[Federal Register: November 1, 2005 (Volume 70, Number 210)]
[Rules and Regulations]
[Page 66115-66220]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no05-16]
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Part IV
Department of Defense
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Office of Personnel Management
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5 CFR Chapter XCIX and Part 9901
Department of Defense Human Resources Management and Labor Relations
Systems; Final Rule
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DEPARTMENT OF DEFENSE
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Chapter XCIX and Part 9901
RIN 3206-AK76/0790-AH82
Department of Defense Human Resources Management and Labor
Relations Systems
AGENCY: Department of Defense; Office of Personnel Management.
ACTION: Final rule.
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SUMMARY: The Department of Defense (DoD or the Department) and the
Office of Personnel Management (OPM) are issuing final regulations to
establish the National Security Personnel System (NSPS), a human
resources management system, within DoD, as authorized by the National
Defense Authorization Act (Pub. L. 108-136, November 24, 2003). These
regulations govern basic pay, staffing, classification, performance
management, labor relations, adverse actions, and employee appeals.
These changes are designed to ensure that the Department's human
resources management and labor relations systems align with its
critical mission requirements and protects the civil service rights of
its employees.
DATES: Effective November 28, 2005.
FOR FURTHER INFORMATION CONTACT: At OPM: Nancy Kichak at 202-606-6500;
at DoD: Brad Bunn at 703-696-4664.
SUPPLEMENTARY INFORMATION:
Table of Abbreviations
AJ--Administrative Judge
COLA--Cost of Living Adjustment
CONUS--Continental United States
DARPA--Defense Advanced Research Projects Agency
DoD--Department of Defense
ECI--Employment Cost Index
EEO--Equal Employment Opportunity
EEOC--Equal Employment Opportunity Commission
EPI--Extraordinary Pay Increase
FLRA--Federal Labor Relations Authority
FLSA--Fair Labor Standards Act
FMCS--Federal Mediation and Conciliation Service
FSIP--Federal Service Impasses Panel
FWS--Federal Wage System
GAO--Government Accountability Office (former General Accounting
Office)
GS--General Schedule
HR--Human Resources
KPP--Key Performance Parameter
LWOP--Leave Without Pay
MRO--Mandatory Removal Offense
MSPB--Merit Systems Protection Board
NAF--Nonappropriated Fund
NAPA--National Academy of Public Administration
NSLRB--National Security Labor Relations Board
NSPS--National Security Personnel System
OMB--Office of Management and Budget
OPM--Office of Personnel Management
PEO--Program Executive Office
PFR--Petition for Review
RFR--Request for Review
SES--Senior Executive Service
SL--Senior Level
ST--Scientific or Professional Positions
WGI--Within-Grade Increase
Table of Contents
This supplementary information section is organized as follows:
Introduction
The Case for Action
Pay and Classification
Performance Management
Staffing, Employment and Workforce Shaping
Adverse Action and Appeals
Labor-Management Relations
Development of the National Security Personnel System
Strategic Engagement and Establishment of the Program Executive
Office
Development of Design Options
Guiding Principles and Key Performance Parameters
Communications During the Design Process
Outreach to Employee Representatives
Outreach to Employees
Outreach to Other Stakeholders
Development of Design Options--Working Groups
Publication of Proposed Regulations
Public Comments
Meet-and-Confer Process
Major Issues
Specificity of the Regulations
Pay for Performance and Pay Pool Funding
Adverse Actions and Appeals
Mandatory Removal Offenses
Labor Relations
Management Rights/Scope and Duty to Bargain
Independence of the National Security Labor Relations Board
Response to Specific Comments and Detailed Explanation of
Regulations
Subpart A--General Provisions
Section 9901.101--Purpose
Section 9901.102--Eligibility and Coverage
Summary of Coverage Eligibility Chart
Section 9901.103--Definitions
Section 9901.104--Scope of Authority
Section 9901.105--Coordination with OPM
Section 9901.106--Continuing Collaboration
Section 9901.107--Relationship to Other Provisions
Section 9901.108--Program Evaluation
Subpart B--Classification
Section 9901.201--Purpose
Section 9901.202--Coverage
Section 9901.203--Waivers
Section 9901.204--Definitions
Section 9901.211--Career Groups
Section 9901.212--Pay Schedules and Pay Bands
Section 9901.221--Classification Requirements
Section 9901.222--Reconsideration of Classification Decisions
Section 9901.231--Conversion of Positions and Employees to the
NSPS Classification System
Subpart C--Pay and Pay Administration
General Comments
Section 9901.301--Purpose
Section 9901.302--Coverage
Section 9901.303--Waivers
Section 9901.304--Definitions
Section 9901.311--Major Features
Section 9901.312--Maximum Rates
Section 9901.313--National Security Compensation Comparability
Section 9901.321--Structure
Section 9901.322--Setting and Adjusting Rate Ranges
Section 9901.323--Eligibility for Pay Increase Associated with a
Rate Range Adjustment
Section 9901.331--General
Section 9901.332--Local Market Supplements
Section 9901.333--Setting and Adjusting Local Market Supplements
Section 9901.334--Eligibility for Pay Increase Associated with a
Supplement Adjustment
Section 9901.341--General
Section 9901.342--Performance Payouts
Section 9901.343--Pay Reduction Based on Unacceptable
Performance and/or Conduct
Section 9901.344--Other Performance Payments
Section 9901.345--Treatment of Developmental Positions
Section 9901.351--Setting an Employee's Starting Pay
Section 9901.352--Setting Pay Upon Reassignment
Section 9901.353--Setting Pay Upon Promotion
Section 9901.354--Setting Pay Upon Reduction in Band
Section 9901.355--Pay Retention
Section 9901.356--Miscellaneous
Section 9901.361--General
Section 9901.371--General
Section 9901.372--Creating Initial Pay Ranges
Section 9901.373--Conversion of Employees to the NSPS Pay System
Subpart D--Performance Management
General Comments
Section 9901.401--Purpose
Section 9901.402--Coverage
Section 9901.403--Waivers
Section 9901.404--Definitions
Section 9901.405--Performance Management System Requirements
Section 9901.406--Setting and Communicating Performance
Expectations
Section 9901.407--Monitoring Performance and Providing Feedback
Section 9901.408--Developing Performance and Addressing Poor
Performance
Section 9901.409--Rating and Rewarding Performance
Subpart E--Staffing and Employment
General Comments
Section 9901.501--Purpose
Section 9901.502--Scope of Authority
Section 9901.503--Coverage
Section 9901.504--Definitions
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Section 9901.511--Appointing Authorities
Section 9901.512--Probationary Periods
Section 9901.513--Qualification Standards
Section 9901.514--Non-Citizen Hiring
Section 9901.515--Competitive Examining Procedures
Section 9901.516--Internal Placement
Subpart F--Workforce Shaping
General Comments
Section 9901.601--Purpose and Applicability
Section 9901.602--Scope of Authority
Section 9901.603--Definitions
Section 9901.604--Coverage
Section 9901.605--Competitive Area
Section 9901.606--Competitive Group
Section 9901.607--Retention Standing
Section 9901.608--Displacement, Release, and Position offers
Section 9901.609--Reduction in force Notices
Section 9901.610--Voluntary Separation
Section 9901.611--Reduction in force Appeals
Subpart G--Adverse Actions
General Comments
Section 9901.701--Purpose
Section 9901.702--Waivers
Section 9901.703--Definitions
Section 9901.704--Coverage
Section 9901.711--Standard for Action
Section 9901.712--Mandatory Removal Offenses
Section 9901.714--Proposal Notice
Section 9901.715--Opportunity to Reply
Section 9901.716--Decision Notice
Section 9901.717--Departmental Record
Subpart H--Appeals
General Comments
Section 9901.802--Applicable Legal Standards and Precedents
Section 9901.803--Waivers
Section 9901.804--Definitions
Section 9901.805--Coverage
Section 9901.806--Alternative Dispute Resolution
Section 9901.807--Appellate Procedures
Section 9901.808--Appeals of Mandatory Removal Actions
Section 9901.809--Actions Involving Discrimination
Subpart I--Labor-Management Relations
General Comments
Section 9901.901--Purpose
Section 9901.902--Scope of Authority
Section 9901.903--Definitions
Section 9901.904--Coverage
Section 9901.905--Impact on Existing Agreements
Section 9901.906--Employee Rights
Section 9901.907--National Security Labor Relations Board
Section 9901.908--Powers and Duties of the Board
Section 9901.909--Powers and Duties of the Federal Labor
Relations Authority
Section 9901.910--Management Rights
Section 9901.911--Exclusive Recognition of Labor Organizations
Section 9901.912--Determination of Appropriate Units for Labor
Organization Representation
Section 9901.913--National Consultation
Section 9901.914--Representation Rights and Duties
Section 9901.916--Unfair Labor Practices
Section 9901.917--Duty to Bargain and Consult
Section 9901.918--Multi-Unit Bargaining
Section 9901.919--Collective Bargaining Above the Level of
Recognition
Section 9901.920--Negotiation Impasses
Section 9901.921--Standards of Conduct for Labor Organizations
Section 9901.922--Grievance Procedures
Section 9901.923--Exceptions to Arbitration Awards
Section 9901.924--Official Time
Section 9901.925--Compilation and Publication of Data
Section 9901.926--Regulations of the Board
Section 9901.927--Continuation of Existing Laws, Recognitions,
Agreements, and Procedures
Section 9901.928--Savings Provisions
Next Steps
NSPS Implementation
Employee Transition Plan (Spiral Strategy)
HR and Labor Relations Transition
Development of Implementing Issuances and Continuing
Collaboration Training
Regulatory Requirements
E.O. 12866--Regulatory Review
Regulatory Flexibility Act
E.O. 12988--Civil Justice Reform
E.O. 13132--Federalism
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35)
Unfunded Mandates
Introduction
The Secretary of Defense, Donald Rumsfeld, and the Director of the
Office of Personnel Management, Linda M. Springer, jointly prescribe
this final regulation to establish a flexible and contemporary system,
consistent with statutory merit system principles and prohibitions
against prohibited personnel practices (in 5 U.S.C. 2301 and 2302,
respectively), for managing the Department's human capital. This system
has been developed pursuant to a process based on extensive outreach to
employees and employee representatives. In addition, DoD and OPM have
engaged in outreach to the public as well as to the Congress and other
key stakeholders. As enacted by section 1101 of the National Defense
Authorization Act (Pub. L. 108-136, November 24, 2003, hereinafter
referred to as ``enabling legislation'' or ``enabling statute'') and
codified at 5 U.S.C. 9902, the system preserves all core civil service
protections, including merit system principles, veterans' preference,
and due process. It also protects against discrimination, retaliation
against whistleblowers, and other prohibited personnel practices, and
ensures that employees may organize and bargain collectively (when not
otherwise prohibited by law, including these regulations, applicable
Executive orders, and any other legal authority).
This Supplementary Information addresses the following areas:
The Case for Action
Summary of the Design Process
[cir] Strategic Engagement and Establishment of the Program
Executive Office
[cir] Development of Design Options
[cir] Meet-and-Confer Process
Major Issues
Response to Specific Comments and Detailed Explanation of
Regulations
Next Steps
The Case for Action
``* * * a future force that is defined less by size and more by
mobility and swiftness, one that is easier to deploy and sustain,
one that relies more heavily on stealth, precision weaponry, and
information technologies.''
With that statement on May 25, 2001, President Bush set a new
direction for defense strategy and defense management--one toward
transformation. On January 31, 2002, Secretary of Defense Donald
Rumsfeld echoed the sentiments expressed by President Bush, stating
that ``[a]ll the high-tech weapons in the world will not transform the
U.S. armed forces unless we also transform the way we think, the way we
train, the way we exercise, and the way we fight.''
Transformation is more than acquiring new equipment and embracing
new technology--it is the process of working and managing creatively to
achieve real results. To transform the way DoD achieves its mission, it
must transform the way it leads and manages the people who develop,
acquire, and maintain our Nation's defense capability. Those
responsible for defense transformation--including DoD civilian
employees--must anticipate the future and wherever possible help create
it. The Department must seek to develop new capabilities to meet
tomorrow's threats as well as those of today. NSPS is a key pillar in
the Department of Defense's transformation--a new way to manage its
civilian workforce. NSPS is essential to the Department's efforts to
create an environment in which the Total Force (military personnel,
civilian employees, and contractors) thinks and operates as one
cohesive unit.
