM procedures, and interviewed subject matter specialists and OPM officials, selected to represent public policy groups, government employee unions, and academia, among others.
section_title: What GAO Found
paragraphs: GAO's analysis of subject matter specialists' comments, related literature, and interviews with Office of Personnel Management (OPM) officials identified a number of important characteristics for a modern, effective classification system, which GAO consolidated into eight key attributes (see table below). GAO's analysis shows that in concept the current General Schedule (GS) classification system's design incorporates several key attributes including internal and external equity, transparency, simplicity, and rank in position. However, as OPM implemented the system, the attributes of transparency, internal equity, simplicity, flexibility, and adaptability are reduced. This occurs, in part, because some attributes are at odds with one another so fully achieving one attribute comes at the expense of another. Thus, OPM, working with its stakeholders, is challenged to determine how best to optimize each attribute.
While the GS system's standardized set of 420 occupations, grouped in 23 occupational familes, and statutorily-defined 15 grade level system incorporates several key attributes, it falls short in implementation. For example, the occupational standard for an information technology specialist clearly describes the routine duties, tasks, and experience required for the position. This kind of information is published for the 420 occupations, so all agencies are using the same, consistent standards when classifying positions—embodying the attributes of transparency and internal equity. However, in implementation, having numerous, narrowly-defined occupational standards inhibits the system's ability to optimize these attributes. Specifically, classifying occupations and developing position descriptions in the GS system requires officials to maintain an understanding of the individual position and the nuances between similar occupations. Without this understanding, the transparency and internal equity of the system may be inhibited, as agency officials may not be classifying positions consistently, comparable employees may not be treated equitably, and the system may seem unpredictable. Several studies have concluded that the GS system was not meeting the needs of the modern federal workforce or supporting agency missions, and some studies suggested reductions in the number of occupational series and grade levels to help simplify the system. In addition, over the years agencies have sought exceptions to the GS system to mitigate some of its limitations either through demonstration projects or congressionally-authorized alternative personnel systems—often featuring a broadband approach that provided fewer, broader occupational groups and grade levels. By using lessons learned and the results from prior studies to examine ways to make the GS system more consistent with the attributes of a modern, effective classification system, OPM could better position itself to help ensure that the system is keeping pace with the government's evolving requirements.
The proportion of federal employees covered under alternative personnel systems increased from 6 percent to 21 percent of the white-collar workforce from 1988 to 2013. Occupational families (i.e., groups of occupations based upon work performed) in the science, technology, engineering, and math (STEM) fields are more prevalent in alternative systems. Of the GS system's 23 occupational families, the 6 with the largest increase from GS to an alternative system were mostly concentrated in STEM occupations (See figure below). GAO estimated that, in 2013, employees in alternative systems were paid about 10 percent more, on average, than GS employees in identical occupations when controlling for factors such as tenure, location, and education in the 90 occupations GAO considered.
OPM is responsible for establishing new—and revising existing—occupational standards after consulting with agencies. From 2003 to 2014, OPM established 14 new occupational standards and revised almost 20 percent of the occupational standards. However, there was no published review or update of 124 occupations since 1990. OPM officials said they first review occupations identified in presidential memorandums as needing review; however OPM does not systemically track and prioritize the remaining occupational standards for review. Therefore, OPM has limited assurance that it is updating the highest priority occupations. Further, OPM is required by law to oversee agencies' implementation of the GS system. However, OPM officials said OPM has not reviewed any agency's classification program since the 1980s because OPM leadership at the time concluded the reviews were ineffective and time consuming. As a result, OPM has limited assurance that agencies are correctly classifying positions according to standards.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Director of OPM (1) work with stakeholders to examine ways to modernize the classification system, (2) develop a strategy to track and prioritize occupations for review and updates, and (3) develop cost-effective methods to ensure agencies are classifying correctly. OPM partially concurred with the first and third recommendation but did not concur with the second recommendation. OPM stated it already tracks and prioritizes occupations for updates. However, OPM did not provide documentation of its actions. GAO maintains that OPM should implement this action.

section_title: Letter
paragraphs: In 2013, about 1.6 million employees (about 80 percent of the  government’s civilian white-collar workforce) were covered by the General  Schedule (GS) classification system—the federal government’s system  for defining and organizing federal positions, primarily to assign rates of  pay. Almost since its inception in 1949, questions have been raised  about the GS classification system’s ability to keep pace with the evolving  complexity and nature of federal work. As one example, the field of  cybersecurity did not exist when the GS system began 65 years ago.  Today, cybersecurity is one of a number of mission-critical skill gaps in  the federal workforce and the GS system does not have a specific  classification standard for the work performed in this occupation. In 2011,  we reported that agencies have difficulties filling this critical need.
Several public policy groups and some Office of Personnel Management  (OPM) reports have raised questions about the ability of the GS system to  meet agencies’ needs for flexible talent management tools that enable  them to align employees with mission requirements. As a result, over the  years there have been a number of proposals and demonstration projects  aimed at addressing limitations with the GS system. Most recently, the  fiscal year 2015 President’s Budget called for reforms to update the  classification system—along with hiring and pay—to create a modernized  personnel system that will allow the federal government to compete for  and reward top talent.
Given the changing nature of federal work, you asked us to examine  aspects of the GS system including the extent to which it helps agencies  address critical skills gaps within the federal civil service. This report  assesses (1) the attributes of a modern, effective classification system  and how the GS system compares with the modern systems’ attributes;  (2) the trends in agencies and occupations covered by the GS system  and the pay difference for selected alternative systems; and (3) the OPM  administration and oversight of the GS system.
