[Joint House and Senate Hearing, 108 Congress] [From the U.S. Government Publishing Office] S. Hrg. 108-91 THE HUMAN CAPITAL CHALLENGE: OFFERING SOLUTIONS AND DELIVERING RESULTS ======================================================================= JOINT HEARING before the OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE of the COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE and the SUBCOMMITTEE ON CIVIL SERVICE AND AGENCY ORGANIZATION OF THE COMMITTEE ON GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTH CONGRESS FIRST SESSION __________ APRIL 8, 2003 __________ Serial No. 108-28 __________ Printed for the use of the Committee on Governmental Affairs and the Committee on Government Reform Available via the World Wide Web: http://www.gpo.gov/congress/house http://www.house.gov/reform U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2003 87-717 PDF For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON GOVERNMENTAL AFFAIRS SUSAN M. COLLINS, Maine, Chairman TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas Michael D. Bopp, Staff Director and Chief Counsel Joyce Rechtschaffen, Minority Staff Director and Chief Counsel Darla D. Cassell, Chief Clerk ------ OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE GEORGE V. VOINOVICH, Ohio, Chairman TED STEVENS, Alaska RICHARD J. DURBIN, Illinois NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware PETER G. FITZGERALD, Illinois FRANK LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire MARK PRYOR, Arkansas Andrew Richardson, Staff Director Michael D. Dovilla, Professional Staff Member Marianne Clifford Upton, Minority Staff Director and Chief Counsel Cynthia Simmons, Chief Clerk COMMITTEE ON GOVERNMENT REFORM TOM DAVIS, Virginia, Chairman DAN BURTON, Indiana HENRY A. WAXMAN, California CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland DOUG OSE, California DENNIS J. KUCINICH, Ohio RON LEWIS, Kentucky DANNY K. DAVIS, Illinois JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri CHRIS CANNON, Utah DIANE E. WATSON, California ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California JOHN SULLIVAN, Oklahoma C.A. ``DUTCH'' RUPPERSBERGER, NATHAN DEAL, Georgia Maryland CANDICE S. MILLER, Michigan ELEANOR HOLMES NORTON, District of TIM MURPHY, Pennsylvania Columbia MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee JOHN R. CARTER, Texas CHRIS BELL, Texas WILLIAM J. JANKLOW, South Dakota ------ MARSHA BLACKBURN, Tennessee BERNARD SANDERS, Vermont (Independent) Peter Sirh, Staff Director Melissa Wojciak, Deputy Staff Director Rob Borden, Parliamentarian Teresa Austin, Chief Clerk Philip M. Schiliro, Minority Staff Director Subcommittee on Civil Service and Agency Organization JO ANN DAVIS, Virginia, Chairwoman TIM MURPHY, Pennsylvania DANNY K. DAVIS, Illinois JOHN L. MICA, Florida MAJOR R. OWENS, New York MARK E. SOUDER, Indiana CHRIS VAN HOLLEN, Maryland ADAH H. PUTNAM, Florida ELEANOR HOLMES NORTON, District of NATHAN DEAL, Georgia Columbia MARSHA BLACKBURN, Tennessee JIM COOPER, Tennessee Ex Officio TOM DAVIS, Virginia HENRY A. WAXMAN, California Ronald Martinson, Staff Director B. Chad Bungard, Deputy Staff Director/Chief Counsel Chris Barkley, Clerk Tania Shand, Minority Professional Staff Member C O N T E N T S ------ Opening statements: Page Senator Voinovich............................................ 1 Representative Jo Ann Davis from the State of Virginia....... 2 Representative Danny K. Davis from the State of Illinois..... 4 Eleanor Holmes Norton, a Delegate in Congress from the District of Columbia....................................... 5 Representative Tom Davis from the State of Virginia and Chairman of the House Committee on Government Reform....... 6 Senator Carper............................................... 16 Representative Chris Van Hollen from the State of Maryland... 17 Senator Lautenberg........................................... 19 Senator Durbin............................................... 63 WITNESSES Tuesday, April 8, 2003 Hon. David M. Walker, Comptroller General of the United States, General Accounting Office...................................... 7 Hon. Dan G. Blair, Deputy Director, Office of Personnel Management..................................................... 21 Bobby L. Harnage, Sr., National President, American Federation of Government Employees, AFL-CIO.................................. 33 Colleen M. Kelley, National President, National Treasury Employees Union................................................ 34 Carol A. Bonosaro, President, Senior Executives Association...... 36 Karen Heiser, Treasurer, Chapter 88, Federal Managers Association 38 Hannah S. Sistare, Executive Director, National Commission on the Public Service................................................. 49 Steven J. Kelman, Ph.D., Weatherhead Professor of Public Management, John F. Kennedy School of Government, Harvard University..................................................... 51 Max Stier, President and Chief Executive Officer, Partnership for Public Service................................................. 53 Jeff Taylor, Founder and Chairman, Monster....................... 55 Major General Robert A. McIntosh, USAFR (Ret.), Executive Director, Reserve Officers Association of the United States.... 57 Alphabetical List of Witnesses Blair, Hon. Dan G.: Testimony.................................................... 21 Prepared statement with an attachment........................ 97 Bonosaro, Carol A.: Testimony.................................................... 36 Prepared statement with attachments.......................... 155 Harnage, Bobby L., Sr.: Testimony.................................................... 33 Prepared statement........................................... 113 Heiser, Karen: Testimony.................................................... 38 Prepared statement........................................... 190 Kelley, Colleen M.: Testimony.................................................... 34 Prepared statement........................................... 