Human Capital: Agencies Need Leadership and the Supporting Infrastructure to Take Advantage of New Flexibilities
Published: 2005-04-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Strategic human capital is the centerpiece of agencies' efforts to transform into high-performing organizations poised to meet the challenges of the 21st Century. Congress, recognizing that the federal human capital management systems designed in the past are outmoded, has provided agencies with exemptions from the old rules and new flexibilities to more strategically manage their workforce. Congress has already granted statutory exemptions and new authorities affecting more than 1.2 million civilian federal employees. The momentum is building to continue to reform the policies, processes, and systems that govern federal human capital management. Congress is interested in taking stock of how agencies have implemented the new flexibilities they have been granted, especially as it considers the future steps to be taken to achieve human capital reform. At the request of Congress, this statement provides an update of GAO's work on the progress agencies have made in implementing these flexibilities to better accomplish their missions and achieve their goals. In addition, it provides information on GAO's experiences with human capital reform and also highlights a set of consistent principles, criteria, and processes that can help to guide future reforms, whether they are new flexibilities granted to individual agencies or applied governmentwide.
section_title: What GAO Found
paragraphs: To take full advantage of the flexibilities provided, agencies need leaders committed to taking a more strategic approach to managing their people in order to improve mission results, and must have the necessary infrastructure in place to make effective use of the flexibilities. This infrastructure includes a human capital planning process that integrates human capital policies, strategies, and programs with its program goals, mission, and desired outcomes; the capabilities to effectively develop and implement a new human capital system; and importantly, the existence of a modern, effective, and credible performance management system that includes adequate safeguards to help ensure consistency. GAO's work shows that, to date, agencies are using the flexibilities to varying degrees but continue to face barriers. In the future, agencies should have to demonstrate they have the required infrastructure and safeguards in place before using any new human capital authorities. Accountable Leadership: Effective performance management systems first align leadership's performance expectations, appraisal systems, and compensation programs with organizational goals and results, then cascade this approach through all levels in the organization. Accordingly, agencies now have authority to increase senior executive pay levels, but only if they have an effective performance management system--one that links individual and organizational results and makes meaningful distinctions in performance. Recent data show, however, that agencies face a challenge in meeting the criteria for qualifying for the new executive pay flexibilities. GAO also continues to see opportunities for Chief Human Capital Officers and their Council to help agencies better implement various flexibilities and share best practices, while providing strategic leadership for reform. Strategic human capital planning: Identifying current and future workforce gaps and ways to use flexibilities to fill them would help agencies remain competitive and achieve their missions. Some agencies do not have all the components of a strategic human capital planning process in place to help them resolve workforce challenges. GAO identified five key principles that could help guide and inform agencies' efforts to build this process. Capabilities to use new tools: Agencies have not used some of the flexibilities designed to help them recruit and hire top talent as much as possible because of a lack of policy and guidance, among other things. OPM has since reported taking a number of initiatives to better educate agencies on the tools and encourage their use. Agencies need to continue implementing new tools, evaluating their impact, and making adjustments. Congress' interest in monitoring agency progress is a critical ingredient to the success of these reforms.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our work on agencies’ use of  recently enacted human capital flexibilities to help address workforce  challenges.  In broad terms, human capital flexibilities represent the  policies and practices that an agency has the authority to implement in  managing its workforce to accomplish its mission and achieve its goals.   The tailored use of such flexibilities for acquiring, developing, and retaining  talent is an important cornerstone of GAO’s model of strategic human  capital management.  The subcommittee’s interest in taking stock of where  agencies are in using the flexibilities provided to them is critical and timely.
As we have consistently testified, and as the subcommittee has consistently  recognized, an agency’s human capital is its most important catalyst for  transforming to meet the new challenges of the 21st century.  We have also  recognized that the federal human capital systems designed in the past are  outmoded and, in some cases, barriers to an agency’s transformation.   Consequently, over the past few years, Congress has granted certain  agencies exemptions from these old rules, as well as new flexibilities to  recruit, hire, develop, manage, retain, and compensate the people with the  knowledge, skills, and abilities that agencies need to accomplish their  critical missions and compete with the private sector for top talent.  This is  especially important as the nation faces long-term fiscal challenges, and  therefore, agencies are likely to have resource constraints in the future.