To assess the attributes of a modern, effective classification system and  the extent to which the GS system balances those attributes, we  interviewed more than 25 subject matter specialists. We selected these  subject matter specialists because they represented various perspectives  on and experiences with federal classification in the following areas:  public policy, government employee unions, academia, the Federal  Managers Association, and former high-level government officials at OPM  and other agencies that implemented an alternative personnel system.  We analyzed the results of discussion groups we held with the specialists  to identify the attributes of a modern, effective classification system. We  provided the subject matter specialists and OPM officials the opportunity  to comment on the attributes and modified the attributes or definitions as  appropriate. In addition, we reviewed relevant literature on the GS  system, published from 2000 to 2014, from OPM, academic journals, and  public policy organizations. We also reviewed relevant literature on  selected alternative personnel systems, applicable federal laws, and  OPM’s classification guidance.information from our discussion groups to compare the design and  implementation of the GS system and a notional alternative personnel  system to determine the extent to which the GS system balances the  attributes of a modern, effective classification system.
We used this information along with  To assess the trends in occupations covered under the GS system and  characteristics of occupations associated with alternative personnel  systems, we used OPM’s Enterprise Human Resources Integration  (EHRI) Statistical Data Mart, which contains information on personnel   We analyzed actions and other data for most federal civilian employees. EHRI data starting with fiscal year 1988, the first year for which data were  available, and ending with 2013, the most recent, complete fiscal year of  data available. To analyze the pay differences between employees on the  GS system and employees on alternative personnel systems, we  performed a multivariate regression analysis on EHRI data for fiscal year  2013. In the regression, we controlled for several factors including  employees’ years of federal service, age, education, and pay basis  (hourly, annually). We estimated this model for occupations with at least  2.5 percent employee representation in both systems and which  contained at least 0.125 percent of the federal government, or about 90 of  more than 400 possible occupations. We assessed the reliability of EHRI  data through electronic testing to identify missing data, out of range  values, and logical inconsistencies. We also reviewed our prior work  assessing the reliability of these data and interviewed OPM officials  knowledgeable about the data to discuss the data’s accuracy and steps  OPM takes to ensure reliability. On the basis of this assessment, we  believe the EHRI data we used are sufficiently reliable for the purpose of  this report.
To assess OPM’s administration and oversight of the GS system, we  reviewed the relevant statutes, particularly Title 5, Chapter 51 of the U.S.  Code, which defines OPM’s role in administration and oversight of the  classification system. We also reviewed OPM guidance and standards,  such as The Classifier’s Handbook and Introduction to the Position  Classification Standards. We then compared the steps OPM takes with  regard to administration and oversight of the classification system to  legislation outlining OPM’s responsibilities. In addition, we interviewed  OPM officials in the offices of Employee Services and Merit System  Accountability and Compliance to determine the actions they have taken  to oversee agencies’ implementation of the classification system. See  appendix I for a more detailed discussion of our scope and methodology.
We conducted this performance audit from May 2013 through July 2014  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  finding and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The GS classification system is a mechanism for organizing work, notably  for the purposes of determining pay, based on a position’s duties,  responsibilities, and qualification requirements, among other things. The  GS system was created by the Classification Act of 1949 and was later  codified in Title 5 of the U.S. Code. The origins of the GS system can be  traced to the 1880s when merit replaced political patronage as the  method of filling federal jobs. Classification was seen as a necessary first  step in the equitable treatment of applicants and employees.
A guiding principle of the GS classification system is that employees  should earn equal pay for substantially equal work. The classification  system aligns positions with rates of base pay by establishing a  standardized schedule, which OPM administers.classification system is the foundation of many other human capital  management policies, as shown in figure 1.
section_title: GS and Alternative Systems Need to More Effectively Balance Key Attributes of a Modern, Effective Classification System Eight Important Attributes of a Modern, Effective Classification System
paragraphs: Our analysis of subject matter specialists’ comments, related literature,  and interviews with OPM officials identified a number of important  characteristics for a modern, effective classification system, which we  consolidated into eight key attributes. While each attribute is important  individually, the inherent tensions between some will challenge OPM,  policymakers, and stakeholders to find the optimal balance points so that  all of the attributes will contribute to an effective system when assembled  collectively. Importantly, the weight that policymakers and stakeholders  assign to each attribute—and the trade-offs made among competing  attributes—are important in evaluating alternative classification designs  like those found in demonstration projects or the Partnership for Public  Service’s recent model.
Moreover, while the attributes listed below were frequently cited by  subject matter specialists and the literature we examined, there was no  consensus in priority or in degree of these attributes. Subject matter  specialists agreed that any changes to the classification system should  align with the guiding principle of equal pay for work of substantially equal  value.
The eight attributes of a modern, effective classification system are as  follows:  Internal equity. All employees with comparable qualifications and  responsibilities for their respective occupations are assigned the same  grade level.
External equity. All employees with comparable qualifications and  responsibilities are assigned grade levels and corresponding pay  ranges comparable to the nonfederal sector.
Transparency. A comprehensible and predictable system that  employees, management, and taxpayers can understand.
Flexibility. The ease and ability to modify the system to meet agency- specific needs and mission requirements, including modifying rates of  pay for certain occupations to attract a qualified workforce, within the  framework of a uniform government-wide system.
Adaptability. The ease and ability to conduct a periodic, fundamental  review of the entire classification system that enables the system to  evolve as the workforce and workplace changes.
Simplicity. A system that enables interagency mobility and  comparisons with a rational number of occupations and clear career  ladders with meaningful differences in skills and performance, as well  as a system that can be cost-effectively maintained and managed.
Rank-in-position. A classification of positions based on mission  needs and then hiring individuals with those qualifications.
Rank-in-person. A classification of employees based on their unique  skills and abilities.
The values policymakers and stakeholders emphasize could have large  implications for pay, the ability to recruit and retain mission critical  employees, and other aspects of personnel management. This is one  reason why—despite past proposals—changes to the current system  have been few, as finding the optimal mix of attributes that is acceptable  to all stakeholders is difficult. For example, on the one hand a rank-in- person system classifies individuals based on individual qualifications  such as performance, education, and seniority. This approach is used by  the military and Senior Executive Service. On the other hand, a rank-in- position system classifies positions based on factors such as the duties,  responsibilities, and qualifications the position requires and is widely used  across the federal government.
subsections: section_title: Implementation of the GS System Could Better Balance Attributes of a Modern, Effective Classification System
paragraphs: The extent to which the design and implementation of the GS  classification system balances the attributes of a modern, effective  classification system varies. There are two main design features of the  GS system: (1) a set of standardized occupations, and (2) statutorily  defined grade levels and steps. We found, in concept, these features  incorporate several of the key attributes including internal and external  equity, transparency, simplicity, and rank-in-position. However, as  agencies implement the GS system the attributes of transparency,  internal equity, simplicity, flexibility, and adaptability are reduced. This  occurs, in part, because as discussed earlier in this report, some  attributes are at odds with one another, so fully achieving one attribute  comes at the expense of another.