DoD civilians are unique in government: They are an integral part
of an organization that has a military function. DoD civilians must
complement and support the military around the world in every time
zone, every day. Just as new threats, new missions, new technology, and
new tactics are changing the work of the military, they are changing
the work of our 700,000 civilians. To support the
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interests of the United States in today's national security
environment--where unpredictability is the norm and greater agility the
imperative--civilians must be an integrated, flexible, and responsive
part of the team.
At best, the current personnel system is based on 20th century
assumptions about the nature of public service and cannot adequately
address the 21st century national security environment. Although the
current Federal personnel management system is based on important core
principles, those principles are operationalized in an inflexible, one-
size-fits-all system of defining work, hiring staff, managing people,
assessing and rewarding performance, and advancing personnel. These
inherent weaknesses make support of DoD's mission complex, costly, and
ultimately risky. Currently, pay and the movement of personnel are
pegged to outdated, narrowly defined work definitions; hiring processes
are cumbersome; high performers and low performers are paid alike; and
the labor system encourages a dispute-oriented, adversarial
relationship between management and labor. These systemic
inefficiencies detract from the potential effectiveness of the Total
Force. A more flexible, mission-driven system of human resources
management that retains those core principles will provide a more
cohesive Total Force. The Department's 20 years of experience with
transformational personnel demonstration projects, covering nearly
30,000 DoD employees, has shown that fundamental change in personnel
management has positive results on individual career growth and
opportunities, workforce responsiveness, and innovation; all these
things multiply mission effectiveness.
The immense challenges facing DoD today require a civilian
workforce transformation: Civilians are being asked to assume new and
different responsibilities, take more risk, and be more innovative,
agile, and accountable than ever before. It is critical that DoD
supports the entire civilian workforce with modern systems--
particularly a human resources management system and a labor relations
system that support and protect their critical role in DoD's Total
Force effectiveness. The enabling legislation provides the Department
of Defense with the authority to meet this transformation challenge.
More specifically, the law provides the Department and OPM--in
collaboration with employee representatives--authority to establish a
flexible and contemporary system of civilian human resources management
for DoD civilians. The attacks of September 11 and the continuing war
on terrorism make clear that flexibility is not a policy preference. It
is nothing less than an absolute requirement, and it must become the
foundation of DoD civilian human resources management.
NSPS is designed to promote a performance culture in which the
performance and contributions of the DoD civilian workforce are more
fully recognized and rewarded. The system offers the civilian workforce
a contemporary pay-banding construct, which will include performance-
based pay. As the Department moves away from the General Schedule
system, it will become more competitive in setting salaries and it will
be able to adjust salaries based on various factors, including labor
market conditions, performance, and changes in duties. The HR
management system is a foundation for a leaner, more flexible support
structure and will help attract skilled, talented, and motivated
people, while also retaining and improving the skills of the existing
workforce.
Despite the professionalism and dedication of DoD civilian
employees, the limitations imposed by the current personnel system
often prevent managers from using civilian employees effectively. The
Department sometimes uses military personnel or contractors when
civilian employees could have and should have been the right answer.
The current system limits opportunities for civilians at a time when
the role of DoD's civilian workforce is expanding to include more
significant participation in Total Force effectiveness. NSPS will
generate more opportunities for DoD civilians by easing the
administrative burden routinely required by the current system and
providing an incentive for managers to turn to them first when certain
vital tasks need doing. This will free uniformed men and women to focus
on matters unique to the military.
The law requires the Department to establish a contemporary and
flexible system of human resources management. DoD and OPM crafted NSPS
through a collaborative process involving management, employees, and
employee representatives. DoD leadership will ensure that supervisors
and employees understand the new system and can function effectively
within it. The system retains the core values of the civil service and
allows employees to be paid and rewarded based on performance,
innovation, and results. In addition, the system provides employees
with greater opportunities for career growth and mobility within the
Department.
A key to the success of NSPS is ensuring employees perceive the
system as fair. In a human resources management system, fairness is the
basis for trust between employees and supervisors. The Department's
mission cannot be accomplished without the workforce. It is a tenet of
the Department that employees will exercise personal responsibility and
sustain a high level of individual performance and teamwork when they
perceive that the human resources system and their supervisors are
fair.
The Department and the Office of Personnel Management are
addressing fairness in the National Security Personnel System in
several dimensions: System design; the right to seek review of
important categories of management decisions; workforce access to
information about system provisions, processes, and decision criteria;
and accountability mechanisms.
NSPS regulations and implementing issuances will include rules to
guard against arbitrary actions. Examples include written performance
expectations, the guarantee that employees rated higher than
``unacceptable'' will receive the full minimum by which their pay rate
range is adjusted, the requirement to prescribe the conditions for
probationary periods established by the Secretary, public notice of
vacancies when the Department is recruiting externally, and prohibition
against establishing reduction in force competitive areas that target
an individual employee on the basis of non-merit factors.
NSPS continues employees' and labor organizations' rights to
challenge or seek review of key decisions. For example, all employees
will be able to request reconsideration of their performance ratings
through an administrative grievance procedure. Bargaining unit
employees will also have the option of using a negotiated grievance
procedure. Employees must be notified in advance of a proposed adverse
action, be given time and opportunity for reply, and be given a
decision notice that includes the reasons for the decision. Labor
organization officials may file unfair labor practice claims or
grievances.
The Department and its Components will make information about NSPS
rules, policies, and practices readily available to the workforce in
the form of published regulations, published implementing issuances,
local level instructions, training, and other sources.
The last dimension of accountability for fair decisions and
practices under NSPS will call on two major streams of information.
First, human resources management accountability reviews
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within the Department will be used to identify and address issues
regarding the observance of merit system principles and regulatory and
policy requirements, including those established under NSPS. In
addition, the Department will monitor the outcomes of administrative
and negotiated grievances, performance rating reconsiderations, equal
employment opportunity complaints, and whistleblower complaints to
correct chronic problems and particular failings.
The second stream will be NSPS program evaluation findings. These
will enable the Secretary and the Director to determine whether the
design of NSPS and the pattern of its results meet statutory
requirements like fairness and equity and the specific performance
expectations of the NSPS Requirements Document for a credible and
trusted system. Section 9901.108 of these final regulations codifies
the requirement for NSPS program evaluation. It opens to designated
employee representatives the design and results of evaluations of
particular NSPS aspects so that they can provide comments and
recommendations to help ensure balanced and fair methods and
conclusions. A robust and long-term NSPS program evaluation plan of
studies and reviews, transactional data analyses, opinion surveys, and
other evaluative methods will be fielded with NSPS implementation.
Fairness in NSPS is not a specific thing, but rather an intrinsic
quality being built into the design of a flexible human resources
management system--one to be accounted for during reviews and
evaluations of NSPS operations and decisions.
A. Pay and Classification
The NSPS pay and classification system will provide a more flexible
support structure that will help attract skilled, talented, workers;
retain and appropriately reward current employees; and create
opportunities for civilians to participate more fully in the total
integrated workforce. A pay banding structure will replace the
artificial limitations created by the current pay and classification
systems. With broad pay bands, the Department will be able to move
employees more freely across a range of work opportunities without
being bound by narrowly described work definitions. The pay structure
will be much more responsive to market conditions. The Department will
be able to adjust rate ranges and local market supplements based on
variations relating to specific occupations, rather than the current
one-size-fits all approach. Labor market conditions will also be
considered when making pay-setting decisions. As prescribed in the
enabling legislation, the new compensation system will better link
individual pay to performance using performance rather than time on the
job to determine pay increases.
B. Performance Management
In recognition of the increased importance of performance in making
pay and retention decisions, the Department has created a much more
robust performance management system.
The Department will use a multi-level system that makes
distinctions in levels of employee performance. The system will link
employee achievements, contributions, knowledge, and skills to
organizational results. It will also allow the Department to better
recognize and support team contributions and accomplishments.
Performance expectations will be clearly communicated to employees and
will be linked to the organization's strategic goals and objectives.
The ability to recognize valid distinctions in performance and reward
employees based on those distinctions will foster a high performance
culture within the Department.
C. Staffing, Employment and Workforce Shaping
NSPS will retain the merit system principles and veterans'
preference while giving the Department the flexibility necessary to
streamline the hiring process and adapt quickly to critical mission
needs. The Department will be able to use direct-hire authority for
severe shortage or critical needs. NSPS will also provide for a more
efficient process for creating appointing authorities, in conjunction
with the Office of Personnel Management, as new requirements emerge. As
part of this process, the system provides for transparency and public
awareness through notice in the Federal Register. The new pay-setting
flexibilities will also enhance the Department's ability to attract and
retain the talented workforce necessary to accomplish its mission.
Through workforce shaping flexibilities, the Department will create
a reduction in force system that places more emphasis on performance
while continuing to protect veterans' preference rights. The downsizing
process will be less disruptive to employees and the mission. The
Department will continue to fully utilize tools such as separation
incentives and the Priority Placement Program to avoid and mitigate the
impact of any reductions it faces.
D. Adverse Actions and Appeals
Consistent with the enabling legislation, the final regulations
streamline and simplify adverse actions and appeals procedures, but
without compromising due process for DoD employees. Employees will
still receive notice of a proposed adverse action, the right to reply,
and the right to appeal to the Merit Systems Protection Board (MSPB).
In the proposed regulations, we proposed to replace the two existing
authorities and adopt a single process and standard for all actions
whether based on unacceptable performance or misconduct. In doing so,
we proposed to adopt the higher of the two current burdens of proof--
``preponderance of the evidence''--rather than the lower standard--
``substantial evidence.'' We have retained this higher burden of proof.
In addition, the final regulations clarify that the full MSPB's
standard for review is as specified in the enabling legislation. The
final regulations retain authority for the Secretary to establish a
number of mandatory removal offenses (MROs) that have a direct and
substantial adverse effect on the Department's national security
mission. The final regulations also retain authority for the Department
to review decisions of MSPB Administrative Judges who are the first
step in the NSPS appeals process.
E. Labor Management Relations
To ensure that the Department has the flexibility to carry out its
vital mission, as authorized by the enabling legislation, the
regulations, among other things, revise management's rights and its
duty to bargain to ensure that the Department can act as and when
necessary. Collective bargaining is prohibited on such critical matters
as procedures observed in making work assignments and deployments
unless the Secretary, in his or her sole, exclusive, and unreviewable
discretion, elects to bargain. The Secretary may authorize bargaining
on these matters to advance the Department's mission accomplishment or
promote organizational effectiveness. If the Secretary does not elect
to bargain procedures on these matters, consultation is required.
Management and exclusive representatives will negotiate over changes
that have foreseeable, significant, and substantial impact, as well as
appropriate arrangements for employees affected by those changes, under
certain specified conditions. Additionally, the regulations create the
National Security
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Labor Relations Board (NSLRB) to address those issues that are most
important to accomplishing the DoD mission, with other matters retained
by the Federal Labor Relations Authority (FLRA). The regulations
provide the Secretary discretion as to when the NSLRB will be in place.
The regulations also provide the Secretary discretion, in consultation
with the Director, to designate another third party to exercise the
authority of the Board in the interim. The revisions to the regulations
strike the right balance between the mission needs of DoD and the
meaningful involvement of employees and their representatives.
Development of the National Security Personnel System
A. Strategic Engagement and Establishment of Program Executive Office
While dialogue with employee representatives began in January 2004,
in April senior DoD leadership initiated a collaborative process to
design and implement NSPS. This process was crafted by a group of 25 to
30 senior experts representing DoD, OPM, and the Office of Management
and Budget. The Defense Acquisition Management model was used to
establish the requirements for the design and implementation of NSPS,
including Guiding Principles and Key Performance Parameters (KPPs),
which defined the minimum requirements for NSPS. The Honorable Gordon
R. England was appointed by the Secretary of Defense as the NSPS Senior
Executive. As the NSPS Senior Executive, Secretary England established
the NSPS Program Executive Office (PEO) as the central DoD policy and
program office to conduct the design, planning and development,
deployment, assessment, and full implementation of NSPS.