We have also learned, however, that to benefit from these reforms, agencies  should have the appropriate institutional infrastructure and safeguards in  place to make effective use of these new authorities.  Agencies need  leaders who are committed to taking a more strategic approach to  managing their human capital assets.  These leaders provide the  organizational vision important in times of change, use the flexibilities  available to them in a targeted and responsible manner, and ensure that  human capital strategies are well-planned, thoroughly implemented, and  sustained over time.    Agencies also need a supporting infrastructure that  includes a human capital planning process that integrates human capital  policies, strategies, and programs with its program goals, mission, and  desired outcomes; the capabilities to effectively develop and implement a  new human capital system; and, importantly, the existence of a modern,  effective, and credible performance management system that includes  adequate safeguards to help ensure consistency.
There continues to be widespread interest in reforming the policies,  processes, and systems that govern federal human capital management.  In  ongoing work for Senator Susan Collins, we are cataloguing the wide array  of statutory exemptions and new authorities that Congress has already  granted to a select group of agencies, affecting more than 1.2 million  civilian employees.  Moving forward, Congress may continue to grant  flexibilities to individual agencies or on a governmentwide basis.  It will be  important to ensure that agencies first have a business case for using the  flexibilities, as well as the necessary infrastructure and safeguards in place  to use them effectively and in a non abusive manner.  In addition, there is  general recognition that the government needs a framework to guide  further reforms.  GAO, working with its external partners, has proposed a  common framework built around a fundamental set of principles, criteria,  and processes.  This could help to enhance the government’s performance,  ensure agency accountability, and provide for a relatively level playing field  across agencies as they implement new authorities.
Today, I would like to highlight some of our recent work on the progress  that agencies have made in implementing the flexibilities granted them, and  that reinforces the actions Congress and agencies are taking or need to  take to (1) provide the strategic leadership, (2) establish the necessary  infrastructure for reforms, (3) better use the new flexibilities provided, and  (4) position the government for future reform.
subsections: section_title: Accountable Leadership Can Serve As a Model for Effective Human Capital Management throughout the Agencies
paragraphs: High-performing organizations understand that they must have senior  leaders who are held accountable for results, drive continuous  improvement, and take a strategic approach to targeting available human  capital tools and flexibilities that will help them achieve their  organizational goals.  Leaders who model effective performance  management can help to institutionalize it throughout their agencies.  As  you know, we have advocated, and you have reinforced, that the federal  government needs to fundamentally rethink its approach to performance  management, better linking individual, unit, and organizational  performance and rewarding individuals according to their relative  performance and contributions.  Effective performance management  systems first align leadership’s performance expectations, appraisals, and  pay with organizational goals and results achieved, then cascade this  approach through all levels in the organization.  In October 2000, the Office  of Personnel Management (OPM) revised its Senior Executive Service  (SES) regulations to require agencies to implement performance  management systems that meet these criteria.
More recently, Congress provided that agencies that have successfully  implemented effective performance management systems for their senior  executives can increase the compensation of their higher-performing  senior executives beginning in January 2004.  To qualify for this flexibility,  OPM must certify, and the Office of Management and Budget (OMB) must  concur, that the agency’s performance management system meets specified  certification criteria, including demonstrating that its performance  management system aligns individual performance expectations with the  mission and goals of the organization and its appraisal system as designed  and applied makes meaningful distinctions in performance.  To receive full  2-year certification, an agency must provide documentation that its senior  executive performance management system meets all nine of the criteria.   Otherwise, agencies can meet four of nine criteria and demonstrate that  their system in design meets the remaining certification criteria to receive  one-year provisional certification and use the higher pay rates.  Agencies  with one-year provisional certification must reapply annually, but agencies  with full certification must reapply every 2 years.  In addition, SES  members are no longer to receive annual across-the-board or locality pay  adjustments but to receive pay and bonus increases based on contribution,  skills, competencies, and other factors.  The system also replaces the six  SES pay levels with a single, open-range pay band.