OPM publishes and defines a set of occupational standards that describe  and differentiate all of the different types of work performed across the  government, which agencies then use to develop position descriptions.  Providing standard government-wide occupational standards is an  example of how transparency and internal equity are built into the  system. For example, the occupational standard for an information  technology specialist clearly describes the routine duties and tasks, and  experience required for the position. This information is published for all  of the 420 occupations defined in the GS system, so all agencies are  using the same, consistent standards when writing position descriptions.  At the same time, any occupation with the same education, experience,  and other requirements should be assigned the same grade level and  same base pay range, contributing to internal equity. The GS system  defines occupations narrowly, meaning that different occupational  definitions may exist even for closely related occupations, like electrical  engineers and electronics engineers. These two occupations both require  similar backgrounds in understanding the theories of advanced  mathematics, economics, and computer science. However, in application,  electrical engineers tend to concentrate on the electrical systems of  physical infrastructure, among other areas, while electronics engineers  tend to concentrate on the electrical systems of devices such as satellites  and communication systems. The precisely defined occupational  standards can also enable comparisons to those occupations in the  private sector, providing some level of external equity.
However, in practice having numerous, narrowly-defined occupational  standards may actually inhibit the system’s ability to optimize these  attributes for reasons including the following:
Classifying occupations and developing position descriptions in the  GS system requires officials to maintain an understanding of the  potential responsibilities of the individual position and of the nuances  between similar occupational definitions. Without this understanding,  having numerous occupations from which to choose may inhibit  transparency and internal equity. For example, one subject matter  specialist said that the requirements of a particular position may be  met by the qualifications of more than one occupational definition. As  a result, officials may not be classifying positions consistently,  comparable employees may not be treated equitably, and the system  may seem unpredictable.
Having many—more than 400—occupations can limit the simplicity  of the system. For example, since individual occupations may have  their own career ladders or a set number of grades for potential  advancement, it can be challenging for agencies to move employees  according to their core skills within and across agencies to address  evolving needs. Likewise, qualified employees may be limited in their  ability to advance in their general fields as related but distinctly  defined occupations may require specific experiences in that  occupation.  Interdisciplinary occupations—those that involve duties and  responsibilities closely related to more than one professional  occupational standard, such as those in certain scientific research  fields like natural resources management and biological sciences— provide some flexibility to agencies as they allow agencies to  combine the work of multiple occupations. This is because the  position could be classified in two or more occupational series and the  employee with education and experience in either of two or more  professions may be considered equally qualified to do the work. The  final classification of the position is determined by the qualifications of  the employee. However, interdisciplinary occupations decrease the  simplicity of the system. This is because employees, management,  and taxpayers may not be able to easily understand how one  occupation differs from another, especially when position descriptions  have overlapping responsibilities.
Finally, a system composed of numerous occupational series can be  cumbersome to systematically review, limiting the system’s  adaptability. This is because reviewing and revising occupational  series can be a time-consuming effort, partially due to analysis  required to understand the differences between and potential effect of  closely related occupations, ensure government-wide applicability and  gain consensus.
The second key design feature of the GS system is the 15 statutorily  defined grade levels intended to distinguish the degrees of difficulty within  an occupation, which are designed to simplify the system and provide  internal equity. Agency officials assign a grade level to a position after  analyzing the duties and responsibilities according to the factor evaluation  system. This allows for easy comparisons of employees in the same  occupation and grade level but in different agencies, providing simplicity  and internal equity to the system, and it may help employees move  across agencies. Within the 15 grades there are 10 steps— time-based  increases that determine a GS employee’s rate of pay—providing  transparency to the system by creating a clear, predictable process.
This design feature emphasizes the GS system as a rank-in-position  system that focuses on the position and the time spent in that position  over the specific characteristics or performance of the incumbent, as a  rank-in-person system would do.
However, in practice the 15 grades and the 10 steps may actually inhibit  the system’s ability to optimize these attributes for reasons such as the  following:
The 15 grades require officials to make meaningful distinctions  between such things as the nature and extent of the skills necessary  for the work at each level, which may be more difficult in some white- collar occupations where those differences may not be clear cut. For  example, officials must be able to determine how the work of a GS-12  accountant is different from a GS-13 accountant. But making clear  distinctions between these occupations may be more nuanced, as the  basis for them hinges on, for example, how agency officials determine  the degree of complexity of the work or the most important duties of  the position. As a result, having 15 grade levels may make the system  seem less transparent, as distinguishing between the levels may not  be precisely measured by the elements of the factor evaluation  criteria. Otherwise, agencies risk having two employees performing  substantially equal work but receiving unequal pay, which decreases  the degree to which the system can ensure internal equity.
Further, having so many grades defined by statute, makes it hard to  review and revise the grades, thereby limiting the adaptability of the  GS system. As the nature of work and the workforce changes, the  system is constrained, since some revisions to the system would  require legislative action. As we concluded in our 2003 report, for  example, “…today’s knowledge-based organizations’ jobs require a  much broader array of tasks that may cross over the narrow and rigid  boundaries of job classifications. The federal job classification process  not only delays the hiring process, but more importantly, the resulting  job classifications and related pay might not match the actual duties of  the job. This mismatch can hamper efforts to fill the positions with the  right employees.”
