oversight

GAO'S Proposed Human Capital Legislation: Views of the Employee Advisory Council

Published by the Government Accountability Office on 2003-09-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                              United States General Accounting Office

GAO                           Testimony
                              Before the Senate Committee on Governmental Affairs




For Release on Delivery
Expected at 9:30 a.m. EDT
Tuesday, September 16, 2003
                              GAO’S PROPOSED
                              HUMAN CAPITAL
                              LEGISLATION
                              Views of the Employee
                              Advisory Council
                              Statement for the Record by GAO’s Employee Advisory
                              Council




GAO-03-1162T
                              A
Mr. Chairman and Members of the Committee:

We are pleased to have the opportunity to comment on the Comptroller
General’s Human Capital II proposal. The Comptroller General formed the
EAC about 4 years ago to be fully representative of the GAO population and
advise him on issues pertaining to both management and employees. The
members of the EAC represent a variety of employee groups and almost all
employees outside of the senior executive service (more than 3,000 of
GAO’s 3,200 employees or 94 percent). The EAC operates as an umbrella
organization that incorporates representatives of GAO’s long-standing
employee organizations including groups representing the disabled,
Hispanics, Asian-Americans, African-Americans, gays and lesbians,
veterans, and women,1 as well as employees in various pay bands,
attorneys, and administrative and professional staff.2

As established in our charter, the Employee Advisory Council serves as an
advisory body to the Comptroller General and other senior executives by:

• seeking and conveying the views and concerns of the individual
  employee groups it represents while being sensitive to the mutual
  interests of all employees, regardless of their grade, band, or
  classification group;

• proposing solutions to concerns raised by employees, as appropriate;

• providing input by assessing and commenting on GAO policies,
  procedures, plans, and practices; and,

• communicating issues and concerns of the Comptroller General and
  other senior managers to employees.

In preparing this statement, the EAC considered the results of discussions
with constituents, and input from Council representatives, including
information gathered from employees during the initial introduction of the
proposal and comments provided on the Comptroller General’s revised


1
  While these organizations historically operated under separate charters by the Comptroller
General, they now are included in the charter of the EAC and appoint representatives to
serve on the Council.
2
  These members are elected by their constituency to two-year terms and may seek
reelection once.




Page 1                                                                       GAO-03-1162T
proposal. Although we have limited quantitative data in this regard and
recognize that not all employees have the same opinions regarding all
provisions of the proposed legislation, we believe our testimony is
representative of a substantial cross-section of GAO employees.

In summary, GAO employees generally support many of the provisions in
the proposed legislation. For example, most employees expressed support
for

• the provision to make GAO’s authority to offer voluntary early
  retirement permanent,

• provisions to enhance vacation time for upper-level hires and relocation
  expenses deemed necessary by the Comptroller General to recruit and
  retain top employees, and

• the provision to establish an exchange program with the private sector.

However, many employees have expressed concerns about the proposals
that affect pay. Specifically, many staff are concerned about the potential
negative impact of the change in the basis for annual salary increases,
although some staff recognize the potential benefits for additional reward
and management flexibility. To a lesser extent, staff are concerned about
changes to pay protections provided under traditional federal employment
rules. Staff have differing opinions on the provision to change GAO’s name
to the Government Accountability Office.

The EAC recognizes and appreciates the efforts the Comptroller General
has made to address employees’ concerns regarding provisions affecting
pay by (1) providing assurances that the new system will sustain
employees’ purchasing power and provide parity with prevailing locality
pay, (2) proposing short- and longer-term modifications to GAO’s
performance management system, and (3) incorporating a 2-year transition
period for implementation of the new system. We hope that if the
legislation is enacted, the Comptroller General will continue to be
responsive to the concerns of employees as the agency moves forward in
implementing these changes.




Page 2                                                         GAO-03-1162T
GAO Employees                Outreach efforts by EAC representatives indicate that most employees
                             support many portions of the legislative proposal under consideration by
Support Most Aspects         the Subcommittee but have concerns about provisions in the proposal
of the Proposed              related to pay. Specifically, employees generally support provisions that
                             make the authorities provided to GAO for voluntary early retirement pay
Legislation but Have         incentives permanent, to provide enhancements in vacation time and
Concerns about Pay           relocation expenses deemed necessary by the Comptroller General to
Provisions and               recruit and retain top employees, and to establish a private sector
                             exchange program. However, many employees are concerned about the
Differing Opinions           provisions that change the way that annual pay decisions are made and, to
about the Proposed           a lesser extent, the proposed change to traditional protections for pay
Name Change                  retention. Employees had differing opinions about the proposed change to
                             GAO’s name.