144 Kelman, Steven J., Ph.D.: Testimony.................................................... 51 Prepared statement........................................... 229 McIntosh, Major General Robert A., USAFR (Ret.): Testimony.................................................... 57 Prepared statement........................................... 259 Sistare, Hannah S.: Testimony.................................................... 49 Prepared statement........................................... 218 Stier, Max: Testimony.................................................... 53 Prepared statement........................................... 239 Taylor, Jeff: Testimony.................................................... 55 Prepared statement........................................... 254 Walker, Hon. David M.: Testimony.................................................... 7 Prepared statement........................................... 71 Appendix Daniel J. Finnigan, Senior Vice President, YAHOO!, and Executive Vice President and General Manager, Hot Jobs, prepared statement...................................................... 262 Responses to questions submitted for the record from: Mr. Walker................................................... 265 Mr. Blair.................................................... 276 Mr. Harnage.................................................. 292 Ms. Kelley................................................... 296 Ms. Bonosaro................................................. 299 Ms. Heiser................................................... 304 Ms. Sistare.................................................. 308 Mr. Kelman................................................... 313 Mr. Stier.................................................... 316 Mr. Taylor................................................... 320 THE HUMAN CAPITAL CHALLENGE: OFFERING SOLUTIONS AND DELIVERING RESULTS ---------- TUESDAY, APRIL 8, 2003 U.S. Senate, Oversight of Government Management, the Federal Workforce and the District of Columbia Subcommittee, of the Committee on Governmental Affairs, joint with the Committee on Civil Service and Agency Organization, Committee on Government Reform, Washington, DC. The Committees met, pursuant to notice, at 9:38 a.m., in room SD-342, Dirksen Senate Office Building, Hon. George V. Voinovich, Chairman of the Committee on Governmental Affairs, presiding. Present: Senators Voinovich, Durbin, Carper, and Lautenberg; Representatives Jo Ann Davis of Virginia, Tom Davis of Virginia, Chairman of the House Committee on Government Reform, Danny Davis of Illinois, Chris Van Hollen of Maryland, and Eleanor Holmes Norton, a Delegate in Congress from the District of Columbia. OPENING STATEMENT OF SENATOR VOINOVICH Senator Voinovich. The hearing will come to order. Good morning, and thank you all for coming. Today the Senate Subcommittee on Oversight of Government Management and the Federal Workforce and the House Subcommittee on Civil Service and Agency Organization are meeting to examine the Federal Government's human capital challenges. This is the OGM Subcommittee's 12th hearing on this issue over the last several years. I am very pleased that Representative Jo Ann Davis is co- chairing this hearing. Her presence here today represents an ongoing partnership that we have forged as counterpart Subcommittee Chairmen since the beginning of this Congress. I believe that the 108th Congress represents a real opportunity to enact major personnel reform for the Federal Government. I am also pleased that Senator Susan Collins and Representative Tom Davis, the Chairmen of our respective full Committees, have expressed a strong interest in moving these important issues forward this year. I think this could be a great year. Today's hearing represents an ongoing Subcommittee effort that is now in its 5th year. One of the reasons I ran for the U.S. Senate was to transform the culture of the Federal workforce, something I conscientiously undertook with the city and State workforces when I was Mayor of Cleveland and Governor of Ohio. Having worked with the Federal Government as an ``outside force''--as president of the National League of Cities and chairman of the National Governors Association--I observed that investing in personnel was not a priority in the Federal Government. As GAO Comptroller General Walker has observed--and we are very happy to have you here with us--for too long Federal employees have been seen as ``costs to be cut rather than assets to be valued.'' By pursuing a strategy of legislative reform and outreach, we have made considerable progress in raising the profile of strategic human capital management for the Federal Government. Last November, as part of the Homeland Security Act, Congress enacted key elements of our legislation, the Federal Workforce Improvement Act of 2002. This was the first major governmentwide human capital reform legislation since the Civil Service Reform Act of 1978, a quarter century ago. Our bill reflected the consensus of a wide variety of public, private, and nonprofit stakeholders. In the homeland security debate, we took the first step to address the pervasive problem by discussing some of the critical personnel issues in the Federal workforce. Now it is time to build on that debate and continue working with the General Accounting Office and the Bush Administration on the issue. GAO's High-Risk List and the President's Management Agenda both recognize strategic human capital management as their No. 1 priority. This year, Chairwoman Davis and I have introduced legislation that will advance our reform agenda. We introduced the Federal Workforce Flexibility Act, the Senior Executive Service Reform Act, and the Presidential Appointments Improvement Act in the Senate and the House. These bills will help provide the tools the Federal Government desperately needs to maximize the effectiveness of its workforce. At a press conference in this room last Wednesday, Representative Davis and I outlined in greater detail the provisions of these bills. Today, we are eager to receive the input of an array of witnesses on our legislation and other