The entire process was accomplished jointly with OPM. An integrated
executive management team composed of senior DoD and OPM leaders
provided overall policy and strategic advice to the PEO and served as
staff to the Senior Executive.
B. Development of Design Options
Guiding Principles and Key Performance Parameters
In setting up the process for the design of the system, senior
leadership adopted a set of Guiding Principles as a compass to direct
efforts throughout all phases of NSPS development. They translate and
communicate the broad requirements and priorities outlined in the
enabling legislation into concise, understandable requirements that
underscore the Department's purpose and intent in creating NSPS. The
Guiding Principles are:
Put mission first--support National Security goals and
strategic objectives;
Respect the individual--protect rights guaranteed by law;
Value talent, performance, leadership and commitment to
public service;
Be flexible, understandable, credible, responsive, and
executable;
Ensure accountability at all levels;
Balance HR interoperability with unique mission
requirements; and
Be competitive and cost effective.
In addition, senior leadership approved a set of Key Performance
Parameters (KPPs), which define the minimum requirements and/or
attributes of the system. Those KPPs are summarized below:
High Performing: Employees/supervisors are compensated/
retained based on performance/contribution to mission;
Agile and Responsive: Workforce can be easily sized,
shaped, and deployed to meet changing mission requirements;
Credible and Trusted: System assures openness, clarity,
accountability and merit principles;
Fiscally Sound: Aggregate increases in civilian payroll,
at the appropriations level, will conform to OMB fiscal guidance, and
managers will have flexibility to manage to budget;
Supporting Infrastructure: Information technology support
and training and change management plans are available and funded; and
Schedule: NSPS will be operational and demonstrate success
prior to November 2009.
Communications During the Design Process
In undertaking a project of this magnitude, impacting over 700,000
civilians of the Department, it was essential to ensure the
availability of information on the new HR and labor relations systems.
It was also critical to solicit the views and ideas of employees,
employee representatives and other stakeholders.
In April 2004, the PEO developed and implemented a communications
strategy. The objectives of DoD's communications strategy are to (1)
demonstrate the rationale for and benefits of NSPS; (2) demonstrate
openness and transparency in the design and process of converting to
NSPS; (3) express DoD's commitment to ensuring NSPS is applied fairly
and equitably; and (4) address potential criticism of NSPS.
The PEO identified numerous channels for disseminating relevant,
timely, and consistent information. These include: Print and electronic
media; e-mail; town hall meetings; focus groups; speeches; and
briefings. A website was developed to serve as a primary, two-way
communications tool for the workforce, other stakeholders, and the
general public. The website includes the capability for visitors to
submit questions and comments. The PEO has responded to thousands of
questions and comments.
The website will remain available during implementation and will
provide current information for managers, supervisors and employees.
Outreach to Employee Representatives
In January and February 2004, we met with union leaders for the
purpose of exchanging ideas and interests on a new labor relations
system. All unions holding DoD national consultation rights (NCR) at
the time were invited to the January 22, 2004, meeting. Seven of these
eight NCR unions elected to attend. In addition, one additional union
without DoD national consultation rights was invited to attend and
participated in the January 22, 2004, meeting. Union leadership from
all of the 43 unions representing DoD employees were invited to attend
and participate in the February 26-27, 2004, meeting. Twenty-six unions
attended and participated in the February 2004 meeting.
In the spring of 2004 and continuing over the course of several
months, we sponsored a series of additional meetings with union
leadership to discuss design elements of NSPS. Officials from DoD and
OPM met throughout the summer and fall with union officials
representing many of the DoD civilians who are bargaining unit
employees. These sessions provided the opportunity to discuss the
design elements, options, and proposals under consideration for NSPS
and solicit union feedback.
During this time, 10 meetings (in addition to the 2 meetings held
in January and February 2004) were held with officials of the 43 unions
that represent DoD employees, including the 9 unions that currently
have national consultation rights. These union officials represent over
1,500 separate bargaining units covering about 450,000 employees. These
meetings involved as many as 80 union leaders from the national and
local level at any one time, and addressed a variety of topics,
including: The reasons change is needed and the Department's interests;
employee communications; and
[[Page 66121]]
proposed design options in the areas of labor relations and collective
bargaining, adverse actions and appeals, and pay and performance
management.
Outreach to Employees
In keeping with DoD's commitment to provide employees and managers
an opportunity to participate in the development of NSPS, the PEO
sponsored a number of Focus Group sessions and town hall meetings at
various sites across DoD. In mid-July 2004, a total of 106 focus groups
were held throughout DoD, including overseas locations. Separate focus
groups were held for employees, civilian and military supervisors, and
managers and practitioners from HR, legal and EEO communities.
Bargaining unit employees and union leaders were invited to
participate. For the major system design elements, focus group
participants were asked what they thought worked well in the current HR
systems and what they thought should be changed. Over 10,000 comments,
ideas and suggestions received during the focus group sessions were
summarized and provided to NSPS Working Groups for use in developing
options for the labor relations, appeals, adverse actions, and human
resources design elements of NSPS.
In addition, town hall meetings were held in DoD facilities around
the world during the summer of 2004, providing an opportunity to
communicate with the workforce, provide the status of the design and
development of NSPS, and solicit thoughts and ideas. The NSPS Senior
Executive, Secretary England, conducted the first town hall meeting at
the Pentagon on July 7, 2004. Some of the town hall meetings were
broadcast live, as well as videotaped and rebroadcast on military
television channels and websites to facilitate the widest possible
dissemination.
Outreach to Other Stakeholders
In addition to reaching out to DoD employees and labor
organizations, DoD and OPM met with other groups who were thought to be
interested in the design of a new HR system for DoD. DoD and OPM
invited selected stakeholders to participate in briefings held at OPM
in August and September 2004.
Those invited to the briefings included: Public interest groups,
such as the National Academy of Public Administration (NAPA), Coalition
for Effective Change, and Partnership for Public Service; veterans'
service organizations; and non-union employee advocacy groups. Both
before and after these briefings, DoD and OPM responded to dozens of
requests for special briefings. DoD and OPM also met with the
Government Accountability Office, Office of Management and Budget, and
Department of Homeland Security to keep them up to date on the team's
activities; and consulted with the Merit Systems Protection Board on
the appeals process to ensure that it provides employees the
protections of due process.
Development of Design Options--Working Groups
In order to incorporate all the information and develop options,
the PEO established functionally aligned Working Groups. Over 120
employees representing the Military Departments (Army, Navy, Air
Force), other DoD Components, and OPM participated in the process.
The Working Groups reviewed all available information, including:
Pertinent laws, rules, regulations; input from NSPS focus groups and
town hall; union consultation meetings; data review and analysis from
alternative personnel systems and laboratory and acquisition
demonstration projects; the enabling legislation; and Guiding
Principles and Key Performance Parameters. In addition, subject matter
experts briefed the Working Groups on a variety of topics, such as pay-
for-performance systems, alternative personnel systems, pay pool
management, and market sensitive compensation systems.
In developing options for the NSPS, the Working Groups benefited
from the Government's experience under demonstration project
authorities (e.g. the China Lake Demonstration Project originally
authorized by section 6 of the Civil Service Miscellaneous Amendments
Act of 1983; the Defense reinvention laboratory demonstration projects
authorized by section 342 of the National Defense Authorization act for
fiscal year 1995, as amended; and the Acquisition Workforce
Demonstration Project, authorized be section 4308 of the National
Defense Authorization Act for fiscal year 1996, as amended) and
alternative personnel systems (e.g. the Defense Intelligence Personnel
System, the Government Accountability Office, and the Federal Aviation
Administration), the DoD ``Best Practices'' initiative (68 FR 16120,
April 2, 2003), and the compilation of research materials from the
Department of Homeland Security HR Systems Design process.
At the conclusion of the process, the Working Groups provided a set
of options covering a broad range of variations on the six areas of
focus: (1) Compensation (classification and pay banding); (2)
performance management; (3) hiring, assignment, pay setting, and
workforce shaping; (4) employee engagement; (5) adverse action and
appeals; and (6) labor relations. Each option was evaluated against the
Guiding Principles and KPPs.
Potential options presented a wide range of views and concerns. The
PEO and senior leaders representing organizations within DoD reviewed
all the options. After extensive discussion, the selected options were
presented to the Overarching Integrated Product Team (OIPT) for review
and the Senior Executive for approval.
Publication of Proposed Regulations
These extensive and collaborative design efforts all preceded the
formal process for developing the new HR and labor relations systems.
The enabling legislation established a formal process in this regard,
officially beginning when the Secretary and the Director published
proposed regulations to establish the new DoD HR and labor relations
systems in the Federal Register on February 14, 2005. The process was
designed to ensure collaboration with employee representatives in the
design and implementation of the new HR and labor relations systems.
The first formal step provided a 30-day period for the public,
employees, and employee representatives to review and submit formal
comments on the proposed system. The second step provided for a minimum
of 30 days to ``meet and confer'' with employee representatives in
order to attempt to reach agreement on the design of the new system.
The third step required notification to Congress on the decision to
implement the new system. The new system becomes effective 30 days
after congressional notification.
C. Public Comments
In response to the proposed rule, the Department received 58,538
comments during 30-day public comment period. The Department received
comments from a wide variety of individuals including DoD civilian and
military personnel, DoD organizations, labor organizations, other
Federal agencies, Members of Congress and the general public. At the
conclusion of the public comment period, and continuing over the next
several months, DoD and OPM staff reviewed and analyzed the comments.
In general, the comments ranged from overall rejection of the
proposed regulations to enthusiastic acceptance. Many comments focused
on the need for
[[Page 66122]]
fairness in the system and the need for training of employees and
managers. Concerns were expressed about maintaining due process and the
scope of bargaining.
Many of the comments were from national labor organizations and
their members.\1\ Almost 80 percent of the comments were form letters
submitted by email or letter.\2\ The form letters expressed general
opposition to the proposed regulations. These submissions expressed
concerns that the proposed regulations lacked sufficient specificity.
The comments also expressed a desire to remain with the current system,
citing too much power being given to managers and supervisors, with no
corresponding accountability. Specific concerns included: Adequate
funding of pay pools; deployment of civilians to war zones; and the
lack of third-party review for performance appraisals, adverse actions
and labor disputes. There was also concern that the regulations did not
adhere to congressional intent to maintain the requirements of the
applicable labor relations statutes. Approximately 415 of the
commenters included substantive analysis of the proposed regulations.
Virtually all of these comments favor some changes, along with a wide
variety of views on the merits of the proposed regulations.
---------------------------------------------------------------------------
\1\ DoD has 43 different unions representing over 1,500 separate
bargaining units covering about 450,000 employees. In the spring of
2004, thirty-six unions joined together to form the United
Department of Defense Workers Coalition (``the Coalition'').
\2\ There were 41 different form letters totaling 43,714
comments. An additional 1,850 form letters were received with
additional comments added by the commenter.
---------------------------------------------------------------------------
Acknowledging that there are strong views on the proposals
presented, DoD and OPM reviewed and carefully considered all the
comments and the arguments made for and against the proposed changes.
The major comments received on the proposed regulatory changes are
summarized below, together with a discussion of the changes made as a
result of the comments. Also summarized are the suggestions for changes
considered where no change is being made. In addition to the more
substantive comments discussed below, a number of editorial suggestions
were made, some of which have been adopted and others which have not. A
number of other changes have been made to better organize or structure
the regulatory text. Finally, we received a number of comments on
issues that go beyond the scope of these regulations, which are not
addressed in the discussion that follows.
D. The Meet-and-Confer Process
The public comment period was followed by the second step in the
formal development process--an additional 30-day period during which
DoD and OPM representatives were to meet and confer with employee
representatives to resolve differences over the proposed regulations
wherever possible.
The meet-and-confer process began officially in April 2005. On
April 8, 2005, a meeting with labor organizations was held to discuss
procedures to be followed during the meet-and-confer process.
The following principals participated in the meet-and-confer
process:
Forty-three labor organizations were invited to
participate. Thirty-six of those labor organizations were represented
by a ``coalition'' led by the AFL-CIO, and were authorized to send an
unlimited number of representatives. Eighteen of the labor
organizations chose to send representatives. The actual number of
representatives present in the room typically ranged from 25 to 50.