Most Employees Support       Most employees support the Comptroller General’s proposed provisions to
Proposals to Improve GAO’s   make permanent GAO’s 3-year authority to offer voluntary early retirement
                             and voluntary separation payments to provide flexibility to realign GAO’s
Ability to Realign the
                             workforce. In addition, GAO employees recognize that attracting and
Workforce and Attract and    retaining high-quality employees and managers throughout the
Retain High Quality          organization is vitally important for the future of GAO. Employees thus
Employees                    generally support the provisions to offer flexible relocation
                             reimbursements, provide upper-level hires with 6-hour leave accrual, and
                             establish an executive exchange program with private sector organizations.
                             Most employees commented positively on these authorities so long as
                             there are internal controls to monitor and report on their use, as are
                             present to provide accountability for other authorities throughout GAO.3



Many Employees Are           Many employees expressed concern about the provisions that affect the
Concerned about the          determination of annual pay increases and pay retention. The opinions
                             expressed by employees generally fall into three categories: (1) general
Provisions That Affect Pay
                             concerns and some supporting views regarding changes in traditional civil
                             service employment rules that could reduce the amount of annual pay
                             increases provided for economic adjustments but provide greater


                             3
                               For example, the Comptroller General detailed GAO’s use of the flexibilities provided in
                             the first round of authorities granted in the GAO Personnel Flexibilities Act of October 2000
                             in U.S. General Accounting Office, Assessment of Public Law 106-303, GAO-03-954SP
                             (Washington, D.C., June 27, 2003).




                             Page 3                                                                        GAO-03-1162T
                                  opportunity for rewarding performance, (2) concerns about making a
                                  portion of annual economic adjustments variable based on performance
                                  assessment, and to a lesser extent (3) concerns about the loss of traditional
                                  pay retention protections.

Concerns and Supporting Views     The first area of employee concern is proposed changes to traditional
on Proposed Changes That          federal civil service employment rules that have historically provided a
Could Reduce Annual Pay           fixed annual increase for all federal employees determined by the President
Provided for Economic             and the Congress. Government employees in general, and GAO employees
Adjustments but Provide Greater   in particular, often conduct work that can have far reaching implications
Rewards                           and impacts. Such work can positively or negatively affect segments of the
                                  population and thereby the general public’s perceptions of, and reactions
                                  to, the federal government, including Members of Congress. Over the
                                  years, the Congress has developed a bulwark of protections to shield
                                  federal workers from reprisals that might result from their service as
                                  employees. Included among these has been the process by which federal
                                  employees’ salaries are annually adjusted as a result of the passage of, and
                                  signing into law, of the annual budget.

                                  The historical process relies on passage of legislation which includes an
                                  annual increase in pay to reflect increases in inflation and overall
                                  employment costs, followed by determinations by the President (and the
                                  Office of Personnel Management) to calculate the distribution of the
                                  legislative economic adjustments between an overall cost-of-living
                                  adjustment and locality-based increases to reflect differences in cities
                                  across the nation. The current mechanism for annual federal pay
                                  adjustments is found in Public Law 101-509, the Federal Employees Pay
                                  Comparability Act.4




                                  4
                                   While the goal of the act is to achieve full comparability, namely pay parity, between federal
                                  employees and their nonfederal counterparts on a locality-by-locality basis, the law has
                                  never been implemented as originally enacted as a result of a provision in the law that
                                  authorizes the President to offer an alternative pay plan in times of war or “serious
                                  economic conditions affecting the general welfare.”




                                  Page 4                                                                          GAO-03-1162T
The Comptroller General has expressed his concern about trends in the
executive branch that make it highly likely that the current civil service pay
system will be the subject of comprehensive reform within the next few
years. Citing federal agencies that already have many of these flexibilities,
such as the Federal Aviation Administration5 and the new Department of
Homeland Security, as well as agencies currently seeking reform, such as
the Department of Defense, he has stated his belief that GAO needs to be
“ahead of the curve.”