Currently, two agencies have received full certification—the General  Services Administration and the Pension Benefit Guaranty Corporation (for  its senior-level /scientific or professional positions).  The Departments of  Agriculture, Commerce (for its senior-level/scientific or professional  positions), Education, Health and Human Services (HHS), Homeland  Security (DHS), and Labor, as well as the National Aeronautics and Space  Administration (NASA), and the Office of Government Ethics have  received provisional certification for calendar year 2005.
subsections: section_title: Some Agencies May Face a Challenge in Meeting Criteria for Qualifying for the New Executive Pay Flexibilities
paragraphs: The criteria that OPM has developed to assess agencies’ performance  management systems are consistent with our research wherein we  identified a set of key practices for effective performance management: aligning individual performance expectations with organizational goals,   connecting performance expectations to crosscutting goals,  providing and routinely using performance information to track   requiring follow-up actions to address organizational priorities,  using competencies to provide a fuller assessment of performance,  linking pay to individual and organizational performance,  making meaningful distinctions in performance,  involving employees and stakeholders to gain ownership of  performance management systems, and  maintaining continuity during transitions.
In anticipation that senior executive performance management and pay  systems were to be modernized, Chairman Voinovich, at your and former  House Government Reform Civil Service Subcommittee Chairwoman Jo  Ann Davis’ request, we used these practices as a guide to review how well  selected agencies were creating linkages between senior executive  performance and their organizations’ success.  You recognized that  information on these agencies’ experiences and knowledge could provide  valuable insights to other agencies as they seek to use senior executive  performance management as a tool to drive internal change and achieve  external results.  Last year, we reported that the agencies were  implementing some of these practices, such as aligning individual and  organizational goals.  However, we also noted that their systems were  inconsistent with other practices, such as making meaningful distinctions  in performance.  This is also the case governmentwide.  For example, OPM  data show that about 75 percent of executives received the highest  performance ratings possible for fiscal year 2003 (the most current data  available).
OPM will need to carefully monitor the implementation of the agencies’  performance management systems, especially those that have provisional  certification, to ensure that agencies are driving organizational  performance by making meaningful distinctions in executive performance  ratings and appropriately paying their senior executives at the higher level.    A number of executive agencies will be challenged in the short term to  provide the necessary performance data on their senior executives in order  to receive full certification or maintain their certification.  Agencies must  provide 2 years of performance rating and bonus data showing that  meaningful distinctions in SES performance were made to qualify.  The  recent data on SES ratings suggest that some agencies’ data will not  comply.  In addition, several agencies’ provisional certifications for  calendar year 2004 expired and have not yet been renewed.  The Acting  Director of OPM noted in a March 2005 memorandum to agency heads that  the SES performance results for fiscal year 2003 do not reflect the  requirements of the new SES performance-based pay system and that OPM  is analyzing the results of the 2004 rating cycle to determine the degree to  which agencies have met the requirements.  Depending on the outcome,  some agencies may lose their certification, and others may not qualify for  this new flexibility.  The key, of course, is not just determining whether  distinctions are made in ratings, but whether those distinctions are  meaningful.  That is, the distinctions should reflect real differences in  individual executives’ contributions to results.
section_title: The Chief Human Capital Officers Have the Potential to More Strategically Implement Flexibilities and Leverage Best Practices among Agencies
paragraphs: The success agencies have in implementing new human capital flexibilities  will depend in large measure on their agency leadership, the existence of  high quality Chief Human Capital Officers (CHCOs), and a strategic and  effective CHCO Council.  The Homeland Security Act of 2002 established  the roles and responsibilities for the CHCO position and the Council.  We  have reported that similar interagency councils, such as those of the Chief  Financial Officers’ (CFO) and Chief Information Officers’, have emerged as  important leadership strategies in both developing policies that are  sensitive to implementation concerns and gaining consensus and  consistent follow-through within the executive branch.  The CHCO  Council can fulfill an equally important role.