To address some of the issues we found in our 2003 report, among other  things we recommended that OPM “study how to simplify, streamline, and  reform the classification process.” In response, OPM published a report  which outlined several strategic principles to modernize the civil service  system, while preserving the merit system principles.
section_title: Extent to Which Broadband Systems Incorporate Attributes of a Modern, Effective Classification System Is Mixed
paragraphs: Over the years, agencies, either through the use of demonstration  projects or congressionally authorized alternative personnel systems,  have sought exceptions to the GS system to mitigate some of its  limitations. Understanding the benefits and challenges of the design  features tested in these alternatives can assist in understanding and  evaluating options to improve the GS system. By using lessons learned  from the alternative systems and results from prior studies of the GS  system to examine ways to make the GS system more consistent with the  attributes of a modern, effective classification system, OPM could better  position itself to help ensure that the system is keeping pace with the  government’s evolving requirements. Further, stakeholders like the  CHCO Council, unions and others can provide insight into the design and  implementation of these alternatives. According to the subject matter  specialists and OPM and agency evaluations of alternative personnel  systems, most of the alternative systems either retained GS occupations  and grades but with higher pay rates to address difficulties in recruiting or  retaining well-qualified employees or implemented a broad-banded  approach to pay and classification. Broadband systems can provide fewer  occupations and fewer grade levels which align with fewer, but broader  ranges of pay for that occupation.
Broader bands that combine groups of GS-equivalent occupations into  larger occupational families may have broadly defined occupational  definitions, increasing agency flexibility to use employees according to  their skills and competencies—thereby embodying an element of rank-in- person. For example, in 1996, the Department of Defense authorized the  Civilian Acquisition Workforce Personnel demonstration project to provide  employees and management flexibility concerning work assignments.  Employees in acquisition occupations with similar characteristics were  grouped together into three career paths and assigned broader bands  that provided both a broader range of pay and broader spectrum of  duties. For example, employees were assigned to projects, tasks, or  functions, but did not have their in-position descriptions changed. On  the other hand, broader occupational definitions can provide less  transparency to the specific skills required of a position and can make it  more challenging to monitor internal equity—as employees in a single  broad band may vary widely in their qualifications and responsibilities. In  addition, broad-banded systems can combine multiple GS grade  equivalents into a smaller range of bands, often between three and five.  Just as the bands represent a broader range of grade levels, broad- banded systems often align with broader ranges of pay than the GS  system. Broad ranges of grades and pay can enable greater external  equity by giving agencies more latitude in matching market pay rates. In  addition, having fewer broad bands can increase the simplicity of the  system because broad bands do not require such a precise analysis of  the degree of difficulty of an occupation.
While fewer occupational bands are designed to create a more simple  system, as implemented this may also decrease transparency because  two employees in the same occupation may have a variety of different  responsibilities, thus limiting cross-agency and government comparisons.  While increasing agency flexibility to use employees according to their  skills and competencies, in practice it may limit the transparency of the  system, because employees and others (e.g., Congress and taxpayers)  may be less certain of career-path options. Agencies with numerous,  distinctly different occupations may not be able to combine occupations  into a single occupational band, thereby limiting the simplicity of the  system.
section_title: Agencies Increased Their Use of Alternative Personnel Systems to Obtain Greater Pay Flexibilities
paragraphs: The proportion of federal white-collar employees covered by alternative  personnel systems increased from 6 percent in 1988 to 21 percent in  2013, as shown in figure 3. Some of the movement away from the GS  system is a result of the implementation of several alternative personnel  systems. For example, the Financial Institutions Reform, Recovery and  Enforcement Act of 1989 (FIRREA) granted certain federal financial  regulatory agencies, which had been taken out of the GS classification  system, the flexibility to establish their own compensation systems.  FIRREA allowed these agencies the flexibility to establish alternative  systems, recognizing that the GS system could impede these agencies’  ability to recruit and retain employees critical to meeting their  organizational missions. Additionally, Congress directed most of the  financial regulatory agencies to seek to maintain pay comparability and to  consult with each other to limit the degree to which agencies are  competing with each other for employees.
During this time, six agencies (the Departments of Commerce, Defense,  Energy, Transportation, and Treasury, and the National Science  Foundation) saw the proportion of employees in alternative personnel  systems increase by at least 10 percentage points. In 2013, more than  140,000 employees, or about 9 percent of the entire federal white-collar  workforce, worked in alternative personnel systems at one of these six  agencies. Despite the increase in the use of alternative personnel  systems in selected agencies, we found that most agencies had a mix of  both—some employees were in the GS system and some were in  alternative systems.
The literature we reviewed on alternative personnel systems suggests  that agencies’ alternative systems were designed with their own purpose  and goals, and agencies moved to alternative classification systems to  attempt to offer market-based pay rates, pay-for-performance, and certain  other flexibilities in an attempt to be more competitive in a labor market.
While 22 of the 24 Chief Financial Officers Act agencies had a majority of  their employees in the GS system in 2013, we found that occupational  families requiring employees with advanced degrees, and in particular  occupations in science, technology, engineering, and math (STEM) fields  and other technical areas were more likely to be in alterative systems  than other types of occupational families. occupational families, the 6 with the largest increase from GS to an  alternative system were mostly concentrated in STEM occupations, as  shown in figure 4.
The Chief Financial Officers Act agencies are the executive branch agencies listed at 31  U.S.C. § 901(b).
The demonstration project covering veterinarians at the U.S. Department of Agriculture, Food Safety  and Inspection Service was terminated in February 2014.  In 1996, an alternative personnel system was applied to Federal Aviation Administration air traffic  controllers at the Department of Transportation. While these occupations are not STEM-related, the  alternative personnel system implemented accounts for the increase in 1996.
We estimated that in 2013 employees in alternative personnel systems  were paid about 10 percent more, on average, than GS employees in  identical occupations when controlling for factors such as tenure, location,  and education in the 90 occupations we considered.was a significant range among the occupations in the difference in pay  between those in the GS and those in alternative systems—going both  ways. For example, an employee in the medical officer occupational  family in an alternative personnel system earned about 18 percent more  than a similar employee working in the GS system. In a few cases, we  found that employees working in the GS system were paid more than  those working in alternative personnel systems after controlling for  characteristics.
section_title: OPM Is Not Systematically Managing and Overseeing the Classification System
subsections: section_title: OPM Provides Guidance, Training, and Technical Assistance to Agencies in Implementing the GS System
paragraphs: Evaluating the current GS system and identifying whether changes to it  are warranted should be informed by how effectively the system is  currently administered. OPM is required by law to create and update  occupational standards and oversee agencies’ implementation of the GS  system.agencies through handbooks and policy manuals, training, individual  meetings with agency officials, quarterly classification forums, and a  dedicated e-mail address for specific questions and advice. The guidance   To carry out these responsibilities, OPM provides guidance to  to agencies includes, for example, Introduction to the Position  Classification Standards, which provides basic definitions and a  description of the principles and policies necessary to apply the  classification standards, and The Classifier’s Handbook, which describes  how to develop position descriptions and how to determine the  occupational series and grade of the positions.