Under the proposal, rather than relying on the administration’s
determination and the Congress’ mandate for an annual salary adjustment,
GAO can develop and apply its own methodology for the annual cost-of-
living adjustments and compensation differences by locality that the
Comptroller General believes would be more representative of the nature,
skills, and composition of GAO’s workforce. Some employees have
expressed following concerns.

• Removing GAO from the traditional process significantly alters a key
  element of federal pay protection that led some employees to seek
  employment in the federal sector. Changing this protection could
  diminish the attractiveness of federal service and result in the need for
  higher salaries to attract top candidates.

• A portion of appropriations historically intended to provide all federal
  employees with increases to keep pace with inflation and the cost of
  living in particular localities should not be tied to individual
  performance.

• GAO-based annual economic adjustments are more likely to be less
  than, rather than more than, amounts annually provided by the
  Congress; thus employees performing at lower (but satisfactory) levels
  who may not receive an equal or greater amount in the form of a bonus
  or dividend may experience an effective pay cut from amounts
  traditionally provided.

• The flexibility for the Comptroller General to use funds appropriated for
  cost-of-living adjustments for pay-for-performance purposes could


5
  While the Federal Aviation Administration is not required to grant cost of living allowances
or locality pay increases, agency management has elected to continue providing these pay
adjustments as they are generally applied to the federal pay system.




Page 5                                                                         GAO-03-1162T
   imperil future GAO budgets by making that portion of the annual budget
   discretionary where it was once mandatory.

• The wide latitude provided in the proposal gives the Comptroller
  General broad discretion and limited accountability for determining
  whether employees receive annual across-the-board economic
  adjustments, the amount of such adjustments, and the timing of
  adjustments could result in unfair financial harm for some employees if
  the broad authorities were improperly exercised.6

• The Comptroller General has not made a compelling case regarding the
  need for these pay-related and other legislative changes, for example by
  showing that existing cost-of-living adjustment mechanisms are
  inaccurate or that the agency has had difficulty in attracting and
  retaining high-quality employees.

On the other hand, some employees also recognize that the proposed pay
provisions may offer some distinct advantages for some employees. Some
employees commented in support of the provision indicating that

• the existing system for calculating inflation and local cost adjustments
  may not accurately reflect reality;

• most employees would not likely be harmed by a system that allocates a
  greater share of pay to performance-based compensation;

• the authorities would allow GAO managers to provide greater financial
  rewards to the agency’s top performers, as compared to the present pay-
  for-performance system;

• making a stronger link between pay and performance could facilitate
  GAO’s recruitment of top talent.

In addition, the provision may, to a limited extent, address a concern of
some field employees by providing alternatives to reductions in force in
times when mandated pay increases are not fully funded or in other


6
  While management’s salary increase decisions for employees are not subject to appeal
under the current system, some employees feel that the application of any methodology that
GAO establishes to determine the amount of annual economic increases under the proposed
approach should be subject to appeal.




Page 6                                                                      GAO-03-1162T
                                  extraordinary circumstances. For example, from 1992 to 1997, GAO
                                  underwent budgetary cuts totaling 33 percent (in constant fiscal year 1992
                                  dollars.) To achieve these budgetary reductions, GAO staff was reduced by
                                  39 percent, primarily through field office closures and the associated
                                  elimination of field-based employees. While we hope the agency will never
                                  again have to manage budget reductions of this magnitude, this provides a
                                  painful example of the vulnerability of staffing levels, particularly in the
                                  field, to budgetary fluctuations. The proposed pay provisions would
                                  provide the Comptroller General with greater flexibility to manage any
                                  future budget crises by adjusting the annual pay increases of all employees
                                  without adversely and disproportionately impacting the careers and lives of
                                  field-based employees.

Concerns about Making a           In addition to the revised basis for calculating annual economic
Portion of Annual Pay Increases   adjustments, employees are concerned about the provision that transforms
Variable Based on Performance     a portion of the annual pay increases that have historically been granted to
Assessment                        federal employees for cost-of-living and locality-pay adjustments into
                                  variable, performance-based pay increases and bonuses. Because the GAO
                                  workforce is comprised of a wide range of highly qualified and talented
                                  people performing a similarly wide range of tasks, employees recognize
                                  that it is likely that some employees at times have more productive years
                                  with greater contributions than others. Therefore, most agree with the
                                  underlying principle of the provision to provide larger financial rewards for
                                  employees determined to be performing at the highest level. However, in
                                  commenting on the proposal, some employees said that GAO management
                                  already has multiple options to reward high performers through bonuses,
                                  placement in top pay-for-performance categories, and promotions. Others
                                  expressed concern that increased emphasis on individual performance
                                  could result in diminished teamwork, collaboration, and morale because
                                  GAO work typically is conducted in teams, often comprised of employees
                                  who are peers.