As stated in its charter, the Council’s purposes include (1) advising OPM,  OMB, and agency leaders on human capital strategies and policies, as well  as on the assessment of human capital management in federal agencies; (2)  informing and coordinating the activities of its member agencies on such  matters as the modernization of human resources systems; and (3)  providing leadership in identifying and addressing the needs of the  government’s human capital community.
To help fulfill this role, the Council has created subcommittees to address  and recommend changes for key areas identified by the Council’s  leadership as critical to the success of strategic human capital  management, including the hiring process and performance management,  as well as leadership development and succession planning.  To date, the  Council has continued to define its agenda and priorities and to establish  itself.  For example, the former OPM Director reported that the Council’s  CHCO Academy was already proving to be a productive forum for  discussing human resources issues among small groups of CHCOs.  The  Council established the Academy as a forum for Council members to  discuss federal human resource issues, learn from one another in an  informal setting, and share best practices in the strategic management of  human capital.  The Academy has considered topics such as (1) current  workforce flexibilities and associated regulations, (2) human resources  competitive sourcing, and (3) compensation reform.  The subcommittees  are also making some progress.  For example, the leadership and  succession planning subcommittee has made recommendations in a  briefing to the full Council to set up a rotation program for senior  executives among different agencies, among other things.
It is critical for the CHCO Council to leverage its progress to achieve  significant accomplishments and facilitate lasting change.  As just one  illustration of the importance of their leadership and coordination roles,  OPM agreed with our May 2003 recommendation to work with and through  the Council to (1) more thoroughly research, compile, and analyze  information on the effective and innovative use of human capital  flexibilities and (2) more fully serve as a clearinghouse in sharing and  distributing information about when, where, and how the broad range of  flexibilities are being used, and should be used, to help agencies meet their  human capital management needs.  Our ongoing work assessing select  agencies’ succession planning, as well as their use of recruitment and  retention tools, suggests that agencies continue to need an avenue for  sharing ideas and best practices and the Council could provide that venue.
We also observed that more strategically, the Council could focus on  several other key crosscutting areas, such as  developing the capabilities required for the successful implementation  of human capital reform,  promoting strategic human capital planning, and   transforming the human capital office and its processes to more fully  contribute to key agency decisions.
For example, selected agencies are seeking to shift the focus of their  human capital offices from primarily compliance activities to consulting  activities.  They are including human capital leaders in key agency strategic  planning and decision making.  In addition, their human capital leaders  took actions to transform the agencies’ human capital organizations by  establishing clear strategic visions, restructuring their organizations, and  improving the use of technology to free organizational resources.  As a  result, the agencies engaged the human capital organization as a strategic  partner in achieving desired outcomes relating to the agencies’ mission.
To continue this shift to a more strategic role, human capital offices are  also understanding that they need to think broadly about how specific  services are delivered.  Human capital offices have traditionally used  alternative service delivery (ASD)—the use of other than internal staff to  provide a service or to deliver a product—as a way to reduce costs for  transaction-based services, such as payroll administration.  Going forward,  human capital offices are seeking to use this approach for more strategic  functions, such as workforce planning.  We continue to see a role for OPM  to provide comprehensive information about how agencies can use ASD for  their human capital activities and that the CHCO Council could be an  excellent vehicle to assist in this area.
section_title: Strategic Human Capital Planning Can Help Agencies Take Advantage of Human Capital Flexibilities but Remains a Continuing Challenge
paragraphs: An essential element in the institutional infrastructure that agencies need  for their human capital management is a human capital planning process  that ensures that an agency will capitalize on its workforce’s strengths and  target the use of its flexibilities.  Strategic human capital planning  addresses two critical needs: (1) aligning an organization’s human capital  program with its current and emerging mission and programmatic goals  and (2) developing long-term strategies for using available flexibilities to  acquire, develop, and retain staff to achieve those goals.