reforms that they might recommend. I thank our four panels of witnesses for joining us today. They represent some of the Nation's foremost experts on personnel management, and I look forward to their testimony. I now yield to the Co-Chair of this hearing, Chairwoman Davis, for an opening statement. STATEMENT OF JO ANN DAVIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA Mrs. Davis. Thank you, Chairman. I want to begin by thanking Senator Voinovich for hosting this important joint hearing and our invited guests for joining us here today. Many words have been spoken over the last few years about the Federal Government's human capital crisis. In fact, it is now unusual to hear the phrase ``human capital'' not followed by the word ``crisis'' when discussing the Federal workforce. This problem takes many forms: There is the potential wave of retirements as the workforce ages; the struggle for many agencies to recruit, hire, and retain talented employees, particularly in technical or scientific fields; the lack of training and career development; and as we will hear today, the concern of employees that their work is not valued. The Federal Government simply cannot function properly without good employees and managers who have the necessary tools to do their jobs for the American people. Meeting the Federal Government's workforce challenges is critical to the success of the Federal Government's core mission today and in the future. Just last week, as Senator Voinovich said, he and I stood in this very same room and announced that we were introducing several pieces of legislation that begin to address some of these challenges by giving managers more flexibility to manage their agencies, streamlining the cumbersome Presidential appointments process, and relieving pay compression at the senior levels. Allow me to highlight some aspects of the bills. The Presidential Appointments Improvement Act streamlines but does not weaken the financial disclosure requirements, puts a process in place to reduce the number of political appointees, and enlists the Office of Government Ethics in an attempt to find a balance between necessary ethics requirements and unnecessarily intrusive ones. The Federal Workforce Flexibility Act provides agencies with enhanced abilities to undertake management demonstration projects, permits agencies to pay out larger recruitment, retention, and relocation bonuses under certain circumstances, and enhances training by requiring agencies to link employee training programs with performance plans and strategic goals. Finally, the Senior Executive Service Reform Act not only alleviates pay compression for senior executives, administrative law judges, Board of Contract Appeals members, and other senior government workers, but it also moves the SES to a broader pay for performance system and simplifies some hiring provisions. I also want to repeat what I said last week. The Senator and I fully intend to work with the employee groups and the administration in shaping these bills as we move forward. That is why we are here today, to listen to and to gather ideas from our witnesses. I look forward to hearing your comments, and I thank you for coming. [The prepared statement of Mrs. Davis follows:] PREPARED STATEMENT OF MRS. DAVIS I want to begin by thanking Senator Voinovich for hosting this important joint hearing, and our invited guests for joining us today. Many words have been spoken over the last few years about the Federal Government's human capital crisis--in fact, it is now unusual to hear the phrase ``human capital'' not followed by the word ``crisis'' when discussing the Federal workforce. This problem takes many forms. There's the potential wave of retirements as the workforce ages, the struggle for many agencies to recruit, hire and retain talented employees--particularly in technical or scientific fields--the lack of training and career development, and, as we will hear today, the concern of employees that their work is not valued. The Federal Government simply cannot function properly without good employees and managers who have the necessary tools to do their jobs for the American people. Meeting the Federal Government's workforce challenges is critical to the success of the Federal Government's core mission, today and in the future. Just last week, Senator Voinovich and I stood in this very same room and announced we were introducing several pieces of legislation that begin to address some of these challenges--by giving managers more flexibility to manage their agencies, streamlining the cumbersome presidential appointments process and relieving pay compression at the senior levels. Allow me to highlight some aspects of the bills:LThe Presidential Appointments Improvement Act streamlines--but does not weaken--the financial disclosure requirements, puts a process in place to reduce the number of political appointees, and enlists the Office of Government Ethics in an attempt to find a balance between necessary ethics requirements and unnecessarily intrusive ones. LThe Federal Workforce Flexibility Act provides agencies with enhanced abilities to undertake management demonstration projects, permits agencies to pay out larger recruitment, retention and relocation bonuses under certain circumstances, and enhances training by requiring agencies to link employee training programs with performance plans and strategic goals. LFinally, the Senior Executive Service Reform Act not only alleviates pay compression for senior executives, administrative law judges, Board of Contract appeals members, and other senior government workers, but it also moves the SES to a broader pay-for-performance system and simplifies some hiring provisions. I also want to repeat what I said last week: The Senator and I fully intend to work with the employee groups and the Administration in shaping these bills as we move forward. That is why we are here today, to listen to and gather ideas from our witnesses. I look forward to hearing your comments. Thank you. Senator Voinovich. Thank you. I now yield to Danny Davis, ranking member of the Civil