                                  These concerns are compounded by long-standing widespread employee
                                  concerns regarding the accuracy and validity of GAO’s performance
                                  appraisal system, which is used for the current system of performance-
                                  based pay adjustments. Any effort to increase the link between pay and
                                  performance implicitly relies upon the existence of a reliable method for
                                  gauging individual performance. We received comments that the varying
                                  levels of complexity, time frames, resource availability, and sensitivity of
                                  GAO work make it difficult to objectively assess individual performance
                                  and to fairly and accurately compare employees’ performance with
                                  sufficient precision. In other words, some employees believe that the



                                  Page 7                                                           GAO-03-1162T
                             subjectivity inherent in the system does not provide a valid basis for
                             distinguishing between subtle differences in performance that may be
                             measured in tenths of a percentage point between performance categories.
                             Employee concerns about performance assessment have not significantly
                             changed as a result of the new competency-based system GAO
                             implemented last year. The comments we have heard are consistent with
                             the concerns expressed to the Congress by GAO employees in 1993:

                             “The PFP (pay-for-performance) process involves managers making very fine distinctions in
                             staff’s performance in order to place them in discrete performance management categories.
                             These categories set artificial limits on the number of staff being recognized for their
                             contributions with merit pay and bonuses.”

                             Related to concerns about subjectivity in the performance assessment
                             system, Council representatives and employees expressed concern about
                             data indicating that as a group, minorities, veterans, and field-based
                             employees have historically received lower ratings than the employee
                             population as a whole. While the data indicate that the disparity is
                             considerably improved or eliminated for employees who have been with
                             the agency fewer than 5 years, some employees have serious reservations
                             about providing even greater discretion in allocating pay based on the
                             current performance management system.

Concerns about the Loss of   To a lesser extent, some employees expressed concerns about the
Traditional Pay Retention    elimination of traditional federal employment rules related to grade and
Protections                  pay retention for employees who are demoted due to such conditions as a
                             workforce restructuring or reclassification. The proposed legislation will
                             allow the Comptroller General to set the pay of employees downgraded as
                             a result of workforce restructuring or reclassification at their current rates
                             (i.e., no drop in current pay), but with no automatic annual increase to
                             basic pay until their salaries are less than the maximum rates of their new
                             grades or bands.

                             Employee concern, particularly among some Band II analysts and mission
                             support staff, focuses on the extent to which this provision may result in a
                             substantial erosion in future pay, since there is a strong possibility that
                             these two groups may be restructured in the near future. For example, one
                             observation is that the salary range within pay bands is such that senior
                             analysts who are demoted would likely wait several years for their next
                             increase in pay or bonus. In this circumstance, employees would need to
                             reconcile themselves to no permanent pay increases regardless of their
                             performance. Some employees cited this potential negative impact on staff
                             motivation and productivity and emphasized that to continue providing


                             Page 8                                                                     GAO-03-1162T
                             service at the level of excellence that the Congress and the American
                             people expect from GAO, this agency needs the best contributions of all its
                             midlevel and journeymen employees. However, the EAC recognizes that,
                             absent this kind of authority and given some of the authorities already
                             provided to the Comptroller General, some employees who may be
                             demoted could otherwise face termination rather than diminished salary
                             increases.



Employee Had Differing       Finally, employees had differing opinions regarding the provision to change
Opinions regarding a         GAO’s name to the Government Accountability Office. Some employees
                             are concerned that the proposed change in GAO’s name to more accurately
Change in GAO’s Name
                             reflect the work that we do will damage GAO’s “brand recognition.” Most
                             employees who oppose the name change do not see the current name as an
                             impediment to doing our work or to attracting quality employees. Some
                             employees expressed concern that the legacy of high-quality service to the
                             Congress that is embedded in the name “United States General Accounting
                             Office” might be lost by changing the name. Other employees support the
                             name change and cited their own experiences in being recruited or
                             recruiting others and in their interaction with other federal agencies. In
                             their opinion, the title “General Accounting Office” reflects
                             misunderstandings and incorrect assumptions about GAO’s role and
                             function by those who are not familiar with our operations and may serve
                             as a deterrent to attracting employees who are otherwise not interested in
                             accounting.