OPM also offers classification training through its HR Solutions and HR  University. These classes train human resource specialists on basic and  advanced classification techniques and are offered in a number of  different media: in-person and self-paced online courses.
OPM officials said they also assist agencies with classification issues  through OPM’s quarterly classification forum and direct inquiries. Officials  said common topics discussed at the forums are related to updates to  occupational standards and implementation challenges to classifying  positions. OPM also uses these forums to update managers and human  resource specialists about ongoing classification system-related projects.  For example, at the March 2014 classifiers’ forum, which we observed,  OPM officials discussed the establishment of a new occupational series  and solicited feedback from the forum participants. Participants also  discussed difficulties they faced in using outdated standards to classify  positions in a rapidly changing environment, such as when a position  requires knowledge of a new technology (e.g., the use of social media in  a public affairs position).
section_title: OPM Could Benefit from a More Strategic Approach to Creating and Updating Occupational Standards
paragraphs: OPM is responsible for establishing new—and revising existing— occupational standards after consulting with agencies; however, OPM  does not know the extent to which it is meeting the needs of agencies  with regard to updating occupational standards. From 2003 to 2014, OPM  established 14 new occupational standards (new occupations in the  federal government), and revised almost 20 percent of the occupational  standards. However, there was no published review or update of 124  occupations, roughly 30 percent of the total GS system occupations,  since 1990. For example, the air traffic controller occupational standard  has not been updated since June 1978 and the food safety inspector  occupational standard has not been updated since June 1971.
OPM officials said that they first address occupations identified in  presidential memorandums. Three of the reviews from 2003 to 2014 were  in response to a presidential memorandum. For example, in 2013, OPM  established a formal records management occupation to define the roles,  responsibilities, and skill sets for agency records management specialists  to comply with the Presidential Memorandum on Managing Government  Records. However, OPM does not systematically track and prioritize the  remaining occupational standards. OPM officials told us the other  occupational standards that they either created or updated were in  response to working with agencies or other stakeholders to determine  government-wide or specific agency needs and analysis of occupational  trends. OPM officials were unable to provide us with documentation of  this prioritization criteria. Further, OPM officials could not provide the  near- or long-term prioritization for reviewing occupations. OPM officials  said that they do not track all of the agency requests they receive  because, in some cases, an agency requested an occupational review  from OPM, but after speaking with the agency and evaluating the need for  a review, OPM officials determined that no review was necessary. OPM  officials said at times they conduct a study to establish an occupation, but  find the work is appropriately addressed by an existing occupation and  that a new occupation is not warranted. For example, OPM officials said  they studied whether a new occupation was needed for positions related  to implementing the GPRA Modernization Act of 2010. However, OPM  officials said they determined that the position responsibilities fell under  the current duties of management and program analysis occupations.
Because OPM does not systematically track all agency requests it  receives and its subsequent decision on whether or not to review  occupational standards, it is unclear whether OPM’s decisions are  meeting agency needs. In our previous work looking at strategies that  help agencies meet their missions, CHCOs said if the position description  and job announcements are based on outdated standards, they are less  likely to reflect the specific skills needed, making it challenging for  agencies to recruit and hire the right individuals.
OPM officials also said that updating the standard for a specific  occupation is a resource-intensive process that often takes 6 months to a  year to complete. Officials also said reviewing an occupational family,  which includes a number of individual occupations, can take multiple  years to complete. Further, officials said that some occupations are more  dynamic than others and may need to be reviewed more frequently. For  example, an emerging occupation or one in the information technology  field may need to be updated more frequently as the nature of the work is  clarified or changes.
OPM does not know if it is keeping pace with agencies’ needs to meet the  evolving nature of government work. Without a more strategic approach  for systemically tracking and prioritizing updates to occupational  standards, especially for more dynamic and emerging occupations, OPM  does not have reasonable assurance that it is fulfilling its responsibilities  to establish new or revise existing occupational standards based on the  highest priorities.
section_title: OPM Is Not Conducting Oversight of Agency Classification Programs
paragraphs: OPM has not reviewed agency classification programs since the 1980s.  Therefore, OPM is not in the best position to know how well or how  consistently agencies are complying with classification standards, policy,  or guidance. OPM is required by law to review “from time to time” a  number of positions in each federal agency to determine whether the  agency is correctly placing positions in classes and grades according to  OPM-published standards. While the law does not indicate a minimum  number of positions and occupations that OPM should review, nor  specific time frames for review, OPM said it is not currently conducting  this oversight at any federal agency. OPM is also authorized to revoke or  suspend an agency’s classification authority if OPM finds that an agency  is not following classification guidance; however, it has not done so in  more than two decades.
OPM officials said the agency stopped conducting oversight reviews in  the 1980s because OPM determined that the reviews were ineffective at  overseeing agency compliance with the occupational standards.  Specifically, officials said the reviews were time consuming and agencies  did not agree with how OPM selected the position descriptions to review.  OPM officials said agencies frequently contested the results of the  reviews leading to another time- and resource-intensive review process  for both OPM and the agencies. Further, OPM officials said revoking an  agency’s classification authority requires OPM to provide classification  support to the agencies, another time- and resource-intensive process.