Service and Agency Organization Subcommittee, for an opening statement. STATEMENT OF DANNY K. DAVIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS Mr. Danny Davis. Thank you very much, Senator Voinovich, Chairwoman Davis--a lot of Davises in this particular group-- Chairman Davis, and Ranking Member Durbin. It is a pleasure to be here today at a joint hearing to consider civil service reform and the General Accounting Office's designation of the Federal Government's human capital as high risk. Over the last several years, the Senate Subcommittee on Oversight of Government Management and the Federal Workforce has held numerous hearings on civil service reform. I am pleased that this session the House Civil Service and Agency Organization Subcommittee will be equally vigorous in examining civil service reform issues. What is emerging from these hearings on civil service reform proposals is once again that the devil is indeed in the detail. To effectively reformed Federal operations and the workforce, we must first understand the logic and reasoning behind the outdated and outmoded rules and regulations. If not, we are destined to reform everything and improve nothing. For example, if the current system is to be reformed to give managers more flexibility, how can we ensure that a new system will be fair and equitable and free from political influence? Efforts to reform civil service that are based on the need for more flexibility may indeed be valid, but offering more flexibility without accountability is simply something that we cannot afford to do. Legislation that offers flexibility without accountability should not be considered unless it specifies how decisionmakers in the government will be held accountable for their actions and the decisions they make. I look forward to working with my counterparts in the Senate, Federal employee unions, research organizations, and others as we work together to improve the efficiency and effectiveness of the Federal Government and to place a higher premium on civil service. Thank you so much, Senator, and I yield back the balance of my time. Senator Voinovich. Thank you very much. We welcome Eleanor Holmes Norton. Eleanor, it is nice to have you here with us. Do you have an opening statement that you would like to make. OPENING STATEMENT OF ELEANOR HOLMES NORTON, A DELEGATE IN CONGRESS FROM THE DISTRICT OF COLUMBIA Ms. Norton. Thank you very much, Senator Voinovich. I would like to say just a few words. First of all, I would like to thank you and Chairman Davis for this joint hearing. I remember, Senator Voinovich, your calling just such a joint hearing, perhaps a couple years ago when you chaired this Subcommittee, and beginning perhaps a tradition of our working together on this really huge problem of human capital in our Federal workforce. Beginning with that flexibility in the SES makes some sense. I am concerned with human capital up and down the Federal workforce, including, of course, those who manage the system. I believe that the Federal Government has rested on its human capital laurels now for decades. The Federal Government was a natural magnet for the smartest people in the society, for the management jobs, and all up and down the line. From the New Deal on, government was exciting. But the Federal Government over the past two decades has failed to wake up to the fact that it now has become competitive with other employers. And the real indication of that is if you go into the public schools of the United States and ask people what they want to be, you will have a hard time finding somebody that says, ``I want to work for the Federal Government,'' or ``I want to have a job that is associated with the Federal Government.'' That is a problem. That is a problem whether you are talking about the SES or the line worker, and some of us happen to be at least as interested in the line workers who deliver the service and who are evaporating, having been trained by us and now going to market their skills elsewhere. I could not be more empathetic with the notion to have managers who have the flexibility to do what needs to be done because I ran a very troubled agency and had to reconstruct it from the ground up, the Equal Employment Opportunity Commission, who had a humongous backlog and literally had to change everything within the agency. I have a keen appreciation for what managers have to do. What I think we have to look at is a discipline that we have in the Federal Government that no other workforce has, and that is that you have to work within a civil service merit system. And how do you get the flexibility that is necessary to manage the system while being true to merit system principles? That is the challenge, and that is the challenge I think we should ourselves be accountable to. Thank you very much, Mr. Chairman. Senator Voinovich. Thank you, Eleanor. I would like to welcome the Chairman of the House Government Reform Committee, Representative Tom Davis. Tom, it is very nice that you came this morning. Would you like to share some opening remarks. STATEMENT OF TOM DAVIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA, CHAIRMAN OF THE HOUSE COMMITTEE ON GOVERNMENT REFORM Mr. Tom Davis of Virginia. Senator, just very briefly. I am just here because this is real important to our Committee, and we are just pleased at your interest in this, and we are hoping maybe this is the session that we can get some things moving. This is a huge problem that faces the Federal Government in the out-years. We are going to hear a lot from our witnesses today. I used to work for a company out in the Beltway, a billion- dollar IT company, and our most important asset wasn't our computers, wasn't our buildings, and it wasn't our patents. It was our people. They walked out the door every night, and we prayed they came back the next day. That was our asset, and how we rewarded and retained those people was very important to our staying competitive and staying ahead of the curve. It is the same with the Federal Government. That is our most important asset, and I think it is sometimes underutilized. And