While there has been increased attention to such planning, strategic human  capital management has remained on GAO’s high-risk list because federal  human capital strategies are still not appropriately constituted to meet  current and emerging challenges or drive the transformations necessary for  agencies to meet these challenges.  We have continued to report  opportunities for various agencies to improve the state of their human  capital planning.  For example, we reported in March that the Space Shuttle  Program within NASA has made limited progress toward developing a  detailed long-term strategy for transitioning its space shuttle workforce  once the shuttle is retired.  Last year, we similarly reported that a major  challenge the Department of Defense (DOD) and most of its components  face in their efforts to develop and implement strategic workforce plans is  their need for information on current competencies and those that will  likely be needed in the future.
While agencies’ approaches to workforce planning will vary, GAO identified  five key principles that this planning should consistently address:  Involve top management, employees, and other stakeholders in  developing, communicating, and implementing the strategic workforce  plan.
Determine the critical skills and competencies that will be needed to  achieve current and future programmatic results.
Develop strategies that are tailored to address gaps in the number,  deployment, and alignment of human capital approaches for enabling  and sustaining the contributions of all critical skills and competencies.
Build the capability needed to address administrative, educational, and  other requirements important to support workforce planning strategies.
Monitor and evaluate the agency's progress toward its human capital  goals and the contribution that human capital results have made toward  achieving programmatic results.
Figure 1 illustrates a model strategic human capital planning process that  can help to inform agencies’ efforts to define their workforces of the future.
section_title: Strategic Approach to Succession Planning and Training Is Also Critical
paragraphs: A key piece of an agency’s strategic human capital plan should also  acknowledge the demographic trends that the agency faces with its  workforce, especially pending retirements, and include succession  strategies and training and development programs to ensure that it will  have the knowledge, skills, and abilities it needs to meet its mission.   Leading agencies go beyond a succession planning approach that focuses  on simply replacing individuals and engage in broad, integrated succession  planning and management efforts that focus on strengthening both current  and future organizational capacity.   Senator Voinovich, at your and former  Chairwoman Davis’ request, we reviewed how agencies in four countries  are adopting a more strategic approach to managing the succession of their  senior executives and other public sector employees with critical skills.   Subsequently, you asked us to follow up with a review of how selected  federal agencies are implementing succession planning and management  efforts, as well as the practices we observed in other countries.  We plan to  report to you on the results of our research in the coming weeks.
Once agencies have used their succession planning to identify workforce  gaps, one strategy they can use to fill these gaps is to implement well- designed training and development programs.  Training and developing  new and current staff to fill new roles and work in different ways will  transform how agencies do business and engage employees in further  innovation and improvements.  In addition, we have reported that  educating managers and employees goes a long way in ensuring the  effective use of flexibilities, and completion of a training plan can  acknowledge the costs of implementation and provide that they be  budgeted up front.  In this context, we published a guide in March 2004 for  assessing training and development efforts in the federal government.  As  part of the guide, we identified the four broad, interrelated components of  the training and development process:  (1) planning/front-end analysis,  (2) design/development, (3) implementation, and (4) evaluation.  Agencies  can use this guide to assess and revise their own programs.
It will be critical for DHS and DOD, as they continue to design and  implement a totally new human capital system in their agencies, to take  such a strategic approach to their training and development programs.   This will help to ensure that (1) managers and employers are prepared to  succeed in implementing the changes, (2) the agencies efficiently use their  limited training and development funds, and (3) the agencies achieve their  intended results.
section_title: Evaluation Provides Agencies with Feedback on How Well Their Strategies Are Working
paragraphs: We previously noted that a critical component of an agency’s strategic  human capital approach is establishing goals prior to the application of  new flexibilities so that agencies can then collect baseline data and  establish performance measures to support the evaluation of these  initiatives. Developing meaningful outcome-oriented performance goals  and collecting performance data to measure the achievement of these goals  presents a major challenge for many federal agencies.  It will be especially  important for DHS and DOD to carefully plan up front for the evaluation of  their new human capital systems, especially since they could have  significant implications for the rest of the federal government.  We have  identified the following elements as facilitating this process:  establishing clear goals and objectives for the initiative or flexibility   designing concrete management improvement steps,  setting key milestones to track the implementation status, and  collecting cost and performance data to gauge overall progress.