The coalition includes: American Federation of State,
County and Municipal Employees (AFSCME); American Nurses Assn. (ANA);
Antilles Consolidated Education Assn. (ACEA); Assn. of Civilian
Technicians (ACT); American Federation of Government Employees (AFGE);
American Federation of Teachers (AFT); Communications Workers of
America (CWA); Fairchild Federal Employees Union (FFEU); Federal
Education Assn. (FEA); Int'l. Assn. of Machinists and Aerospace Workers
(IAMAW); Graphic Communications International Union (GCIU); Hawaii
Council of Commissary Dept. of Defense Unions (HCCDU); Int'l.
Brotherhood of Boilermakers; Int'l. Assn. of Fire Fighters (IAFF);
Int'l. Assn. of Tool Craftsman (IATC); Int'l. Brotherhood of Electrical
Workers (IBEW); Int'l. Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America (IBT); Int'l. Guard Union of
America (IGUA); Int'l. Union of Operating Engineers (IUOE); Int'l.
Union of Painters and Allied Trades (IUPAT); Int'l. Federation of
Professional and Technical Engineers (IFPTE); Int l. Organization of
Masters, Mates and Pilots (IOMMP); Laborers International Unions
(LIUNA); National Marine Engineers Beneficial Assn. (MEBA); Metal
Trades Dept./AFL-CIO (MTD); National Assn. of Aeronautical Examiners
(NAAE); National Air Traffic Controller Assn. (NATC); National
Federation of Federal Employees (NFFE); National Assn. of Gov.
Employees (NAGE); Professional Airways Systems Specialists (PASS);
Retail Wholesale, and Department Store Union (RWDSU); Seafarers Int'l.
Union of North America (SIUNA); Service Employees International Union
(SEIU); Sheet Metal Workers Int'l. Assn. (SMWIA); Sport Air Traffic
Controllers (SPORT); United Assn. of Journeymen and Apprentices of the
plumbing, sprinkler fitting industry of the U.S. and Canada (UA);
United Nurses Assn. of California (UNAC); and United Power Trades Org.
(UPTO)
Other unions also participated in the meet-and-confer
process. These include: Fraternal Order of Police (FOP) and the
National Assn. of Independent Labor (NAIL).
Five representatives from DoD, including the Principal
Deputy Under Secretary of Defense (Personnel and Readiness), the
Program Executive Officer, the Deputy PEO, and two senior program
managers.
Two senior executives from the Office of Personnel
Management (OPM) and various senior program managers as necessary.
The Secretary, in consultation with the Acting Director,\3\ also
requested the services of the Federal Mediation and Conciliation
Service for the entire meet-and-confer process. Face-to-face meet-and-
confer sessions occurred from April 18, 2005, through June 2, 2005.
During that period, the parties met for 19 days, with other days spent
preparing for meetings and exchanging recommendations for amendments to
the regulations. The Department provided 36 written recommendations to
revise the regulations as well as 14 recommended clarifications of
intent. The unions presented revised regulations for each subpart of
the proposed regulations in addition to other revisions covering such
topics as--exigencies and post-implementation bargaining, implementing
issuances, and third-party review of performance appraisals and adverse
actions. At the conclusion of the meet-and-confer process, the NSPS
Senior Executive and the Acting Director of OPM met with
representatives from the labor organizations in mid-June 2005, to
provide them with an opportunity to present their issues and concerns
directly to the principals.
---------------------------------------------------------------------------
\3\ During this period of time, the Honorable Dan Blair was
Acting Director of the Office of Personnel Management. On June 28,
2005, the Honorable Linda M. Springer was sworn in as OPM's
Director.
---------------------------------------------------------------------------
The review of the public comments and the proposals during the
meet-and-confer process has led to significant revisions of the
proposed regulations. Some of the revisions are substantial,
[[Page 66123]]
such as extending employees the right to grieve performance ratings of
record, restricting authority to issue implementing issuances \4\ that
supersede inconsistent provisions of collective bargaining agreements,
changing the standard for mitigating penalties, providing an
opportunity for labor organizations to submit names of potential
members of the NSLRB, and retaining the current interest of justice
standard for payment of attorney fees. Other revisions are purely
technical.
---------------------------------------------------------------------------
\4\ Implementing issuances are defined in Sec. 9901.103 of the
regulations. Issuances are defined in Sec. 9901.903.
---------------------------------------------------------------------------
Significant differences with many of the labor organizations remain
over such issues as the scope of bargaining, implementing issuances
that supersede conflicting provisions of collective bargaining
agreements, the specificity of the regulations, the ability to grieve
pay decisions, the use of behavior as part of performance evaluation
and the use of performance in a reduction in force. These differences
cannot be reconciled with the need for a contemporary and flexible
system of human resources management as DoD seeks to transform the
civilian part of the Total Force of military personnel, civilian
employees, and DoD contractors. The current system limits opportunities
for civilians at a time when the role of DoD's civilian workforce is
expanding to include more significant participation in Total Force
effectiveness. NSPS will generate more opportunities for DoD civilians
by easing the administrative burden routinely required by the current
system. It will provide an incentive for managers to (1) identify
military positions that can be converted to civilian and (2) to turn to
civilians first when certain vital tasks need doing. This will free
military men and women to focus on matters unique to the military,
while greatly increasing the role of the Department's civilian
employees. The need for a flexible and contemporary system to support
the Department's national security mission is nothing less than an
absolute requirement and it must become the foundation of DoD civilian
human resources management.
Where we indicate agreement in this Supplementary Information, we
are referring to agreements reached between DoD and OPM, after
consideration of public comments and proposals made during the meet-
and-confer process, rather than to agreements reached between
management and labor organization representatives during the meet-and-
confer process.
Major Issues
The 58,538 public comments, in addition to the face-to-face
discussions during the meet-and-confer process, clearly defined the
issues that were of most concern to DoD civilians potentially covered
by all or parts of NSPS. Major issues identified were as follows: (a)
Specificity of the Regulations; (b) Pay for Performance and Pay Pool
Funding; (c) Adverse Actions and Appeals; (d) Mandatory Removal
Offenses; (e) Labor Relations; (f) Management Rights/Scope and Duty to
Bargain; and (g) Independence of the NSLRB. Because these issues are
critical to understanding the objectives of the Department's new HR and
labor relations systems, as well as the implementation of NSPS, we have
given them particular attention in the following sections of this
SUPPLEMENTARY INFORMATION.
a. Specificity of the Regulations
A significant issue raised in the public comments and during the
meet-and-confer process concerns the lack of specificity in the
proposed regulations. Many of the commenters recommended that the
regulations include far greater specificity, while others referred to
the inability to provide substantive comments on the proposed rule
without more information.
These comments and concerns focused almost exclusively on the
subparts establishing the HR system--those dealing with Subpart B--
Classification, Subpart C--Pay and Pay Administration, Subpart D--
Performance Management, Subpart E--Staffing and Employment, and Subpart
F--Workforce Shaping. Those subparts remain relatively general in
nature and expressly provide for the Department to develop implementing
issuances to carry out the policies established in accordance with
NSPS. In contrast, the subparts dealing with adverse actions, appeals,
and labor relations (subparts G, H, and I, respectively) are more
detailed, requiring fewer implementing issuances.
The law requires the Department to establish a contemporary and
flexible system of human resources management (see 5 U.S.C. 9902(b) (1)
and (2)). Of all of the various objectives set by Congress for this
system in the enabling legislation, flexibility was the very first
enumerated. Unnecessary and excessive detail in subparts B, C, D, E,
and F would undermine that objective. The regulations provide the
overall framework for the new HR system without the inflexible
requirements present in today's system. In response to these comments,
and as a result of the meet-and-confer process, we have added greater
detail to certain sections of the subparts at issue. These additions
are documented at length in our responses to the detailed comments that
follow.
However, even with added detail, all five of the subparts at issue
retain their original structure in the final regulations, establishing
a general policy framework to be supplemented by detailed Departmental
implementing issuances. We believe this is the appropriate approach,
providing the Department the flexibility it requires in implementing an
HR system of this scope.
Labor organization comments focus primarily on process, asserting
that by including greater detail in the proposed regulations, they
would have been given an opportunity to participate and provide input
to the final regulations via the statutory meet-and-confer process set
forth in 5 U.S.C. 9902(f)(1)(A)-(C). Among other things, that statutory
process requires the Department and OPM to provide employee
representatives with an opportunity to comment on the proposed
regulations and, thereafter, meet with DoD and OPM officials (under the
auspices of the Federal Mediation and Conciliation Service, if
necessary) in an attempt to resolve any concerns and disagreements. As
the labor organizations and other commenters have correctly pointed
out, the proposed regulations did not provide for an analogous
opportunity with respect to the development of implementing issuances.
This became a major topic of discussion during the meet-and-confer
process, with labor organizations insisting that DoD and OPM either
include all implementing details in these final regulations or subject
the Department's implementing issuances to collective bargaining. We
did not adopt either alternative. Including such detail in these
regulations would not provide the Department the flexibility its
mission requires. In addition, collective bargaining over the content
of implementing issuances is prohibited by the enabling legislation.
In summary, the inflexibility of the current system required new
ways to meet the rapidly changing requirements for DoD civilians to
provide support to the military members. A standardized, yet flexible
DoD environment that promotes the growth of all employees and improves
the manager's ability to manage the workforce is essential. The
regulations were developed to provide the Department the ability to
maintain flexibility, while at the same time involving employee
representatives in
[[Page 66124]]
the details of new processes established through implementing
issuances.
Five of the subparts in these final regulations remain relatively
general in nature, providing broad policy parameters but leaving much
of the details to implementing issuances. We believe this structure,
patterned after the chapters in title 5 that they replace, is
appropriate. By providing for detailed implementing issuances, the
subparts dealing with Classification, Pay and Pay Administration,
Performance Management, Staffing and Employment, and Workforce Shaping
provide the Department with the flexibility mandated by Congress, and
they do so without compromising the Department's commitment to
substantive employee representative involvement in the development of
those implementing issuances.
b. Pay for Performance and Pay Pool Funding
The pay system we described in the proposed regulations was
designed to fundamentally change the way we pay employees in the
Department of Defense. Instead of a pay system based primarily on
tenure and time-in-grade, we proposed a system that bases individual
pay increases on performance. This proposal honors major points that
were debated by the Congress and agreed upon with the passage of the
enabling legislation. In addition, the proposed pay system would be far
more market-sensitive than the current pay system. The proposed changes
relating to classification, pay, and performance management were
designed to achieve these two primary goals.
A number of commenters agreed with the proposal to create a more
occupation-specific and market- and performance-based classification
and pay system. However, most commenters strongly recommended that we
maintain the status quo; that is, that DoD continue to rely on the
General Schedule (GS) and Federal Wage System (FWS) classification and
pay systems. Many commenters thought the proposed pay-for-performance
system would lower employee morale, increase competition among
employees, and undermine teamwork and cooperation. Some also questioned
the ability of the Department to successfully implement the proposed
system, or of DoD managers to establish and apply performance standards
fairly and consistently to pay decisions. Other commenters thought a
pay-for-performance system would have a chilling effect on the
expression of dissenting opinions, especially those concerning fraud,
waste, and abuse. Some commenters recommended that current employees be
allowed to remain in the existing system or have the option to stay in
the current system or convert to NSPS. Still others wanted a more
gradual implementation with testing of the effectiveness of the new
system on various populations first.
We have retained the system described in the proposed regulations.
We believe Congress and the American people expect their public
employees to be paid according to how well they perform, rather than
how long they have been on the job. They also expect the Department to
do everything it can to recruit and retain the most talented
individuals it can find to carry out its critical mission. The GS and
FWS pay systems do not provide the opportunity to appropriately reward
top performers or pay them according to their true value in the labor
market. Under the GS and FWS pay systems, performance is rewarded as an
exception rather than the rule, and market is defined as ``one size
fits all,'' with no distinction for differences in market pay based on
occupation.
The GS and FWS pay systems are primarily longevity-based systems--
that is, pay increases are linked primarily to the passage of time.