The EAC Appreciates          We appreciate the Comptroller General’s efforts to involve the Employee
                             Advisory Council and to solicit employee input through discussions of the
the Comptroller              proposal. As a result of employee feedback and feedback from GAO
General’s Efforts to         managers and the EAC, the Comptroller General has made a number of
                             revisions and clarifications to the legislative proposal along with
Address Concerns of          commitments to address concerns relating to the annual pay adjustment by
GAO Employees about          issuing formal GAO policy to formally establish his intent to retain
Pay-Related Human            employees’ earning power in implementing the authorities; by revising the
                             performance management system; and by deferring implementation of pay
Capital II Provisions        changes until 2005.



Retention of Earning Power   Key among the commitments made by the Comptroller General is his
and Locality Pay Parity      assurance to explicitly consider factors such as cost-of-living and locality-



                             Page 9                                                            GAO-03-1162T
                         pay differentials among other factors, both items that were not in the
                         preliminary proposal. In addition, the Comptroller General has said that
                         employees who are performing adequately will be assured of some annual
                         increase that maintains spending power. He outlined his assurance in
                         GAO’s weekly newsletter for June 30th that successful employees will not
                         witness erosion in earning power and will receive an annual adjustment
                         commensurate with locality-specific costs and salaries. According to the
                         Comptroller General, pay protection commitments that are not included in
                         the statute will be incorporated in the GAO orders required to implement
                         the new authorities. This is consistent with the approach followed when
                         GAO made similar pay protection commitments during the conversion to
                         broad bands in the 1980s. To the extent that these steps are taken, overall
                         employee opinion of the changes should improve because much of the
                         concern has focused on making sure that staff who are performing
                         adequately do not witness economic erosion in their pay.



Planned Revisions to     In response to concerns regarding the performance management system
Performance Management   and the related variable elements of annual pay increases raised by the
                         EAC, employees, and senior managers, the Comptroller General has told
                         employees that he will provide increased transparency in the area of
                         ratings distributions, for example by releasing summary-level performance
                         appraisal results. In addition, the Comptroller General has stated that he
                         plans to take steps to improve the performance management system that
                         could further reduce any disparities. Specifically, on June 26, the
                         Comptroller General released a "Performance Management System
                         Improvement Proposal for the FY 2003 Performance Cycle" that outlines
                         proposed short-term improvements to the analyst performance
                         management system that applies to the majority of GAO employees. These
                         include additional training for staff and performance managers and a
                         reduction in the number of pay categories from five to four. A number of
                         longer-term improvements to the performance appraisal system requiring
                         validation are also under consideration, including weighting competencies
                         and modifying, adding, or eliminating competencies. For all employees to
                         embrace any additional pay-for-performance efforts, it is vital that the
                         Comptroller General take steps that will provide an increased level of
                         confidence that the appraisal process is capable of accurately identifying
                         high performers and fairly distinguishing between levels of performance.




                         Page 10                                                        GAO-03-1162T
Deferred Implementation of   Finally, the Comptroller General has agreed to delay implementation of the
Pay Provisions               pay-for-performance provisions of the proposal until October 1, 2005. This
                             change should provide an opportunity to assess efforts to improve the
                             annual assessment process and lessen any impact of changes in the
                             permanent annual pay increase process for employees approaching
                             retirement. It should also provide an opportunity to implement a number
                             of measures designed to improve confidence in the annual assessment
                             process.



Conclusion                   In summary, as GAO employees we are proud of our work assisting the
                             Congress and federal agencies to make government operations more
                             efficient and effective. Although all of us would agree that our agency is
                             not perfect, the EAC believes GAO is making a concerted effort to become
                             a more effective organization. We will continue to work closely with
                             management to improve GAO, particularly in efforts to implement and
                             monitor any additional authorities granted to the Comptroller General. We
                             believe that it is vital that we help to develop and implement innovative
                             approaches to human capital management that will enable GAO to
                             continue to meet the needs of the Congress; further improve the work
                             environment to maximize the potential of our highly skilled, diverse, and
                             dedicated workforce; and serve as a model for the rest of the federal
                             government.




(997901)                     Page 11                                                       GAO-03-1162T
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