OPM officials said in 2014 they had 6 full-time classification policy  specialists tasked with maintaining the classification standards, compared  to 16 in 2001, and many more in the 1980s. OPM officials said that lower  staffing levels limit the agency’s ability to perform oversight. However,  OPM, like all agencies, must make tradeoffs between competing  demands with its limited resources during an era of constrained  resources. According to OPM officials, the reduction in employees with  classification experience has declined government-wide. In our 2013  high-risk update, we found that an OPM-led working group identified the  human resources specialist series—which includes classifiers—as a  mission-critical skills gap.resources specialist series can be traced back to the mid-1990s.
The decrease in classifiers within the human  OPM officials said they rely on agencies’ internal oversight programs to  ensure proper application of the classification policies. However, OPM  officials told us they do not review agency oversight efforts to ensure  consistency, nor do they know which agencies, if any, have robust  internal oversight mechanisms. Agencies are responsible for classifying  positions consistent with OPM occupational standards and guidance.  According to OPM officials, oversight functions for classification vary by  agency.
OPM officials told us that employees have the right to appeal  classification decisions regarding their position if they believe that their  position has not been correctly classified by an agency. OPM officials  said the appeals published in the Digest of Significant Classification  Decisions and Opinions provide interpretative guidance to agencies to  assist them in applying standards. According to OPM officials, employees  commonly appealed the assigned grade level of a position when the job  duties described in a position description were not consistent with  classification standards. OPM officials said that they may require  agencies to conduct classification consistency reviews as a result of a  classification appeals decision. While reviewing classification appeals can  give OPM a sense of an agency’s ability to classify individual positions, it  does not address OPM’s responsibility to oversee the classification  process. Without a strategic approach to oversight, OPM has limited  assurance that agencies are correctly classifying positions according to  the standards. This may be especially important as the number of  occupations and agencies moving to alternative systems continue to  increase.
section_title: Conclusions
paragraphs: The GS system was designed to uphold the key merit system principle of  equal pay for work of substantially equal value and other important goals.  However, our work and that of other organizations have shown how the  GS system has not kept pace with the government’s evolving  requirements. Indeed, federal agencies have taken on additional roles  and responsibilities, the missions they face have become increasingly  complex, and the employees they need must possess a range of  expertise and skills.
While there is no one right answer or single way to design a classification  system, the eight attributes of a modern, effective classification system  that we identified—internal equity, external equity, transparency,  flexibility, adaptability, simplicity, rank-in-position, and rank-in-person— provide policymakers and stakeholders the criteria to assess the many  proposed options and alternatives. Collectively they provide a useful  framework for informing discussions of whether refinements to the current  system or wholesale reforms are needed. Indeed, the value placed on  each of the attributes and how they are optimized will largely drive the  design of any approach to classification.
Going forward, OPM could improve its management and oversight of the  GS system. OPM, like all agencies, must consider cost-effective ways to  fulfill its responsibilities in an era of constrained resources. Using a more  strategic approach to track and prioritize reviews of occupational  standards—that perhaps better reflect more evolving occupations—could  help OPM better meet agencies’ evolving needs and the changing nature  of government work. Further, a strategic approach to oversight could help  OPM better fulfill its responsibility to ensure agencies are correctly  implementing the classification process.
section_title: Recommendations for Executive Action
paragraphs: To improve the classification system and to strengthen OPM’s  management and oversight, we recommend that the Director of OPM  take the following three actions:
Working through the CHCO Council, and in conjunction with key  stakeholders such as the Office of Management and Budget, unions,  and others, should use prior studies and lessons learned from  demonstration projects and alternative systems to examine ways to  make the GS system’s design and implementation more consistent  with the attributes of a modern, effective classification system. To the  extent warranted, develop a legislative proposal for congressional  consideration.
Develop cost-effective mechanisms to oversee agency implementation of  the classification system as required by law.
Develop a strategy to systematically track and prioritize updates to  occupational standards.
Develop a strategy that will enable OPM to more effectively and  routinely monitor agencies’ implementation of classification standards.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this product to the Director of OPM for comment.  In written comments, which are reprinted in appendix III, OPM partially  concurred with two of the three recommendations and did not concur with  one. OPM also provided technical comments on our draft report, which  we incorporated as appropriate.
OPM stated that it partially concurred with our recommendation to work  with key stakeholders to use prior studies and lessons learned to examine  ways to make the GS more consistent with the attributes of a modern,  effective classification system. OPM agreed that the system needs reform  but OPM noted several efforts to assist agencies with classification  issues, including its interagency classification policy forum and partnering  with agencies to address challenges related to specific occupational  areas. While these examples of assisting agencies to better implement  the GS on a case-by-case basis are helpful, they are not fully addressing  the fundamental challenges facing the GS system, which we and others  have said is not meeting the needs of federal agencies. For example, as  noted in this report, at the March 2014 interagency classification forum  that we observed, OPM provided status reports on classification projects  such as its study on pay equity and closing critical skills gaps. OPM also  discussed its new procedures for collecting agency comments during  occupational reviews. OPM stated that the studies and lessons learned of  alternative personnel systems and demonstration projects focused on pay  rather than classification. However, as we noted in the report,  classification and pay are closely related, and we continue to believe that  the lessons learned from these efforts should be used to examine ways to  make the GS system more consistent with the attributes of a modern,  effective classification system. OPM also discussed its new procedures  for collecting agency comments during occupational reviews.  We are  encouraged at OPM’s plan to leverage partnerships with key stakeholders  to inform future strategies and action plans, and continue to recommend  that OPM uses these efforts examine ways to make the design and  implementation of the GS system more in line with the attributes of a  modern, effective classification system.
OPM stated that it did not concur with our recommendation to develop a  strategy to systematically track and prioritize updates to occupational  standards. Specifically, OPM noted that occupational standards are  updated in response to a systematic, prioritized process informed by  working with agencies and other stakeholders and analysis of  occupational trends. However, OPM officials were unable to provide us  with the documentation of their efforts.  As noted in our report, OPM has  not published a review or update of 124 occupations, roughly 30 percent  of the total number of occupations on the GS system, since 1990.  Further, OPM officials could not provide the near- or long-term  prioritization of occupations schedule for review. As a result, OPM cannot  demonstrate whether it is keeping pace with agencies’ needs nor does it  have reasonable assurance that it is fulfilling its responsibilities to  establish new, or revise existing occupational standards based on the  highest priorities. We continue to believe that OPM should take action to  fully address this recommendation.