While time in grade determines eligibility for a GS or FWS step
increase, it is true that a finding that the employee is performing at
an acceptable level of competence is also required. However, this
minimal requirement is met by roughly 99 percent of all GS employees.
Thus, at any given grade level, the vast majority of employees can
expect to automatically receive base pay increases of up to 30 percent
over time--in addition to the annual across-the-board pay increases--so
long as their performance is ``acceptable.'' Even employees whose
performance is unacceptable receive annual across-the-board pay
increases that range from 3 to 5 percent, and special rates that are
even higher. Over time, even less productive employees will progress
steadily to the top of the GS and FWS pay ranges and may end up being
paid significantly more than higher-performing employees with less time
in grade. Such a system cannot be fairly characterized as providing
performance-based pay.
The NSPS pay-for-performance system, by contrast, is designed to
recognize and reward performance in two key ways. First, it establishes
the fundamental principle that no employee may receive a base pay or
local market supplement increase if his or her performance does not
meet or exceed expectations. In contrast to the present pay systems,
employees rated unacceptable will not get an annual adjustment. Second,
the NSPS system provides for individual base pay increases based on an
employee's performance, whether by demonstrating requisite competencies
at the entry/developmental level or by meeting or exceeding performance
expectations at the full performance level. In contrast to the present
pay systems, under NSPS, an employee will progress through the pay
range based on how well he or she performs.
This concept may be simply summarized: The higher the performance,
the higher the pay. This, too, is a fundamental principle of the new
system, and we choose the order of these words deliberately. This
system does not assume that individuals are motivated by pay, but
rather that we have an obligation as an employer to reward the highest
performers with additional compensation--however they may be motivated
to achieve excellence. The Department has a special responsibility in
this regard. Thus, the system we have designed is not a ``performance-
for-pay'' system, but a ``pay-for-performance'' system. Nevertheless,
we believe it will inspire DoD employees to perform at their best. This
is in contrast to the GS and FWS pay systems, where it is possible for
a high-performing employee to be paid the same, or even less, than a
lower performing co-worker.
As it designs and implements NSPS, the Department is taking the
following steps to ensure that the performance management system
functions properly:
Training managers to provide candid and constructive
feedback to help employees maximize their contribution and potential;
Emphasizing the need for ongoing and meaningful dialogue
between managers and employees;
Use of a pay pool process to ensure that performance
decisions are made in a careful, deliberative environment that uses a
consistent approach to decisions regarding performance ratings and
shares;
Implementing a new competency-based performance management
system that is intended to create a clear linkage between employee
performance and the Department's strategic plan and core values;
Increasing employee understanding and ownership of
organizational goals and objectives;
Adopting automation tools that facilitate ``best
practices'' in the pay-for-performance environment;
Reinforcing the use of team and organizational rewards;
and
[[Page 66125]]
Preserving non-cash rewards as tools to recognize
performance.
The 50-plus-year-old GS pay system also is not sufficiently market-
sensitive, potentially under-valuing the talents of the Department's
most critical employees. Under the GS and FWS pay systems, all
employees in a given geographic location receive the same annual pay
adjustment without regard to their occupation or the level of duties
and responsibilities they are expected to perform. This one-size-fits-
all approach treats all occupations alike, across the board as well as
in particular locations, regardless of market value. Thus, we
inevitably end up underpaying employees in some occupations and
overpaying others. Even within an occupation, the rigidities of the
current pay systems sometimes force us to underpay employees at the
entry/developmental grades, with recruiting difficulties and high
attrition the result.
The new NSPS pay system is designed to be much more market-
sensitive. First, it allows NSPS, after coordination with OPM, to
define occupational career groups and levels of work within each career
group that are tailored to the Department's missions and components.
Second, it gives DoD considerable discretion, after coordination with
OPM, to set and adjust the minimum and maximum rates of pay for each of
those career groups or bands, based on national and local labor market
factors and other conditions. Instead of ``one size fits all'' pay
rates and adjustments, the system allows DoD to customize those
adjustments and optimize valuable but limited resources. This kind of
flexibility, which is lacking under the GS and FWS pay systems, will
enable DoD to allocate payroll dollars to the occupations and locations
where they are most needed to carry out the Department's mission.
The goals and principles of the new system are sound, and we have
confidence that the Department has the capability to execute them
effectively. Pay-for-performance systems like that proposed for DoD are
not new. Pay banding has been around in the Federal Government since
1980, and the Federal Government has substantial experience in
implementing performance-based pay systems (e.g., in demonstration
projects). DoD alone has tested and implemented 11 performance-based
pay systems since 1980. Research shows that employee attitudes toward
such systems change over time, as they gain experience with them. For
example, employee support for the ``China Lake'' broadbanding/pay-for-
performance demonstration project was only 29 percent before the
project began, reached 51 percent by 1985, and was 69 percent by 1988.
Employee support was 70 percent when Congress made the project
permanent in 1994. Today, thousands of Federal employees already are
covered by successful performance-based pay systems.
The system we have devised is also consistent with the findings and
recommendations of NAPA in its May 2004 Report, ``Recommending
Performance-Based Federal Pay.'' The basis for managing individual
salary increases should be pay for performance. This recommendation has
been a constant theme in discussions for more than two decades and the
principle in every demonstration project that tested new pay policies.
The evidence from the projects confirms that pay for performance can be
successful in DoD. Nonetheless, the switch to a pay-for-performance
system will be implemented via a spiral (multi-phase) approach
resulting in application of the NSPS HR system, including the pay-for-
performance system, to new segments of the DoD population at
approximately 6-month intervals over a 2-year period. The phased
intervals of implementation will provide opportunities to assess and
adjust the system as each new group of employees is covered by the new
system. For the most part, populations phased into NSPS will be grouped
by organization in order to facilitate the change in organizational
culture that will be essential to the success of NSPS and the improved
organizational performance resulting from its implementation.
In summary, we believe the Department's pay-for-performance system
is an imperative, essential to DoD's ability to attract, retain, and
reward a workforce that is able to meet the high expectations set for
it by the Department's senior leaders for the purpose of accomplishing
the Department's mission--the defense of our nation.
Many commenters expressed concern that there will not be sufficient
resources made available to fund pay pools at adequate levels. There
were also many comments suggesting that pay pool money will be diverted
from pay to mission requirements or to reward supervisors and managers,
thereby leaving less for lower-graded employees.
Proper funding of pay pools is fundamental to the success of NSPS.
DoD senior leadership recognized its importance in setting two Key
Performance Parameters--``Credible and Trusted'' and ``Fiscally
Sound.'' In addition, this issue was the subject of testimony by the
NSPS Senior Executive to the Senate Armed Services Committee in April
2005. Secretary England was asked what assurances he could give that
limited appropriations or other budget pressures would not result in
pay pools too small to truly reward performance. He declared that the
Department viewed this as a basic covenant with its employees and
confirmed that action is being taken to protect pay pool funding.
The Department is implementing financial policies for NSPS.
Protection of pay pool funding is being addressed in several different
ways. First, the Department will mandate the minimum composition and
expenditure of pay pool funds. Second, appropriate senior-level
officials are required to certify that funds allocated to the
performance-based pay pools have been used only for the purpose for
which they were intended. Third, any exception to the minimum funding
of the pay pool will be based on stringent criteria, along with higher-
level approval. Fourth, mechanisms will be in place to monitor
compliance.
In accordance with the enabling legislation, for fiscal years 2004
through 2008, the aggregate amount allocated for compensation of DoD
civilian employees under NSPS, to the maximum extent practicable, will
not be less than if they had not been converted to the NSPS. This takes
into account potential step increases and promotions employees would
have received if not converted to NSPS. In addition, Sec. 9901.313(b)
provides that for fiscal years 2009 and beyond, DoD will develop a
formula that ensures, to the maximum extent possible, that employees
are not disadvantaged in the overall amount of pay available, in the
aggregate, as a result of conversion to NSPS, while providing
flexibility to accommodate changes in the function of the organization,
changes in the mix of employees performing those functions, and other
changed circumstances that may affect pay levels.
c. Adverse Actions and Appeals
In authorizing the creation of a new human resources system for the
Department, Congress specifically required that employees be afforded
the protections of due process. Recognizing the critical nature of the
Department's mission, Congress also stated in 5 U.S.C. 9902(h)(2) that
the new appeals process may ``establish legal standards and procedures
for personnel actions, including standards for applicable relief, to be
taken on the basis of employee misconduct, or performance that fails to
meet expectations.''
[[Page 66126]]
The proposed regulations included a number of changes to adverse
actions and appeals procedures. Consistent with the enabling
legislation, these changes were intended to simplify and streamline
those procedures and provide for greater individual accountability, all
without compromising guaranteed due process or protections against
whistleblower reprisal or discrimination. Greater accountability is
particularly critical to the Department. By its very nature, the
Department's national security mission requires an exceptionally high
level of workplace order and discipline. The fact that DoD employees
provide critical support to the military mission of defending the
country means that they, and the Department have a special
responsibility to the public.
With that in mind, the proposed regulations provided for shorter
notice for adverse actions, an accelerated appeals adjudication process
using MSPB AJs, a preponderance of the evidence burden of proof to
sustain the Department's adverse actions, whether based on conduct or
performance, or both, and specifically limited the mitigation of agency
selected penalties by MSPB AJs and private arbitrators. The proposed
regulations also required that arbitration decisions on adverse actions
be reviewable by the Department and the full MSPB prior to review by
the Federal Circuit Court of Appeals. The proposed regulations also
gave the Secretary authority to establish a number of mandatory removal
offenses (MRO)--that is, offenses that have such a direct and
substantial impact on national security that they must carry a
mandatory removal penalty. While the enabling legislation provides
authority to establish an internal appeals process using adjudicators
other than MSPB AJs, the Secretary and the Director decided that with
the changes outlined above, DoD could achieve the objectives of the
enabling legislation using MSPB AJs for initial review of employee
adverse action appeals. Ultimately, the enabling legislation provides
for full MSPB review of any DoD final appeals decision as well as for
judicial review.
Commenters, including labor organizations participating in the
meet-and-confer process, generally expressed concern that these
changes, separately and together, would vitiate the due process rights
of DoD employees. They argued that the changes would substantially
diminish the authority of third parties such as MSPB and arbitrators to
fully and fairly review and adjudicate adverse actions. Commenters, as
well as some members of Congress, expressed particular concern, about
the proposal to permit the Department to review arbitrator and MSPB AJ
decisions on adverse actions. Commenters expressed skepticism that the
stringent standards established for this review would adequately
protect due process of employees. Commenters also expressed concern
about the proposal to limit the ability to mitigate penalties unless
the penalty was ``wholly without justification.'' Commenters generally
supported the proposal to adopt a ``preponderance of evidence''
standard of proof, although a few commenters were opposed to this
proposal.
These comments express a fundamental misconception of the
requirements of due process as established by the United States Supreme
Court. For example, in accordance with Supreme Court decisions, due
process requires that before an employee who has a property interest in
a job is removed, he or she is entitled to notice, an opportunity to
reply, a decision, and a post-decision review. The final regulations
preserve these due process rights for covered employees and afford even
greater protection than the U.S. Constitution requires. Recognizing
that many of these comments were erroneously characterized as due
process issues, we nevertheless considered their merits.
DoD and OPM have decided that the final regulations will continue
to provide for a shorter, 15-day minimum advance notice to an employee
of a proposed adverse action (compared to a 30-day notice under current
law). We have also retained the provision giving employees a minimum of
10 days to respond to the charges specified in the notice of adverse
actions. Some commenters suggested that the 10-day period was not long
enough, but this notice is actually longer than the 7-day minimum reply
period that is provided under current law. This reply period runs
concurrently with the notice period, which is also consistent with
current law. Employees continue to have a right to be heard before a
proposed adverse action is taken against them. This change protects
that right while still providing for a more streamlined process. Since
these are minimum time periods, local management may extend these time
limits on a case-by-case basis if necessary.
