Human Capital: OPM Needs to Improve the Design, Management, and Oversight of the Federal Classification System
Released: 2014-09-02T00:00:00

Letter

Background

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.

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

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.

Implementation of the GS System Could Better Balance Attributes of a Modern, Effective Classification System

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.

Extent to Which Broadband Systems Incorporate Attributes of a Modern, Effective Classification System Is Mixed

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.

Agencies Increased Their Use of Alternative Personnel Systems to Obtain Greater Pay Flexibilities

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.

OPM Is Not Systematically Managing and Overseeing the Classification System

OPM Provides Guidance, Training, and Technical Assistance to Agencies in Implementing the GS System

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).

OPM Could Benefit from a More Strategic Approach to Creating and Updating Occupational Standards

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.

OPM Is Not Conducting Oversight of Agency Classification Programs

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.

Conclusions

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.

Recommendations for Executive Action

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.

Agency Comments and Our Evaluation

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.

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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.

Appendix I: Objectives, Scope, and Methodology

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.

Appendix II: Interactive Graphic Information

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.

Text on Graphic Budget Planning

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.

Appendix III: Comments from the Office of Personnel Management

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact:

Robert Goldenkoff, (202) 512-2757 or goldenkoffr@gao.gov.

Staff Acknowledgments:

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.