I think we will hear some great ideas today on some of the things we need to do in a proactive manner so that this human capital crisis that we face in the out-years perhaps doesn't come to pass. So thanks for your leadership; thanks to Mrs. Davis for hers. And I am just glad to be here. [The prepared statement of Hon. Tom Davis of Virginia follows:] PREPARED STATEMENT OF CHAIRMAN TOM DAVIS, HOUSE COMMITTEE ON GOVERNMENT REFORM Despite best intentions, reform of the civil service system is a long debated topic with very little progress to show for it. With the exception of a few minor steps forward, there is surprisingly little difference between today's civil service system and the original system created fifty years ago. Unfortunately, the job market outside of government has changed drastically over the last half century, necessitating that Congress and the Administration take a careful look at the civil service system to determine what changes can and should be made in order to recruit and retain the best and the brightest civil servants. The Administration has already taken the first step on this issue, assigning ``strategic management of human capital'' as one of five government-wide initiatives in the FY 2002 President's Management Agenda. More specifically, the President's Management Agenda calls upon agencies to (1) establish performance-oriented compensation systems, (2) adopt information systems that will minimize the ``brain drain'' should a wave of retirements occur in the next decade, and (3) take full advantage of existing personnel flexibilities in order to determine what statutory changes are necessary. The recently issued final report by the National Commission on the Public Service (the ``Volcker Commission'') iterated the importance that the Bush Administration has placed on the strategic management of human capital. The Volcker Commission recommended that (1) the Federal workforce be rooted in new personnel management principles that rely more heavily on government performance, (2) a more flexible personnel system be adopted, in terms of rewarding effective employees and disciplining underperformers, (3) the process of recruiting new hires be streamlined, and (4) agency managers be given the flexibility to more closely tie compensation to current market comparisons. We held a hearing with several of the members of the Commission (Volcker, Carlucci and Shalala) who all told us the importance of a new system. The Congress must work to determine which civil service system improvements must be accomplished in the coming years and legislate such improvements. Senator Voinovich. Well, thanks very much. Will the witnesses that are going to be testifying today stand? It is the custom of this Subcommittee that we swear in all witnesses. If you will, raise your right hand. Do you swear that the testimony you are about to give before this Subcommittee is the truth, the whole truth, and nothing but the truth? Let the record note that the witnesses have answered in the affirmative. The sole witness of our first panel is the Hon. David M. Walker, Comptroller General of the United States of America. It is a pleasure that Comptroller General Walker's mother and father are here with us. We welcome you to this hearing. Two years ago, Mr. Walker appeared before the Subcommittee to discuss the designation of strategic human capital management as a new item on GAO's government high-risk list. Today, the Subcommittee is interested in learning what progress has been made on this issue and to receive Mr. Walker's recommendation for strengthening human capital management so that it can be removed from the high-risk list. I would ask all witnesses, if possible, to limit their oral statements to 5 minutes each, and I remind you that your complete statements will be entered into the record. Mr. Walker, we would like to hear from you this morning. Thank you for being here. TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF THE U.S. GENERAL ACCOUNTING OFFICE Mr. Walker. Thank you, Chairman Voinovich, Chairwoman Davis, Chairman Davis, Ranking Member Davis, Ms. Norton--you are right; there are a lot of Davises here today. It makes it a lot easier, though, quite frankly. And as you noted for the record, Chairman Voinovich, my parents are here today, and for the record I want to thank them for all that they have done to help me be where I am today. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Walker appears in the Appendix on page 71. --------------------------------------------------------------------------- It is a great pleasure to appear before you today to discuss the Federal Government's greatest asset: Its people. Since GAO designated strategic human capital management as a governmentwide high-risk area in January 2001, Congress, the administration, and the agencies have taken a number of steps to address the Federal Government's human capital shortfalls. In fact, my major point today is, I believe, that we have made more progress in addressing the government's longstanding human capital challenges in the past 2 years than in the last 20. And I am confident that we will make even more progress in the next 2 years than the past 2 years. Despite the building momentum for comprehensive and systematic reforms, it remains clear that today's Federal human capital strategies are not yet appropriately constituted to meet current and emerging challenges or to drive the needed transformation across the Federal Government. Committed and sustained leadership and persistent attention on behalf of all interested parties will continue to be necessary to build on the progress that has been made and is being made if lasting reforms are to be successfully implemented. Congress has had and will need to continue to have a central role in improving agencies' human capital approaches. As part of the oversight and appropriations process, Congress can continue to examine whether agencies are managing their human capital to improve programmatic effectiveness and to encourage agencies to use the range of appropriate flexibilities available under