OPM stated that it partially concurred with our recommendation to  develop a strategy to more effectively and routinely monitor agencies’  implementation of classification standards. OPM stated that it will  continue to leverage the classification appeals program to provide  interpretative guidance to agencies to assist them in classifying positions.  OPM also stated it will direct consistency reviews as appropriate,  however as we note in the report, OPM does not review agencies’ internal  oversight efforts. We are encouraged to see that OPM stated it will look  for opportunities to further expand their monitoring and oversight activities  and we will continue to monitor OPM’s efforts in that regard. However,  OPM did not state whether it would develop a strategy to assist it in doing  so as we recommended.  We continue to believe that OPM should  develop a strategy to fully address the recommendation and we will  continue to monitor OPM’s efforts in that regard.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Committee on  Oversight and Government Reform. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report please contact  me at (202) 512-2757 or goldenkoffr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Given the changes in the federal workforce and the ongoing attention to  federal civil service skills gaps, there has been a growing interest in  reexamining the federal classification system to ensure agencies are  equipped with the tools to maintain or acquire the skills and talent  needed. Our objectives were to assess (1) the attributes of a modern,  effective classification system and how the General Schedule (GS)  classification system compares with the modern systems’ attributes; (2)  the trends in agencies and occupations covered under the GS system  and the pay difference for selected alternative systems; and (3) the Office  of Personnel Management’s (OPM) administration and oversight of the  GS system.
To assess the attributes of a modern, effective classification system, we  held discussion groups with subject matter experts and conducted a  literature review. Our discussion groups included over 25 subject matter  specialists. We selected these subject matter specialists because they  represented various perspectives on and experiences with federal  classification. Specifically, we conducted sessions covering the following  areas: (1) the public policy arena, with representatives such as the  Partnership for Public Service, Project on Government Oversight,  American Enterprise Institute, Booz Allen Hamilton, the Federal Salary  Council, Human Resources Research Organization, and American  Society for Public Administration; (2) federal employee organizations, with  representatives such as the American Federation of Government  Employees, National Treasury Employees Union, International Federation  of Professionals and Technical Engineers, and the National Federation of  Federal Employees; (3) academia with representatives from American  University and Rutgers University; (4) an official from the Federal  Managers Association; (5) former employees of OPM, including high- ranking officials and prior OPM directors; and (6) officials who were  formerly in personnel positions at federal agencies that have employees  on alternative personnel systems, such as the Departments of Defense,  Energy, and Homeland Security. We collaboratively analyzed major  themes through repeated review and discussion of detailed notes of the  discussion groups to identify the attributes of a modern, effective  classification system along with other themes for consideration. We  provided the subject matter experts and OPM officials the opportunity to  comment on the attributes, and modified the attributes or definitions as  appropriate. For additional perspectives on the attributes of a modern,  effective system we reviewed relevant literature on the GS system  published from 2000 to 2014 from OPM, academic journals, and public  policy organizations. In addition, we reviewed relevant literature on  selected alternative personnel systems, applicable federal laws, and  statutes pertaining to classification, and OPM’s classification guidance,  such as The Classifier’s Handbook and The Introduction to the Position  Classification Standards. Because OPM is not responsible for the  oversight of alternative personnel systems, it does not have a listing of all  alternative personnel systems. Therefore, the universe of alternative  personnel systems is unknown and our analysis did not attempt to  catalogue all of the alternative personnel systems. When we refer to  alternative personnel systems in this section, we refer to systems that are  broader than alternative pay plans that we analyze in objective 2. We  reviewed literature on several alternative personnel systems and  demonstration projects, such as the Department of Commerce’s  Alternative Personnel System and National Institute of Standards and  Technology; the Department of Defense Science and Technology  Reinvention Laboratory demonstration project, Civilian Acquisition  Workforce Personnel demonstration project, and Naval Demonstration  project at China Lake, and the Department of Energy’s National Nuclear  Security Administration. We used this information, along with information  from our discussion groups and the literature review, to compare the  design features of the GS classification system and a notional alternative  personnel system to determine the extent to which the GS system  balances the attributes of a modern, effective classification system.
To assess the trends in agencies and occupations covered under the GS  system and the pay difference for alternative systems, we analyzed  personnel data from OPM’s Enterprise Human Resources Integration  (EHRI) Statistical Data Mart for fiscal years 1988 through 2013. Our  analysis included nonsenior executive, white-collar occupations in the 24  Chief Financial Officers (CFO) Act agencies, which represent the major  departments, such as the Department of Defense and most of the  executive branch workforce.  Our trend analysis begins with fiscal year  1988 because it was the first year for which data were available, and  ends with 2013 because it was the most recent, complete fiscal year of  data available during our review. To determine trends in the proportion of  the federal nonexecutive, white collar workforce covered by alternative  personnel systems, we analyzed for each fiscal year the proportion of  those employees—government-wide and within CFO Act agencies and  occupational families—covered under general schedule pay plans (GS,  GL, GM) compared to all other pay plans.
To analyze the pay differences between employees on the GS system  and employees on alternative personnel systems, we performed a  multivariate regression analysis on EHRI data for fiscal year 2013.  Consistent with standard practice in studies of the determinants of  earnings, we attempted to explain the differences by predicting the  logarithm of annual adjusted pay on characteristics of federal workers. In  the regression, we controlled for employees’ years of federal experience,  age, education, type of service (competitive or excepted), type of  appointment (permanent or nonpermanent), veterans’ preference,  schedule (full or part-time), and pay basis (hourly, annually). We also  included a set of indicator variables for agency of employment,  occupational series, and geography. By including these indicator  variables, we controlled for the possibility that agencies might have higher  pay rates and occupations might earn different rates of pay regardless of  whether they were in the GS or an alternative system. We estimated this  model for occupations with at least 2.5 percent employee representation  in both systems, and which contained at least 0.125 percent of the federal  government, or about 90 of more than 400 possible occupations.