We are persuaded by the concerns expressed by commenters, as well
as labor organizations during the meet-and-confer process, that the
enabling legislation establishes the standard by which the full MSPB
may mitigate penalties. Specifically, the proposed regulations
precluded mitigation except where a determination is made that the
penalty is so disproportionate to the basis for the action as to be
wholly without justification. Since the enabling legislation
specifically provides the criteria for full MSPB review of NSPS appeals
decisions, the Secretary and Director agree that it is unnecessary to
require the full Board to apply the ``wholly without justification''
standard. The criteria for full MSPB review as provided in the enabling
legislation have been added to these regulations. Furthermore, the
Secretary and Director agree to revise the ``wholly without
justification'' standard for MSPB AJs that are used as part of the
Department's appeals process as well as arbitrators. The standard has
been revised to preclude mitigation except when the action is ``totally
unwarranted in light of all pertinent circumstances.'' This standard is
similar to that recognized by the Federal courts and is intended to
limit mitigation of penalties by providing deference to an agency's
penalty determination. The Department has statutory authority to
establish new legal standards. In this case, the Department is electing
to adopt a legal standard that meets the need of the Department by
ensuring deference is provided to the Department's penalty
determinations along with the requirement that AJs give consideration
to the Department's national security mission.
Under the final regulations, MSPB AJs (as well as arbitrators) will
also be able to mitigate penalties in adverse action cases, but only
under limited circumstances. We continue to believe that, because the
Department bears full accountability for national security, it is in
the best position to determine the penalty for poor performance and/or
misconduct, subject to a more limited review than exists now under
chapter 75 of title 5, U.S. Code. Thus, its judgment in regard to
penalty should be given deference. This limited standard for mitigation
of penalties selected by DoD is intended to explicitly restrict the
authority of MSPB AJs and arbitrators to modify penalties to those
situations where the penalty is simply not warranted. MSPB AJs and
arbitrators may not modify the penalty imposed by the Department unless
such penalty is totally unwarranted in light of all pertinent
circumstances. Consistent with the intent that deference be given to
agency selected penalties, the regulations also provide that when a
penalty is mitigated, the maximum justifiable penalty must be applied.
In determining the maximum justifiable
[[Page 66127]]
penalty, MSPB AJs and arbitrators will use the applicable agency table
of penalties or other internal guidance.
Commenters and labor organizations expressed strong concerns over
DoD reviewing MSPB AJ decisions. These concerns ranged from whether the
Department had legal authority to conduct this review to whether this
assists in achieving the Department's goal of streamlining the appeals
process. Some expressed concerns that this would not be a truly
independent appeals process as a result. We recognize these concerns,
but believe that the process provides for appropriate review and
safeguards. The enabling legislation authorizes an appeals process
resulting in a final Department decision that is subject to full MSPB
review. Consistent with this authority, we have established an
independent appeals process using existing and familiar resources, MSPB
AJs, to adjudicate employee appeals of DoD adverse actions. These AJs
would issue initial decisions that would lead to a final Department
decision subject to full MSPB review. The decision to utilize the MSPB
AJ corps, rather than establishing a new corps of AJs, is purposeful.
We are mindful of the need to conserve resources and recognize the
value these AJs' independence brings to the process. Nevertheless, to
ensure that the Department receives proper deference to its critical
mission requirements, the Department will retain the opportunity to
review and modify, under criteria prescribed in these regulations,
those initial AJ decisions before they become final Department
decisions. In response to concerns raised by the unions during the
meet-and-confer process, this review will occur at the DoD level. This
highlights that the highest levels of the Department wish to ensure
that this process is applied fairly and consistently across the
Department. Also, in order to ensure timely decisions by the Department
when taking action on an AJ or arbitrator decision, time limits for
taking action will be established in implementing issuances.
Ultimately, any decision of the Department is subject to review by the
full MSPB and the Court of Appeals for the Federal Circuit. We believe
this process affords employees full and fair opportunity for redress,
as well as adjudicative independence, and deference to DoD's critical
mission needs, consistent with the NSPS statutory authority.
Finally, many commenters and labor organizations participating in
the meet-and-confer process expressed concerns about the organization
of the appellate procedures, finding them difficult to follow. We are
persuaded by their concerns and have reorganized the appellate
procedures in a user-friendly format.
With the changes outlined above, we believe we have addressed and
resolved the concerns raised by commenters regarding adverse actions
and appeals. Due process is preserved under the final regulations.
Thus, the adverse actions and appeals procedures set forth in these
regulations are ``fair, efficient, and expeditious,'' consistent with
congressional direction.
d. Mandatory Removal Offenses
The proposed regulations authorized the Secretary to identify
offenses that, because they have a direct and substantial adverse
impact on the Department's national security mission, warrant a
mandatory penalty of removal from the Federal service. Only the
Secretary could mitigate the removal of an employee determined to have
committed such a mandatory removal offense (MRO). Employees alleged to
have committed these offenses would have the right to advance notice,
an opportunity to respond, and a written decision. They would also be
entitled to appeal that decision to the independent MSPB AJs, who could
reverse the action but could not mitigate the removal penalty.
Decisions of the MSPB AJs are subject to review by DoD as well as the
full MSPB.
Commenters and unions expressed a number of objections to the
concept of MROs. Since no examples of potential MROs were provided in
the proposed regulations, they feared that removal could be too harsh a
penalty as for yet unspecified offenses. They also were concerned that
employees would not be given full and complete notice of such offenses
prior to their application.
As proposed, an MRO should have a direct and substantial adverse
impact on the Department's national security mission. Accordingly, we
have decided to retain MROs. However, in response to comments, the
Secretary and the Director understand the concern over the lack of
specificity with regard to MROs. During the meet-and-confer process,
participating labor organizations expressed a similar concern, but we
believe we were able to satisfactorily address most of their objections
about lack of specificity by sharing with them potential mandatory
removal offenses.
In addition to those MROs discussed during the meet-and-confer
process, an illustrative list of potential MROs follows:
Purchasing, using, or transporting weapons or materials
for the purpose of committing, attempting to commit, or aiding and
abetting terrorism.
Committing, attempting to commit, or aiding and abetting
an act of sabotage against the Department of Defense that resulted or
could have resulted in loss of life, significant financial loss or
adverse impact on military readiness.
Soliciting or intentionally accepting a bribe or other
unauthorized personal benefit in return for an act that compromises or
could compromise national security.
Employees involved in the Personnel Reliability Program
failing to safeguard the assets for which they are directly responsible
and such failure results in loss, theft, sabotage, unauthorized use,
destruction, detonation, or damage.
Intentionally engaging in activities that compromise or
could compromise the information or financial infrastructure, including
major procurement fraud, of the Department of Defense, when the
employee knew or reasonably should have known of the compromise or
potential compromise.
There is no question that employees must be made aware of the final
list of MROs approved by the Secretary. Both the Secretary and the
Director believe that this is a basic issue of fairness and a tenet of
an organizational culture that establishes clear accountability. That
is why the proposed regulations provided that MROs will be identified
to employees in advance, as part of implementing issuances, and made
known to all employees upon identification. During the meet-and-confer
process, participating labor organizations were especially concerned
about this issue. We agree that these offenses should not be a surprise
to anyone, and have retained these provisions in the final regulations
but have also added a requirement that they be publicized via notice in
the Federal Register. The Secretary also intends to consult with the
Department of Justice in preparing the list of offenses for
publication.
With these changes, the final regulations provide for the
independence demanded by commenters while assuring DoD's ability to
remove employees who engage in offenses that have direct and
substantial impact on the Department's national security mission. The
Secretary is accountable to the President and the American people for
safeguarding national security. No other agency or department bears
this burden. These regulations ensure that the Secretary's authority
aligns with that responsibility.
[[Page 66128]]
e. Labor Relations
Without exception, employee representatives objected to the
proposed labor relations regulations, both in their comments and during
the meet-and-confer process. Employee representatives argued that
Congress expressly specified only two modifications to chapter 71--
bargaining above the level of recognition and independent third party
review of decisions. We disagree. In enacting chapter 99, Congress
expressly recognized the need for the Department to design a labor
relations system that both addresses the unique role that the
Department's civilian workforce plays in supporting the Department's
national security mission and allows for a collaborative issue-based
approach to labor management relations.
Moreover, Congress specifically authorized the Secretary, together
with the Director, to establish and adjust this labor relations system
in support of the overall HR management system notwithstanding the
provisions of the current system as set forth in chapter 71. Thus, the
Secretary and the Director have modified chapter 71 ``to address the
unique role that the Department's civilian workforce plays in
supporting the Department's national security mission.'' (5 U.S.C.
9902(m)) In taking the steps necessary to establish and adjust this
labor relations system, Congress further recognized that the provisions
of this system will supersede existing collective bargaining agreements
covering Department employees and negotiated pursuant to the provisions
of chapter 71. Finally, Congress indicated that the authority of the
Secretary and Director to devise and adjust the Department's labor
relations system would expire in 2009 absent further action by Congress
(5 U.S.C. 9902(d)(2) and 5 U.S.C. 9902(m)(1), (2), (8), and (9)).
f. Management Rights/Scope and Duty To Bargain
The ability to act quickly is central to the Department's national
security mission--not just during emergencies but, more importantly, in
order to prepare for or prevent emergencies. The ability to act quickly
is necessary even in meeting day-to-day operational demands. The
Department must be able to assign employees and to introduce the latest
security technologies without delay. This principle was crucial in the
formulation of the enabling legislation and in the congressional debate
that followed its introduction. Congress clearly recognized the
Department's need to operate under a new labor relations system that
would provide the flexibility necessary to respond to a variety of
vital operational challenges and carry out its national security
mission.
To achieve this objective, the proposed regulations revised, among
other things, the management rights and duty to bargain provisions
found in 5 U.S.C. chapter 71. We expanded the list of management rights
that are excluded from bargaining, including the numbers, types, and
grades of employees or positions assigned to any organizational
subdivision, work project, or tour of duty; and the technology,
methods, and means of performing work--rights that deal directly with
the Department's national security operations. In addition, we excluded
from bargaining the procedures that the Department would follow in
exercising these expanded operational management rights. We also
proposed to allow the Department to take action in any of these areas
without advance notice to labor organizations and without pre-
implementation bargaining.
Without exception, labor organizations objected to the proposed
regulations, both in their comments and during the meet-and-confer
process, arguing that altering the scope of bargaining in any way is
contrary to the enabling legislation. They also claimed that these
changes were unnecessary because current law already provided the
Department with sufficient flexibility to deal with emergencies. They
also took strong exception to the provisions in the proposed
regulations that would allow issuances to supersede conflicting
provisions of any collective bargaining agreements and limit bargaining
to only those matters that are not inconsistent with the issuances.
Labor organizations did acknowledge the Department's need to take
certain actions without pre-implementation bargaining, and during the
meet-and-confer process they proposed a process for accelerated
bargaining within established time limits and the use of binding
arbitration to resolve all bargaining disputes. Additionally, they
suggested that the term ``emergency'' be interpreted as including
``exigencies requiring action reasonably necessary to carry out the
Department's national security mission before collective bargaining
concerning the action can be completed,'' and that in such exigencies
the Department will afford the opportunity to bargain when
circumstances reasonably allow. Their proposals would have allowed the
Department to temporarily suspend provisions of collective bargaining
agreements in situations where there is a direct connection between the
exigency and the Department's national security mission. Even under
such mission critical and exigent conditions, they insisted that post
implementation agreements would have prospective effect only if the
emergency was unforeseen. If the national security exigency were
foreseen, then any remedy for Department action that was contrary to a
contractual provision would have retroactive effect unless the
retroactive effect would ``unduly disrupt Department operations
reasonably necessary to carry out the Department's national security
mission.''
We recognize the good faith effort made by these labor
organizations to meet the Department's operational needs. However,
their proposals were lacking in several respects. We have, therefore,
retained the management rights/scope of bargaining provisions in the
proposed regulations with some modifications.
With respect to procedures, the proposals offered by the labor
organizations do not go far enough. They would still require the
Department to bargain, before acting, over the procedures it would
follow in exercising its management rights, including those that deal
directly with its operations. Once negotiated, those procedures can and
do place significant constraints on critical actions such as the
assignment of work, the deployment of personnel, and the staffing of
tours of duty. These procedures are negotiable under 5 U.S.C. chapter
71. Labor organizations would have the Department continue that
obligation, but under time limits and with an expanded interpretation
of the chapter 71 provisions regarding emergencies that would allow
management to bargain post implementation in certain limited
circumstances.