current law--and, yes, Mr. Davis, in fact, to hold them accountable, to make sure that they are using the flexibilities in a reasonable manner and a manner that does not result in abuse. Congress will also play a critical role in determining the nature and scope of any additional human capital flexibilities that will be made available to agencies while assuring that adequate safeguards are incorporated to prevent abuse. Congress also has the responsibility to ensure the reasonableness and adequacy of financial resources that are made available to agencies for their most valuable asset, namely, their people. Congress is currently considering several pieces of legislation to help agencies address their current and emerging human capital challenges. I believe that the basic principles underlying these legislative proposals have merit, and collectively they would make a positive contribution to addressing high-risk human capital issues and advancing the needed cultural transformation across the Federal Government. I also believe that certain additional safeguards and provisions should be considered by the Congress, and we look forward to working with this Subcommittee and the Congress in that regard. Mr. Chairman, as you know, I have a lengthy statement which I would like to have included in the record, and it includes a number of specific examples about additional safeguards and possibly other provisions that this Subcommittee may want to consider. For example, in our view, the SES needs to lead the way in the Federal Government's effort to better link pay to performance. However, in our view, agencies should be required to have modern, effective, credible, and, as appropriate, validated performance management systems in place before they are granted authority to significantly link pay to performance for broad-based employee groups. In this regard, the Congress should consider providing specific statutory standards that agencies' performance management systems would be required to meet before OPM could approve any such pay-for-performance effort. Our own experience at GAO in implementing such reforms and the practices of other leading organizations, which was the subject of a report issued by the two Chairs last week, could serve as a starting point for such consideration. We, at GAO, believe that it is our responsibility to lead by example. We seek to be in the vanguard of the Federal Government's overall transformation efforts, including in the critically important human capital area. We are clearly in the lead at the present time, and we are committed to staying in the lead. We have identified and made use of a variety of tools and flexibilities, some of which were made available to us in the GAO Personnel Act of 1980, and some of which were made available by the Congress in 2000. But many of the flexibilities we have are available to every Federal agency. Overall, we have implemented a number of human capital initiatives, including a number outlined in my testimony, some of which are recent, some of which are longstanding, and others of which are planned or in progress. Many of these required one-time investments to make them a reality. We worked with Congress to present a business case for funding a number of these initiatives, and fortunately the Congress has supported these and other GAO transformation efforts. In that regard, as you know, we expect in the coming weeks to be formally approaching Congress with recommendations to provide GAO with additional statutory flexibilities in order to help us better manage our people. The legislation we are planning to recommend would, among other things, facilitate GAO's continuing efforts to recruit and retain top talent; develop a more performance-based compensation system; help better align our workforce; and facilitate our succession planning and knowledge transfer efforts. We believe that these authorities will strengthen our efforts to serve the Congress and the American people. As has been the case in the past, we also expect that the use of our authorities will provide valuable lessons for the Congress and other agencies on how human capital flexibilities can be used in a way that provides reasonable flexibility but incorporates appropriate safeguards to prevent abuse, including reasonable transparency and appropriate accountability mechanisms. Mr. Chairman, Ms. Chairman, all other Members present here today, that concludes my oral statement. I would be more than happy to answer any questions you may have. Thank you. Senator Voinovich. Thank you very much, Mr. Walker. Your testimony discusses the need to reform the current Federal pay system to reflect the knowledge-based workforce of the 21st Century versus the heavy clerical workforce of the 1950's. To that end, the Bush Administration included in the 2004 budget a $500 million pay-for-performance fund to complement the annual cost of living adjustment. This proposal has not been that well received. I have a concern about it, and that is, whether agencies have the infrastructure to fairly administer a pay-for-performance system. Now, you alluded to that in your testimony, but would you comment on what steps agencies need to take to effectively implement such a system? Mr. Walker. Senator, I believe a vast majority of Federal agencies do not have the infrastructure in place in order to effectively and fairly move to a more performance-based compensation structure. I think we ought to start with the SES, and I think that agencies need to, with regard to the broad- based workforce, develop modern, effective, credible, and as appropriate, validate performance appraisal systems that are based on key competencies, linked to their strategic plan, tied to the desired outcomes and the core values of their respective agencies. We have done that at GAO. I also believe that it is important to be able to supplement that new modern, effective, and credible performance appraisal system with such other safeguards as paneling processes comprised primarily of career executives to try to assure equity and consistency in application. I believe it