In addition to facilitating success, effective evaluations would facilitate  congressional oversight; allow for any midcourse corrections; assist  agencies in benchmarking progress with other efforts; and provide for  documenting best practices and sharing lessons learned with employees,  stakeholders, other federal agencies, and the public.
section_title: Agencies Are Taking Advantage of New Flexibilities to Varying Degrees but Face Some Barriers
paragraphs: As we introduced in testimony to you last year, from our previous  interviews with human resources directors from across the federal  government and our previous human capital work, we have reported on six  key practices that agencies should implement to use human capital  flexibilities effectively. Figure 2 identifies these key practices.
The overall effort to improve the federal hiring process is a notable  example highlighting the importance of effectively using flexibilities.   Agencies complained that they were losing good talent because the hiring  process was too long and cumbersome.  Congress, OPM, and agencies have  all undertaken efforts to help improve the process.  However, in a survey  we conducted last year, CHCO Council members reported that their  agencies were making limited use of new hiring flexibilities that Congress  had provided agencies:  category rating and direct-hire authority.  Category  rating is an alternative rating and selection procedure that can provide  agency managers with a larger pool of qualified job candidates from which  to select rather than have to use numerical ranking and the rule of three,  while also protecting veterans' preference.  Direct-hire authority allows  agencies to appoint candidates directly to positions where OPM determines  there is a severe shortage of candidates or a critical hiring need, rather than  numerically rating and ranking applicants.  Agencies cited a number of  barriers to using these flexibilities, including a lack of policy and guidance  on these tools.
Consistent with our findings and recommended actions, OPM has since  reported a wide range of efforts it has undertaken, including some in  partnership with key external stakeholders, to assist agencies in using the  new hiring authorities, including a number of important initiatives that  took place after we surveyed CHCO Council members. For example, OPM  has hosted training symposia on both tools.  OPM has taken these actions  with the goal of helping to ensure that agencies are aware of the hiring  flexibilities available to them as well as assisting agencies in taking full  advantage of these available flexibilities.
I also wanted to highlight ongoing work that addresses several other  human capital flexibilities that Congress has provided.  First, Congress has  authorized agencies to repay, at their discretion, their employees’ student  loans as a means to recruit and retain a talented workforce.  We have work  under way to review agencies’ use of the program.  In addition, the  Homeland Security Act of 2002 provides governmentwide authority for  offering voluntary separation incentive payments, commonly referred to as  buyouts, and voluntary early retirement, or early outs, for the purpose of  workforce reshaping.  We also have work under way to identify the extent  to which agencies are implementing these tools. We plan to report on the  results of our research later this year.
subsections: section_title: GAO’s Experiences with Human Capital Reform
paragraphs: GAO exists to support Congress in meeting its constitutional  responsibilities and to help improve the performance and ensure the  accountability of the federal government for the benefit of the American  people. We deeply appreciate the support and assistance we have received  from this subcommittee and others in Congress in providing us with the  tools and authorities we need to support Congress.  We believe that it is  vitally important to GAO’s future that the agency continue modernizing and  updating our human capital policies and system in light of the changing  environment and anticipated challenges ahead. We believe that the GAO  Human Capital Reform Act is well reasoned with adequate safeguards for  GAO employees.  As you know, GAO has had certain human capital tools  and flexibilities for over two decades. GAO’s more recent Human Capital  Reform Act of 2004 (Human Capital II) combines diverse initiatives that,  collectively, should further GAO’s ability to enhance the agency’s our  performance and attract, retain, motivate, and reward a high-performing  workforce now and in the future.
Specifically, Human Capital II allows for a number of additional human  capital tools and flexibilities, including  making permanent GAO’s three-year authority to offer voluntary early  retirement and voluntary separation incentive payments;  allowing the Comptroller General to adjust the rates of basic pay of GAO  employees on a separate basis from the annual adjustments authorized  for employees of the executive branch;  providing authority to reimburse employees for certain relocation  expenses and to award certain employees with additional annual leave  benefits; and  authorizing an executive exchange program with private sector  organizations to further the institutional interest of GAO or Congress,  including for the purpose of providing training.
