Posthearing Questions Related to Proposed DOD Human Capital Reform

Published by the Government Accountability Office on 2003-07-03.

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

                                                                                     Comptroller General
                                                                                     of the United States
United States General Accounting Office
Washington, DC 20548

          July 3, 2003

          The Honorable Susan M. Collins
          Committee on Governmental Affairs
          United States Senate

          Subject: Posthearing Questions Related to Proposed Department of Defense (DOD)
          Human Capital Reform

          On June 4, 2003, I testified before your committee at a hearing entitled “Transforming
          the Department of Defense Personnel System: Finding the Right Approach.”1 This
          letter responds to your request that I provide answers to posthearing questions from
          Senator George V. Voinovich and Senator Thomas R. Carper. The questions and
          responses follow.

          Questions from Senator Voinovich

          1. Mr. Walker, in your written testimony, you support the phased in approach
          for DOD reforms. While this will give the Department additional time to
          establish a better personnel system, do you believe it may contribute to a
          fractured atmosphere, potentially creating a culture of “haves,” employees
          benefiting from the new system and “have-nots?”

          As I have testified, we believe that it is critical that agencies or components have in
          place the human capital infrastructure and safeguards before implementing new
          human capital reforms. This institutional infrastructure includes, at a minimum (1) a
          human capital planning process that integrates the agency’s human capital policies,
          strategies, and programs with its program mission, goals, and desired outcomes,
          (2) the capabilities to develop and implement a new human capital system effectively,
          and (3) a modern, effective, credible and, as appropriate, validated performance
          appraisal and management system that includes adequate safeguards, such as
          reasonable transparency and appropriate accountability mechanisms, to ensure the
          fair, effective, and nondiscriminatory implementation of the system.

          Clearly, some components of DOD may have such an infrastructure and safeguards in
          place before others. However, as we have noted, in the human capital area, how you
          do something and when you do it, can be as important as what you do. In our view,

           U.S. General Accounting Office, Human Capital: Building on DOD’s Reform Effort to Foster
          Governmentwide Improvements, GAO-03-851T (Washington, D.C.: June 4, 2003).

                                                          GAO-03-965R DOD Human Capital Reform
the positive benefits of implementing the new human capital authorities properly and
effectively will far outweigh any potential issues of some DOD components benefiting
from the new personnel authorities before others.

2. In the Homeland Security legislation, Congress gave the new Department
broad flexibility to amend six areas of Title 5 (performance appraisals,
classification, pay rates and systems, labor management relations, adverse
actions, and appeals). It has been said that the Department of Homeland
Security’s personnel system may become the future human resource model
for the federal government. Today the Secretary of Defense explained his
vision for the personnel system for the civilian workforce, which in some
instances goes well beyond the Homeland Security proposal. I know that the
Department of Defense has had a great deal of success with their
demonstration projects, but do you think we should wait until the Homeland
Security system is fully established before we give broad authority to the
Defense Department?

As we noted in our high-risk series, modern, effective, and credible human capital
strategies will be essential in order to maximize performance and assure
accountability of the government for the benefit of the American people.2 As the
employer of almost 700,000 civilians, in no place is a modernized human capital
system more critical than DOD. However, as I have often noted, such a system
should not be implemented without an adequate human capital infrastructure and

Although we do not believe that DOD should wait for the full implementation of the
new human capital system at the Department of Homeland Security (DHS), which
could take several years, we do think that there are important lessons that can be
learned from how DHS is developing its new personnel system. For example, DHS
has implemented an approach that includes a design team of employees from DHS,
the Office of Personnel Management (OPM), and major labor unions. To further
involve employees, DHS has conducted a series of town hall meetings around the
country and held focus groups to further learn of employees’ views and comments.
According to DHS, draft regulations for the new personnel system will be issued this
fall, final regulations by early 2004, and implementation to begin at that point. DOD,
as any organization seeking to transform, needs to ensure that employees are
involved in order to obtain their ideas and gain adequate “buy-in” for any related
transformational efforts.

3. Mr. Walker, in your testimony before the House Government Reform
Committee and my Subcommittee, you expressed reservations with DOD’s
preparedness to implement a pay for performance system. You have
observed that the Department does not have a credible and verifiable
performance management system. S. 1166 seeks to address that concern by
establishing criteria for a performance management system. Please comment
on that portion of the bill.

 U.S. General Accounting Office, High-Risk Series: Strategic Human Capital Management,
GAO-03-120 (Washington D.C.: January 2003).

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We are pleased that both the House of Representatives’ version of the proposed
National Defense Authorization Act for Fiscal Year 2004 and the proposed National
Security Personnel System Act contain statutory safeguards and standards along the
lines that we have been suggesting to help ensure that DOD’s pay for performance
efforts are fair to employees and improve both individual and organizational

The statutory standards described in the National Security Personnel System Act
proposal are intended to help ensure a fair, credible, and equitable system that results
in meaningful distinctions in individual employee performance; employee
involvement in the design and implementation of the system; and effective
transparency and accountability measures, including appropriate independent
reasonableness reviews, internal grievance procedures, internal assessments, and
employee surveys. In our reviews of agencies’ performance management systems------
as in our own experience with designing and implementing performance-based pay
reform for ourselves at GAO------we have found that these safeguards are key to
maximizing the chances of success and minimizing the risk of failure and abuse.