We assessed the reliability of the EHRI data through electronic testing to  identify missing data, out of range values, and logical inconsistencies. We  also interviewed OPM officials about our use of the data and reviewed our  prior work assessing the reliability of these data. On the basis of this  assessment, we believe the EHRI data we used are sufficiently reliable  for the purpose of this report.
To assess how OPM administers the GS classification system and  oversees agency implementation of the classification standards, we  reviewed relevant statutes, agency policies and guidance, and  interviewed OPM officials. Specifically, we reviewed Title 5, Chapter 51 of  the U.S. Code, which establishes the role of OPM and the agencies in  oversight of the GS classification system, among other things. reviewed OPM’s guidance to agencies on how to classify positions and  determine the proper grade, title, and category in which to place the  positions. This guidance was included in documents such as The  Introduction to the Position Classification Standards, The Classifier’s  Handbook, Handbook of Occupational Groups and Families, Qualification  Standards, and the Digests of Significant Classification Decisions and  Opinions. In addition, we conducted interviews with relevant OPM officials  in the offices of Merit System Accountability and Compliance, and  Employee Services to determine the actions they have taken to oversee  agencies’ implementation of the classification system, and we compared  these actions to legislation outlining OPM’s responsibilities. To  understand the administration and oversight issues agencies encounter  with regard to the classification system, we observed OPM’s quarterly  classification forum with human capital specialists and attended the  Classification Refresher Training.
We conducted this performance audit from May 2013 to July 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
5 U.S.C §§ 5101-5115.
section_title: Appendix II: Interactive Graphic Information
paragraphs: Appendix II: Interactive Graphic Information Text on Graphic  General Schedule Classification System   The GS classification system assigns jobs to specific occupational groups, series, and  rates of pay. The GS system also influences other human capital management practices  and policies beyond the classification process.
Rollover Text on Graphic  The GS classification system contains grade levels, which determine base pay rate. This,  in turn, establishes a cap on the amount of recruitment, retention, and relocation  incentives.  Recruitment. An agency may pay a recruitment incentive to a newly-hired employee if it  has determined the position will be difficult to fill without an incentive. A recruitment- incentive payment generally may not exceed 25 percent of the employee’s base pay rate.  Retention. An agency may pay a current employee a retention incentive if it determines  that an employee possesses unusually high or unique qualifications, or if its special need  for the employee’s services makes it essential to retain that employee. In such cases, the  employee would be likely to leave the agency without an incentive. Retention incentives  may also apply to a group or category of employees. Total retention bonuses generally  may not exceed 25 percent of the base pay for an individual employee or 10 percent for a  group or category of employees.  Relocation relocate—permanently or temporarily—to accept a position if it determines that position  will be difficult to fill without the incentive. Total relocation-incentive payments generally  may not exceed 25 percent of the employee’s annual base pay.  . An agency may pay a relocation incentive to a current employee who must  A position’s classification includes a grade level, which—together with the step level— corresponds to base pay rate. These base pay rates:  determine the amount of some payments (e.g., within grade, quality-step, and salary  increases resulting from promotion);  define the dollar value of certain personnel actions (e.g., overtime and severance  pay);  are the base from which percentages are calculated for a variety of allowances (e.g.,  recruitment, retention, and relocation incentives); and  are factors in formulas used to calculate various pay entitlements (e.g., retirement  benefits).
A position’s classification influences the training and developmental opportunities  available to an employee (e.g., classroom training, rotation to another agency or program).  Training needs are the difference between the competencies required to perform the job  and an employee’s current capability. Managers use the position classification to establish  performance expectations.
The GS classification system informs the standards used to evaluate an employee’s  performance via position descriptions, which identify the employee’s responsibilities and  manager’s expectations.  Performance rewards and corrective actions are also linked to GS. For example, superior  performance can lead to a quality step increase, while poor performance can result in a  demotion to a lower grade. Also, base pay rates serve to cap performance-based awards  which may not exceed 20 percent of base pay.
The GS classification system establishes a road map for employees and determines how  far they may advance in the same position as long as their performance is satisfactory. A  promoted employee must be placed at the step of the higher grade that represents at least  a two-step increase from the employee’s previous grade. The system automatically  delivers the two-grade rise and accompanying pay raise.  The GS system sets promotion expectations for both the employee and the supervisor.  Federal regulations require an employee to spend 52 weeks in a grade before becoming  eligible for advancement resulting in a higher grade or higher rate of basic pay.
subsections: section_title: Text on Graphic Budget Planning
paragraphs: Rollover Text on Graphic  The GS classification system informs future planning and budgeting for salaries and  expenses. Because a position’s grade corresponds to an already established base pay  rate, a budget manager can forecast the number and types of positions that can be filled  or terminated should the budget environment change.
The GS classification system is a work-management tool that allows agencies to align  their work with their human resources to perform the work. The agencies use the GS  system to identify the mix of occupations and skills needed to fulfill their mission goals,  conduct analyses to identify and close skills gaps, develop strategies to address human  capital needs, and ensure that the agency is appropriately structured.
Since 1949, the GS classification system has been used for additional human resources  management practices. For example:
GS is an unofficial system that equates military rank with civilian grade, screening  systems for certain employee benefits, and deciding who gets prime office space.  The Federal Deposit Insurance Corporation uses GS classification standards to  establish occupational groups and grades for its positions, but sets pay based on  market surveys and negotiations with unions.  The Central Intelligence Agency classifies most of its positions using the GS structure  and a modified evaluation system to determine grades.
section_title: Appendix III: Comments from the Office of Personnel Management
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact:
paragraphs: Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov.
section_title: Staff Acknowledgments:
paragraphs: In addition to the individual named above, Chelsa Gurkin, Assistant  Director; Trina Lewis, Assistant Director; Robyn Trotter, Analyst-in- Charge; Ulyana Panchishin; Jeffrey Schmerling; Ben Bolitzer; Jehan  Chase; Sara Daleski; Karin Fangman; Steven Putansu; Robert Robinson;  Rebecca Shea; and Stewart Small made major contributions to this  report.