Consistent with GAO’s long-standing practice, the new human capital  flexibilities are being implemented in continuing consultation with GAO’s  employees and executives.  GAO’s regulations for offering voluntary early  retirement were issued on November 15, 2004.  The Comptroller General  may authorize early retirements for applicants on the basis of the  institutional needs of GAO, subject to certain statutory limits.  GAO  believes that its careful use of these flexibilities will continue to be an  important tool in incrementally improving the agency’s overall human  capital profile, freeing resources for other uses, and enabling GAO to  reduce a skill gap or address other succession concerns.
GAO has also begun to implement the flexibility on adjusting the rates of  basic pay for GAO employees.  GAO is implementing a compensation  system that places greater emphasis on job performance while, at a  minimum, protecting the purchasing power of employees who are  performing acceptably and ensuring that they are paid within competitive  compensation ranges.  With the help of an international human capital  consulting firm, GAO developed new market-based compensation pay  ranges for analysts, attorneys, and specialists that are already in the first  phase of implementation. With the new market-based pay system,  employee compensation will now consider current salary and allocate  individual performance-based compensation amounts between a merit  increase (i.e., salary increase) and a performance bonus (i.e., cash).  GAO is  in the early stages of conducting a similar study of market-based pay for the  remainder of GAO’s workforce who began the transition to performance- based compensation in 2004 with the introduction of pay banding and a  new competency-based performance appraisal system.
Draft regulations implementing the Executive Exchange Program were  provided to employees for comment on January 31, 2005.  The comment  period closed on March 4, 2005 and review and analysis of the comments is  in process.  We anticipate issuing final regulations on or before June 1,  2005, and are concurrently working on the operational implementation of  the program.
section_title: A Consistent Set of Principles, Criteria, and Processes Can Help Guide Future Reforms
paragraphs: In the future, agencies most likely will continue to request some of the  flexibilities and reforms granted to agencies such as GAO, DOD, and DHS,  as they strive to become higher-performing and results-based  organizations.  In response, Congress may continue to grant individual  reforms or design a set of more comprehensive governmentwide reforms  or a combination of these approaches.  To qualify for these reforms,  agencies should be able to demonstrate that they have the necessary  infrastructure in place before they are authorized to implement significant  human capital flexibilities and authorities.  In anticipation of future  reforms, and to help advance the discussion concerning how human capital  reform should proceed, GAO and the National Commission on the Public  Service Implementation Initiative hosted a forum on whether there should  be a governmentwide framework for human capital reform and, if so, what  this framework should include.  While there were divergent views among  the forum participants, there was general agreement on a set of principles,  criteria, and processes that would serve as a starting point for further  discussion in developing a governmentwide framework, as shown in  Figure 3.
section_title: Conclusions
paragraphs: Strategic human capital management is the centerpiece of the federal  government’s overall management transformation effort.  A number of  stakeholders have a key role in this process.  Congress has provided  agencies, including DOD and DHS, with broad human capital authorities to  help them with their transformations.  Agencies are taking advantage of  these provided flexibilities but continue to face some barriers.  OPM and  the CHCO Council can continue to assist agencies in navigating these  flexibilities, as well as take a more coordinated and strategic view of  federal human capital management policies, processes, and systems.   Agencies will need to continue implementing these tools, evaluating the  results achieved, and adjusting implementation, especially if they are to use  their resources most wisely in a fiscally constrained environment.  The  Subcommittee’s and Congress’ interest in monitoring agencies’ progress  with these new human capital tools and willingness to adjust and support  them are a critical ingredient to success.  Furthermore, agencies requesting  additional flexibilities should be able to first demonstrate a need and then  that they have the infrastructure and capabilities to use these flexibilities  effectively.  Finally, in granting these, or more comprehensive  governmentwide reforms, we have offered Congress a framework, a set of  consistent principles, criteria, and processes to consider as it designs the  federal human capital system for the 21st century.
Chairman Voinovich and Members of the subcommittee, this concludes my  prepared statement. I would be pleased to answer any questions you may  have.
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