The proposed National Security Personnel System Act also takes the essential first
step in requiring DOD to link the performance management system to the agency’s
strategic plan. Building on this, we suggest that DOD also be required to link its
performance management system to program and performance goals and desired
outcomes. Linking the performance management system to related goals and desired
outcomes helps the organization ensure that its efforts are properly aligned and
reinforces the line of sight between individual performance and organizational
success so that an individual can see how her/his daily responsibilities contribute to
results and outcomes.

Questions from Senator Carper

1. In your written testimony, you say it would be preferable to employ a
governmentwide approach to address human capital issues in the future. Of
the issues addressed in S. 1166 and the Defense Department proposal, which
do you believe would be best handled using a governmentwide approach?

As you point out, I have testified that Congress should consider both governmentwide
and selected agency changes to address the pressing human capital issues
confronting the federal government. Agency-specific human capital reforms should
be enacted to the extent that the problems being addressed and the solutions offered
are specific to a particular agency (e.g., military personnel reforms for DOD). In
addition, targeted reforms should be considered in situations where additional testing
or piloting is needed for fundamental governmentwide reform.

In our view, it would be preferable to employ a governmentwide approach to address
certain flexibilities that have broad-based application and serious potential
implications for the civil service system, in general, and OPM, in particular. We
believe that several of the reforms that DOD is proposing fall into this category.
Some examples include broad-banding, pay for performance, reemployment, and
pension offset waivers. In these situations, it may be prudent and preferable for

Page 3                                      GAO-03-965R DOD Human Capital Reform
Congress to provide such authorities on a governmentwide basis and in a manner that
assures that a sufficient personnel infrastructure and appropriate safeguards are in
place before an agency implements the new authorities. Importantly, employing this
approach is not intended to delay action on DOD’s or any other individual agency’s
efforts but rather to accelerate needed human capital reform throughout the federal
government in a manner that ensures reasonable consistency on key principles within
the overall civilian workforce. This approach also would help to maintain a level
playing field among federal agencies in competing for talent.

2. Many of the proposals made by the Defense Department have been made in
the past by other departments and agencies to address longstanding,
governmentwide human capital problems. Every department and agency, I’m
sure, can claim to have difficulty, for example in recruiting and retaining
qualified personnel to replace retirees, in hiring individuals quickly or in
finding ways to reward employees for excellent performance. In your view,
is what the Defense Department is seeking narrowly tailored to meet
department-specific needs? Has the Defense Department provided sufficient
justification for the kind of personnel authority they are seeking?

The authority DOD is seeking is not directly tailored to meet department-specific
needs. In addition, DOD has not provided a written justification for much of its
proposal. Nevertheless, DOD does need certain additional human capital flexibilities
in order to facilitate its overall transformation effort.

Secretary Rumsfeld and the rest of DOD’s leadership are clearly committed to
transforming how DOD does business. Based on our experience, while DOD’s
leadership has the intent and the ability to transform the department, the needed
institutional infrastructure is not in place in a vast majority of DOD organizations.
Our work looking at DOD’s strategic human capital planning efforts and looking
across the federal government at the use of human capital flexibilities and related
human capital efforts underscores the critical steps that DOD needs to take to
properly develop and effectively implement any new personnel authorities. In the
absence of the right institutional infrastructure, granting additional human capital
authorities will provide little advantage and could actually end up doing damage if the
authorities are not implemented properly by the respective department or agency.

DOD has noted that its new personnel system will be based on the work done by
DOD’s Human Resources Best Practices Task Force. The Task Force reviewed both
federal personnel demonstration projects and selected alternative personnel systems
to identify practices that it considered promising for a DOD civilian human resources
strategy. These practices were outlined in an April 2, 2003, Federal Register notice
asking for comment on DOD’s plan to integrate all of its current science and

 See, for example, U.S. General Accounting Office, DOD Personnel: DOD Actions Needed to
Strengthen Civilian Human Capital Strategic Planning and Integration with Military Personnel
and Sourcing Decisions, GAO-03-475 (Washington, D.C.: Mar. 28, 2003); Human Capital: Effective
Use of Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-2 (Washington, D.C.:
Dec. 6, 2002); and Defense Logistics: Actions Needed to Overcome Capability Gaps in the Public
Depot System, GAO-02-105 (Washington, D.C.: Oct. 12, 2001).

Page 4                                           GAO-03-965R DOD Human Capital Reform
technology reinvention laboratory demonstration projects under a single human
capital framework consistent with the best practices DOD identified.

Finally, as I noted in my statement before the Committee, the relevant sections of the
House of Representatives’ version of the proposed National Defense Authorization
Act for Fiscal Year 2004 and Chairman Collins, Senator Levin, Senator Voinovich, and
Senator Sununu’s National Security Personnel System Act, in our view, contain a
number of important improvements over the initial DOD legislative proposal.


We are providing copies of this letter to the Ranking Minority Member, Senate
Committee on Governmental Affairs; the Chairman and Ranking Minority Member,
Senate Committee on Governmental Affairs, Subcommittee on Oversight of
Government Management, the Federal Workforce and the District of Columbia; the
Chairman and Ranking Minority Member, Senate Committee on Governmental
Affairs, Subcommittee on Financial Management, the Budget, and International
Security; and the Honorable Thomas R. Carper. For additional information on our
work on federal agency transformation efforts and strategic human capital
management, please contact me on (202) 512-5500 or J. Christopher Mihm, Director,
Strategic Issues, on (202) 512-6806 or at mihmj@gao.gov.


David M. Walker
Comptroller General
of the United States


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