However, in today's operational environment, the exception has
become the rule. Department managers, supervisors, and employees are
critical to the Department's mission to defend our national security.
The Department must be able to rely on the judgment and ability of
managers and supervisors to make day-to-day decisions--even if this
means deviating from established or negotiated procedures. Moreover,
the Department's managers and supervisors must be able to make split-
second decisions to deal with operational realities free of procedural
constraints.
With respect to post-implementation bargaining, the proposals
offered by labor organizations are similarly lacking. Although they
would allow management to implement without bargaining in advance when
faced with
[[Page 66129]]
an emergency, they would still require immediate post-implementation
negotiations and third-party impasse resolution over such matters.
However, the reality of DoD's operational environment today is that
change is constant, and as a consequence, so too would be post-
implementation bargaining, with the prospect of prolonged third-party
impasse resolution. These negotiations would be required even in cases
where the change was short-lived and/or where its impact was
insignificant, insubstantial, or transient. The demand on DoD's
frontline managers, supervisors and employees to engage in constant
post-implementation negotiations would divert them from accomplishing
the mission. This is unacceptable and inconsistent with the authority
Congress granted to the Department in the enabling legislation.
Further, under 5 U.S.C. chapter 71, interpretations of negotiated
appropriate arrangements tend to assume that those agreements have
anticipated future changes, but today's operational environment belies
that assumption. Changes necessitated by operational demands are
recurring and variable. Our frontline managers and supervisors must not
be bound by agreements presupposing circumstances that are assumed to
be constant, when they must face current and future exigencies.
Nevertheless, in recognition of the concerns articulated by
commenters during the public comment period and during the meet-and-
confer process by participating labor organizations and as a result of
the June 16, 2005, meeting of the United DoD Workers Coalition, DoD's
NSPS Senior Executive, and OPM's Acting Director, the Secretary and the
Director decided that the proposed regulations would be revised in a
number of ways.
First, we have modified the definition of ``issuances'' to make
clear the distinction between an ``implementing issuance'' and an
``issuance''. An ``implementing issuance'' is a document issued to
carry out a policy or procedure implementing NSPS (but does not include
internal operating guides, manuals, or handbooks that do not change
employees' conditions of employment), while an ``issuance'' is a
document to carry out a non-NSPS policy or procedure of the Department.
We have also clarified that while an implementing issuance immediately
supersedes those provisions of collective bargaining agreements that
are inconsistent with the implementing issuance, an issuance does not
supersede a conflicting provision of a collective bargaining agreement
during the term of that agreement. This ensures the viability of the
collective bargaining process under NSPS. When a provision of a
collective bargaining agreement conflicts with an issuance, the
collective bargaining provision remains in effect until the expiration
or renegotiation of the agreement, at which time the parties will have
to bring the conflicting provision into conformance with the issuance.
This is comparable to the process that has long been followed regarding
Governmentwide regulations. Specifically, issuances will be subject to
national consultation with those labor organizations holding national
consultation rights. Moreover, following consideration of comments and
recommendations received through the national consultation process,
issuances are subject to collective bargaining to the extent proposals
are not inconsistent with the issuance and are otherwise negotiable
under Sec. 9901.910 and Sec. 9901.917.
More importantly, and in response to concerns that managers may
issue implementing issuances and issuances for the sole purpose of
invalidating particular provisions of a collective bargaining agreement
that they do not like, we have also modified the regulations to specify
that implementing issuances, that is, those that implement NSPS and
supersede conflicting provisions of existing collective bargaining
agreements, may only be issued by the Secretary, Deputy Secretary,
Principal Staff Assistants, or Secretaries of the Military Departments.
We have limited ``Principal Staff Assistants'' to senior officials in
the Office of the Secretary of Defense who report directly to the
Secretary and Deputy Secretary of Defense. We also have added a new
subparagraph, Sec. 9901.905(c) to make clear that any provision of a
collective bargaining agreement that is inconsistent with issuances
that do not implement NSPS will remain in effect until the expiration,
renewal, or extension of the agreement, whichever occurs first.
Finally, we have modified the regulations to permit bargaining, in
the sole, exclusive, unreviewable discretion of the Secretary, over the
procedures that would be followed in exercising the expanded
operational management rights. We have also modified the regulations to
permit bargaining, at the election of the Secretary, over appropriate
arrangements on the routine matters related to the expanded operational
management rights. The Secretary may authorize such bargaining to
advance the Department's mission accomplishment or promote
organizational effectiveness. Mid-term agreements on appropriate
arrangements and procedures for (a)(1) and (a)(2) management rights are
not precedential or binding on subsequent acts, or retroactively
applied, except at the Secretary's sole, exclusive, and unreviewable
discretion. Procedures and appropriate arrangements in term agreements
are binding, except that nothing will delay or prevent the Secretary
from exercising his or her authority under subpart I. For example, the
Secretary may authorize deviation from such agreements when it is
necessary to carry out the Department's mission. This authority builds
on the authority that exists today when an emergency occurs, as that
term is applied under chapter 71, to address the unique nature of the
Department's mission and the operational demands it must face.
Taken together, we believe these revisions meet the Department's
mission needs, are consistent with the enabling legislation's intent to
preserve collective bargaining rights as provided for in 5 U.S.C.
chapter 99, and assure employees that issuances will not be issued for
the improper purpose of eliminating local bargaining. While commenters
have argued that any alteration of the scope of bargaining violates the
enabling legislation, this interpretation is inconsistent with the
express authority Congress has given the Secretary and the Director to
establish and from time to time adjust the labor relations system for
the Department to address the unique role that the Department's
civilian workforce plays in supporting the Department's national
security mission. These regulations fulfill that statutory requirement
while providing employees with the rights envisioned by Congress.
g. Independence of the National Security Labor Relations Board
The National Security Labor Relations Board (NSLRB) described in
the NSPS regulations is intended to act as one element of independent
third-party review of collective bargaining disputes as provided for in
5 U.S.C. 9902(m)(6). Commenters, including labor organizations
participating in the meet-and-confer process, objected to the creation
of the NSLRB because they believe that an internal DoD review board
would not be independent from management influence, unlike the Federal
Labor Relations Authority (FLRA). Commenters suggested that any board
whose membership would be appointed and removed by the Secretary could
not reasonably be expected to remain impartial. They also suggested
that the primary reason for taking
[[Page 66130]]
jurisdiction of these matters away from the independent and impartial
FLRA is to guarantee that DoD management can influence the NSLRB's
decisions, giving them an unfair advantage over employee
representatives.
We have decided to retain the NSLRB. Employing the NSLRB to
adjudicate labor disputes in place of the FLRA ensures timely and
efficient case management by a body cognizant of the important and
unique nature of the Department's mission. We believe that the final
regulations have adequately balanced the Department's interest in
timeliness and mission recognition with employees' desire to have an
impartial dispute adjudicator. The regulations establish NSLRB
membership criteria that require candidates to exhibit integrity and
impartiality in addition to extensive knowledge of labor laws, DoD's
mission, or both. Although the Secretary has authority to remove NSLRB
members before the expiration of their terms, that authority is limited
to removal for inefficiency, neglect of duty or malfeasance in office,
which is a standard similar to that for removing members of the FLRA.
In addition, since the standard is established in these jointly
prescribed regulations, it may not be changed unilaterally by the
Secretary. Finally, we stress that the NSLRB decisions are subject to
review by the FLRA, which acts as another element of independent third-
party review. The FLRA decisions, including those reviewing decisions
of the NSLRB, remain subject to judicial review as they are under
chapter 71. These regulations establish that the NSLRB will operate
independent of the chain of supervision as does any agency
administrative judge or administrative review board whose decisions can
be appealed to a higher authority.
Multiple commenters, including labor organizations participating in
the meet-and-confer process, recommended that the labor organizations
be given the opportunity to participate in the NSLRB nomination
process. We agree and have included in the final regulations an
explicit requirement that the Secretary consider labor organization
nominations. Whereas the proposed regulations did not provide a role
for labor organizations in the nomination process, the final
regulations provide that the Secretary will consider labor organization
nominations in selecting the two non-chair members of the NSLRB. This
assures labor organizations a voice in the NSLRB selection process.
While we have not adopted all suggestions related to the NSLRB, we
believe the final regulations ensure that NSLRB members will discharge
their duties in a fair and impartial manner by (1) including employee
representatives in the process for selecting such members; (2)
requiring that individuals appointed as members have integrity,
impartiality, and subject matter expertise; (3) limiting the grounds on
which the Secretary can remove NSLRB members; and (4) providing for
FLRA review of NSLRB decisions and, as prescribed in chapter 71,
judicial review of FLRA decisions.
Response to Specific Comments and Detailed Explanation of Regulations
Subpart A--General Provisions
Section 9901.101--Purpose
Section 9901.101 explains the overall purpose of the regulations in
5 CFR part 9901, which is to implement a new human resources management
system and a new labor relations system, as authorized by 5 U.S.C.
9902. The section states various guiding principles and key operational
characteristics and requirements. We have added a reference in Sec.
9901.101(a) to the labor relations system, which is established under 5
U.S.C. 9902(m), since this is a separate and distinct authority. (See
additional discussion regarding this distinction in the analysis of
comments regarding Sec. 9901.102.)
Commenters questioned the authority to waive or modify statutes
through these regulations. We are modifying Sec. 9901.101(a) to
clarify that 5 U.S.C. 9902 provides authority for these regulations to
waive or modify certain statutory provisions.
A commenter recommended that the regulations restate the statutory
merit principles instead of just referencing them as a guiding
principle. We do not believe such a restatement is necessary; however,
we have added a statutory citation--5 U.S.C. 2301--in Sec.
9901.101(b)(1).
Commenters expressed concern regarding the key operational
characteristic ``Agile and Responsive Workforce and Management,'' which
was further described as ``workforce can be easily sized, shaped, and
deployed to meet changing mission requirements.'' In particular, some
objected to viewing civilian employees as deployable in the same manner
as military personnel. While DoD has always had and will continue to
have the right to assign employees to serve in geographic locations
based on mission requirements, the word ``deploy'' in this section is
being used in a broader context and was intended to encompass the
strategic organization of work based on employee skills and
competencies and mission needs. In particular, we believe the authority
in subpart B to classify work into broader career groups supports this
objective.
Section 9901.102--Eligibility and Coverage
Section 9901.102 sets forth general rules regarding employee
eligibility and coverage under the various subparts of part 9901.
Categories of eligible employees become covered only when the Secretary
affirmatively approves coverage as of a specific effective date.
Commenters indicated that the Secretary's discretionary authority
in coverage matters is too broad. We believe it is essential that the
Secretary be given such discretion. The authority to establish systems
would be meaningless unless there is corresponding authority to place
eligible employees under the system. The Secretary needs flexibility to
phase in coverage in an orderly way, while retaining authority to
change effective dates as needed, based on changing conditions or
mission requirements.
Commenters stated that the authority in Sec. 9901.102(b)(1) to
establish an immediate effective date for subpart I (dealing with labor
relations) conflicts with 5 U.S.C. 9902(l). Section 9902(l) provides
that the Secretary may apply the ``National Security Personnel System''
only if (1) the affected organizational or functional unit has no more
than 300,000 employees or (2) the Secretary determines ``in accordance
with subsection (a)'' that the Department has in place a performance
management system that meets the criteria in 5 U.S.C. 9902(b). The term
``National Security Personnel System'' is defined in 5 U.S.C. 9902(a)
to be the ``human resources management system,'' which is established
under the authority of subsection (a). Section 9902(b) provides
requirements for a system established ``under subsection (a).'' Under 5
U.S.C. 9902(b)(3)(D) and (d), the human resources management system
established under subsection (a) does not reach to the labor relations
system established under 5 U.S.C. chapter 71. Instead, 5 U.S.C. 9902(m)
provides a totally separate authority to establish and adjust a ``labor
relations system.'' We believe it is clear that the limitations in 5
U.S.C. 9902(l) apply only to the human resources management system
established under 5 U.S.C. 9902(a).
Commenters raised questions about the coverage of employees in
certain DoD laboratories who are covered by a demonstration project or
an alternative system. Section 9902(c) of title 5, U.S. Code, states
that the National Security Personnel System will not apply to
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defense laboratories in organizations listed in Section 9902(c)(2)
before October 1, 2008, and will apply after that date only if the
Secretary determines that greater flexibilities are available.
Consistent with the explanation in the preceding paragraph, the
reference to the ``National Security Personnel System'' in 5 U.S.C.
9902(c) refers to the human resources management system which is
defined as the National Security Personnel System in Section 9902(a).
Thus, the restrictions in 5 U.S.C. 9902(c) do not apply to the coverage
of these laboratory employees under the labor relations system
established under 5 U.S.C. 9902(m), and these employees may be covered
by subpart I (dealing with labor relations) before October 1, 2008.
Commenters objected to the possible coverage of certain civilian
mariners who are currently covered by a pay system established under 5
U.S.C. 5348 and are also covered by 5 U.S.C. chapter 71. These
employees will be covered by subpart I (dealing with labor relations).
However, the Secretary has determined that they will not be covered by
the human resources system, including the adverse actions and appeals
provisions. Other commenters asked about certain Army Corps of
Engineers employees under Public Law 97-257. U.S. Army Corps of
Engineers employees paid from Corps of Engineers Special Power Rate
Schedules will be covered by subpart I (dealing with labor relations).
The Secretary has determined that they will not be covered by the human
resources system, including the adverse actions and appeals provisions.
Commenters asked whether a category of employees could be covered
by some, but not all, provisions of subparts B through H. In
particular, commenters noted that National Guard Technicians were
eligible for coverage but were subject to certain provisions outside
title 5--e.g., qualification requirements established under title 32,
instead of qualification standards established under 5 U.S.C. chapter
51. Since 5 U.S.C. 9902 does not provide authority to modify or waive
statutory provisions outside of certain specified chapters in title 5,
any such provisions would continue in effect. The Secretary may extend
coverage to eligible employees under subparts B through H to the extent
those provisions are not in conflict with other statutory requirements.
Commenters proposed that certain occupations be excluded from
coverage--e.g., attorneys or law enforcement officers--because of the
nature of their work. We disagree. We believe the flexible systems we
are authorizing can be applied successfully to all occupational
categories.
Commenters raised questions regarding the purpose of Sec.
9901.102(f). Paragraph (f) is intended to allow the Secretary to extend
NSPS coverage to employees who are currently covered by systems
established administratively under authorities outside of title 5, but
only when those authorities give DoD the discretion to cover those
employees under administratively determined systems or to leave them in
the title 5 systems that would otherwise apply. For example, if DoD has
discretionary statutory authority to cover a category of employees
under an administratively determined classification and pay system
instead of the General Schedule, such employees remain potentially
eligible for General Schedule coverage and accordingly would also be
eligible for NSPS coverage. Commenters questioned whether paragraph (f)
could be used to cover educators employed by the DoD Education Activity
in an NSPS pay system. Since the pay system for those educators
employed overseas (Department of Defense Dependents Schools) is
established under nondiscretionary statutory provisions in title 20,
they are not eligible for coverage under an NSPS pay system. However,
the pay system for those educators employed in the Continental United
States (Defense Domestic Elementary and Secondary Schools) is
established under discretionary provisions in title 10. Therefore, they
are eligible for coverage under an NSPS pay system.
Commenters proposed that current employees (or at least current
employees meeting certain age and service requirements) be
``grandfathered'' and left in existing title 5 systems instead of being
covered by NSPS, unless they elect otherwise. This proposal is not
practicable from an administrative viewpoint and is contrary to the
objectives behind the enabling legislation. We believe the
flexibilities provided under the proposed NSPS will yield significant
benefits to the Government and will also benefit employees based on
their performance. It is therefore not acceptable to delay full
application of NSPS.
Commenters questioned why members of the Senior Executive Service
(SES) are not covered by NSPS--specifically, the classification, pay,
and performance provisions in subparts B through D. In fact, SES
members are eligible for coverage under those NSPS provisions, subject
to the conditions in Sec. 9901.102(d). (See coverage provisions in
Sec. Sec. 9901.202(b)(4), 9901.302(b)(4), and 9901.402(b)(1).) We note
that the SES pay and performance provisions in title 5 are already
designed to be performance-sensitive. Thus, DoD does not plan to cover
SES members in its initial implementation spirals. DoD may determine at
a later date whether coverage under NSPS pay and performance provisions
is necessary given the title 5 authorities that already apply to SES
members.
In light of the numerous comments regarding the coverage
eligibility of specific categories of DoD employees under the various
subparts of these regulations, we have prepared the following summary
chart showing various categories of employees that are eligible for
coverage under the NSPS systems. This chart is not intended to be
comprehensive or authoritative, but covers the major categories of
employees in DoD outside of the General Schedule. In the chart,
categories of employees that are identified as eligible for coverage
under a particular subpart are annotated with ``Yes,'' and those that
are identified as ineligible for coverage are annotated with ``No.''
The chart and its footnotes must be read together for full information
on coverage eligibility. Actual coverage is subject to applicable law
and approval by the Secretary under Sec. 9901.102(b).
Summary of Non-General Schedule Coverage Eligibility Under 5 CFR Part 9901
----------------------------------------------------------------------------------------------------------------
Eligible for human resources
Category system/appeals process (subparts Eligible for labor relations
B-H) system (subpart I)
----------------------------------------------------------------------------------------------------------------
Air and Army Reserve Technicians........... Yes.............................. Yes.
Army and Air National Guard technicians Yes \1\.......................... Yes.\2\
(dual status) under 32 U.S.C. 709.
[[Page 66132]]
Army and Air National Guard technicians Yes \1\.......................... Yes.\2\
(non dual status) under 32 U.S.C. 709.
Hydropower Corps of Engineers Special Power No............................... Yes.
Rate Schedules (WB pay plan).
Navy Civil Service Mariner (WM pay plan)... No............................... Yes.
Overseas Teachers (DoDDS).................. No............................... Yes.
Pentagon Force Protection Agency (title 5 Yes \3\.......................... Yes.
and title 10 employees).
Federal Wage System (WA, WD, WG, WJ, WK, Yes.............................. Yes.
WL, WN, WO, WS, WT, WY, XF, XG, XH pay
plans).
Nonappropriated Fund....................... Yes \4\.......................... Yes.
Domestic Teachers (DDESS).................. Yes \4\.......................... Yes.
Defense Laboratories in Organizations No \5\........................... Yes.
listed in 5 U.S.C. 9902(c).
Armed Services Board of Contract Appeals... No for Board members;............ No for Board members;
Yes for other employees.......... Yes for other employees.
Court of Appeals for the Armed Forces...... No for Judges and attorneys in No for Judges and attorneys in
chambers; Yes for other chambers; Yes for other
employees \6\. employees.\6\
Consultants and Experts (10 U.S.C. 129b)... No............................... No.
DARPA, scientists and engineers............ No............................... No.
DCIPS (including DISES).................... No............................... No.
Executive Schedule......................... No............................... No.
Faculty at DoD Educational Institutions:... Yes \4\.......................... Yes.
Air University, Air Force Institute of
Technology, Army War College/Command &
General Staff College, Defense
Acquisition University, National Defense
University, Defense Language Institute,
George C. Marshall Center, Asia-Pacific
Center for Security Studies, Western
Hemisphere Institute for Security
Cooperation, U.S. Naval Postgraduate
School, Naval War College/U.S. Marine
Corps University, USAF Academy, U.S.
Naval Academy, U.S. Military Academy.
Faculty and staff at USUHS................. No............................... No.
Foreign Nationals (Direct Hire)............ No............................... No.
Schedule C................................. Yes.............................. No.
SES........................................ Yes.............................. No.
Senior Level (SL/ST)....................... Yes.............................. Yes.
DoD Office of the Inspector General........ Yes, unless appointed under No.
authority of the Inspector
General Act of 1978 (5 U.S.C.
App. Sec. 6)\7\.
----------------------------------------------------------------------------------------------------------------
\1\ Subject to limitations pursuant to 32 U.S.C. 709.
\2\ But excluded from national level bargaining under 5 U.S.C. 9902(g).
\3\ Title 10 employees under title 10 discretionary authority and subject to 10 U.S.C. 2674.
\4\ Under title 10 discretionary authority.
\5\ Until 2008, excluded from HR system and appeals process pursuant to 5 U.S.C. 9902(c).
\6\ Pursuant to 10 U.S.C. chapter 47, subchapter XII.
\7\ Currently there are no appointees under that authority.
Section 9901.103--Definitions
Section 9901.103 provides definitions of terms used in more than
one subpart. Commenters expressed concerns about some definitions.
Commenters requested greater clarity with respect to the use of
``implementing issuances.'' Accordingly, we are revising the definition
of ``implementing issuances'' to make clear that such documents can be
issued by only certain high-level DoD officials (despite the
Secretary's broad delegation authority), including those formally
designated as acting in those high-level positions. We have also
clarified that implementing issuances do not include internal operating
guides, handbooks, or manuals that do not change conditions of
employment. This is consistent with current practice. We have also
added a definition of ``Military Department.''
To address general comments regarding the need for greater
specificity where possible, we have added definitions of the terms
``initial probationary period'' and ``in-service probationary period.''
These terms are used in subpart E (Staffing and Employment) and subpart
F (Workforce Shaping). In addition, we clarified the definition of
``NSPS'' to more closely track the language in the statute. ``NSPS''
means the human resources management system established under 5 U.S.C.
9902(a). It does not include the labor relations system established
under 5 U.S.C. 9902(m). We do, however, use ``NSPS'' in the
supplementary information and in public statements as a shorthand
reference to describe both the HR and the labor relations systems. We
also note that chapter 99 is entitled the National Security Personnel
System.
Commenters expressed concern about the definition of
``performance.'' In particular, commenters objected to the
[[Page 66133]]
use of the terms ``behavior,'' ``demeanor,'' ``attitude,'' and ``manner
of performance'' in defining performance. We note that these terms are
used in a context that makes clear that we are dealing with observable
behaviors that affect the accomplishment of assignments,
responsibilities, and organizational goals. We believe performance
assessments would not be complete without considering employees'
behaviors in carrying out assigned work. For example, customer service
is generally a paramount organizational objective. Thus, the manner in
which employees treat customers is an important aspect of overall
performance. Employee behaviors can be objectively observed and
evaluated against established performance expectations. Some commenters
suggested that assessments of manner of performance would open the door
to abuse, cronyism, punishment for criticism of management, or
retaliation against whistleblowers. We disagree. Under NSPS, employees
are still protected against prohibited personnel practices and will
have the same whistleblower rights they have always had. We note that
managers will be held accountable for how they manage this process.
A commenter questioned whether the definition of ``promotion''
allows management to add higher-level duties without providing pay
increases. It appears that this comment is primarily directed at the
new classification authority under subpart B that would allow DoD to
reduce the number of grade level distinctions by using bands to
describe levels of work. Each band will encompass a single broad level
of work that may encompass a range of duties previously performed at
different grade levels. Promotion is movement to a higher level of
work, i.e., higher band.
Commenters requested greater clarity regarding the term
``unacceptable performance.'' In conjunction with related changes made
in subpart D (Performance Management), we are clarifying that an
employee's performance may be found to be unacceptable based on failure
to successfully complete work assignments or other instructions that
amplify written performance expectations.
Section 9901.104--Scope of Authority
Section 9901.104 identifies the provisions in title 5 that are
subject to waiver or modification under 5 U.S.C. 9902.
Commenters objected to any modification or waiver of any title 5
provision. A commenter suggested this section would grant legislative
power reserved for Congress. In fact, this section merely implements an
authority provided by Congress. Under 5 U.S.C. 9902, DoD and OPM may
prescribe regulations establishing new human resources management and
labor relations systems notwithstanding certain title 5 provisions. In
other words, Congress has provided that systems established by
regulation may be used in place of certain statutory systems. This is
not dissimilar to numerous cases where Congress has excluded an agency
from a title 5 provision and allowed the agency to develop its own
rules administratively, except that, in the case of NSPS, Congress has
actually established additional re