is also important to make sure that offices of opportunity and inclusiveness such as ours and human capital offices are involved up front before final decisions are made on performance appraisals, pay, and promotion decisions, to make sure that they are being applied, as much as is humanly possible, consistently, in an equitable manner and in a manner that prevents discrimination or abuse. These are some of the things that I believe it is important to have in place. Conceptually, I believe that the administration is right that we need to move more towards pay for performance, but I think agencies need to have the infrastructure in place before they operationalize related authories. I also question the adequacy of the amount of performance based pay they are proposing in addition to the 2- percent base. Thank you. Senator Voinovich. Would you be willing to share with us some statutory language that could be a precondition to proceeding with such a system? We would be very interested in having that. Mr. Walker. We would be happy to provide technical assistance to these Subcommittees in that regard, Mr. Chairman. Senator Voinovich. Congressman Davis. Mrs. Davis. Thank you, Mr. Chairman. Which Congressman, him or me? Senator Voinovich. Mr. Chairman Davis. Mr. Tom Davis of Virginia. I will just be brief. Let me ask---- Senator Voinovich. I am glad they worked that out. Mr. Tom Davis of Virginia. The administration's proposal right now, your concerns about it are, first, we don't have the infrastructure really to move this ahead in an appropriate fashion. Second, I am concerned about pay parity issues. When you start giving military one and the civilian branch another, it just makes it look like this is the raise that we would have gotten and now you are going to have to earn it. And I think it creates a whole difficulty in implementing it. Let me just get your comments. You have expressed some concern about it, and I wonder if you could elaborate. Mr. Walker. I think pay parity is an important issue. My view is there is no question that we need to move more towards a performance-oriented compensation system and a more market- oriented compensation system. The pay parity system that we have right now, quite frankly, treats everybody the same, virtually. It assumes that the pay gap, for example, is the same for every position, every locality, every skill and occupation, and that is just not true. That is factually wrong. And so I think that clearly we need to move more towards a system that pays more based upon skills, knowledge, position, and performance rather than the one that we have which is basically largely a one-size-fits-all approach, so I agree that we need to move that way, but I think that one of the safeguards needs to be that before agencies would be allowed to do that for a broad cross-section of their workforce, they need to demonstrate that they have the infrastructure in place to be able to implement pay for performance in a fair, equitable, and reasonable manner. Mr. Tom Davis of Virginia. Do you think they need some additional legislation to do that, or could that be done administratively? Mr. Walker. I think that you could do that as part of legislation that would provide specific statutory safeguards that would say, for example, in order for OPM to approve an agency being able to use more performance-based compensation, they would have to meet these certain statutory standards that they could then administer. Mr. Tom Davis of Virginia. Also, isn't it a fact, I mean, in some areas every time there is a vacancy, there are hundreds of applications and there is no problem getting people at a certain pay level, and in other areas, we have difficulty getting people. We train them a little bit and we lose them. So there is disparity throughout the Federal system, and we don't treat the system that way. We seem to have a one-size-fits-all. Is that accurate? Mr. Walker. That is correct. There are certain critical occupations where you need to be able to use additional tools in order to attract and retain people, and I think that our system needs to recognize that. It does to a certain extent. Agencies have the ability to pay recruiting bonuses and retention bonuses, and I know that one of the provisions in the legislation under consideration would enhance that with regard to certain critical occupations. I think that has intellectual merit as long as you have adequate safeguards to make sure that people are using the authority when it is justified and not doing it in situations where it is not. Mr. Tom Davis of Virginia. I also am concerned about so much work is being outsourced simply because we don't have an in-house capacity. We don't have any in-house check and it is going out the door because of a capacity issue. And we are having difficulty particularly in some technical areas recruiting, training, and retaining people in some of these areas. Mr. Walker. Well, the sourcing issue is a very important issue. As you know, I chaired a panel last year, the Commercial Activities Panel, that make some recommendations on sourcing strategy. There are several contracting areas in the Federal Government that have been on our high-risk list for years-- NASA, IRS, DOD, DOE, just as an example, where they have contracted out a significant amount of activities without providing an adequate number of Federal workers who have the skills and knowledge, to be able to manage cost, quality, and performance. It is critically important that the Congress adopt the recommendations of the Commercial Activities Panel, that the administration follow them, and that we have an adequate number of people to be able to manage whatever we decide to contract out. Mr. Tom Davis of Virginia. Thank you, and I am proud to claim you as a constituent. Mr. Walker. Thank you, Mr. Chairman. Senator Voinovich. Representative Davis. Mrs. Davis. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Mr. Walker, the Homeland Security Act of 2002 which was enacted on November 25 requires the appointment of chief human capital officers in the major agencies. The chief human capital officers are to advise and assist the agency head and other agency officials in carrying out the agency's responsibility for selecting, developing, training, and managing a high- quality, productive workforce, as well as implementing the rules and regulations of the President and OPM and the laws governing the civil service within the agency. These chief human capital officers are to be appointed by the agency head within 180 days of the enactment of the Homeland Security Act, which would be May 24, 2003. Do you know how that process is coming along? Mr. Walker. I am going to be meeting with OPM Director Kay Coles James this afternoon on several topics. That is one of the issues that I plan to discuss with her. I believe it is critically important that we get this right rather than do it quick. These positions need to be filled with the right type of people. This is a strategic position. It is one that is fundamentally different from many of the types of personnel or human resource positions that we have had in the Federal Government in the past. And I think it is important that we have a governmentwide approach that assures some consistency in how we are filling these jobs. In other words, I think it is important, and hopefully OPM is playing an active role in working with the agency heads, to make sure that the type of people that they are proposing to appoint in fact are the type of people that are necessary to get the job done. And I will be making that inquiry this afternoon. But in the final analysis, I think it is much more important to do it right than to do it quick. Mrs. Davis. Could you, after you meet with OPM, get back to us with a report on where they stand on these appointments? Mr. Walker. I would be happy to do that. Mrs. Davis. Thank you, Mr. Chairman. Senator Voinovich. Would you now like to call on your Ranking Member? Mrs. Davis. Yes. Now I will call on my Ranking Member, Danny Davis. Mr. Danny Davis. Thank you very much, Madam Chairman. Mr. Walker, it is good to see you again. I want to thank you so much, and especially I want to thank you for the responsiveness of your agency to inquiries and requests that I have made for information, analysis, and studies. We really appreciate that. I appreciated your comments relative to emphasis on leadership and accountability as well as the idea that financial resources must be available in order to have the kind of capital structure that we need in terms of the ability to take care of the human elements that must be employed. I also appreciated the idea that the Federal Government has to be and should, in fact, be the leader, and that leadership has to go in the areas of recruitment, development, and especially inclusivity, that is, being able to reach out throughout the breadth and depth of America and make sure that our workforce seriously looks like America in a real kind of way. It is my understanding that the Managing Director of the Office of Opportunity and Inclusiveness reports directly to you. Could you tell us what the value of having this person or this office report to you is? Mr. Walker. Thank you, Mr. Davis. We are happy to support your requests. You have had some very good ones Ron Stroman, who is our Managing Director for Opportunity and Inclusiveness, reports directly to me. He is directly responsible for trying to make sure that our agency is taking affirmative steps to reach out to hire a diverse workforce, that we have appropriate policies, procedures, systems, and safeguards in place to maximize opportunity for all of our employees and to prevent discrimination. It has helped tremendously because, first, Ron is a first-class professional. He is one of the top people in his field in the country, not just in the Federal Government. Second, by having him report directly to me and by having us work together on an ongoing basis, it demonstrates clear commitment from the top of the agency to this important element of human capital strategy. And we have made considerable progress in the recent past, in part as a result of the efforts of Ron and his team. Mr. Danny Davis. Does each agency or government unit have such an individual internally? Mr. Walker. Well, my understanding is there are a number of offices that have Offices of Civil Rights. My view is those terms are somewhat outdated. It is really about what you said. It is about opportunity, equal opportunity, and inclusiveness, and it is taking affirmative steps to try to achieve that while at the same point in time not compromising standards and assuring reverse discrimination. And so the answer is no, I do not believe that each agency has something like we do. And to the extent that they have an office, it may not be approaching its duties and responsibilities in the same way that we are. I am not saying that ours is right or necessarily even the best, but it is fundamentally different from what I saw when I headed two Executive Branch agencies. Mr. Danny Davis. And, finally, Mr. Chairman, if I might, following up on a line of questioning by Chairman Davis relative to outsourcing, and privatizing, I have always wondered whether much of our activity in outsourcing is philosophical or is it based upon need, or do we have the ability to develop the competencies that are needed in certain lines of activity? And do we have enough call for that internally so that our own workforce would be able to provide those services effectively and efficiently and if there aren't some areas where we really don't use the talent as effectively as we could? Mr. Walker. Several answers. First, I think at times it has been philosophical. For example, in the Eisenhower administration, the policy was if it could be done by the private sector, it should be done by the private sector. Sometimes it is political because of campaign promises that are made that deal with this issue. But there are market factors as well. The fact of the matter is that the government, even if it wanted to be able to attract and retain people to perform certain functions, if because of its compensation policies or practices or whatever else, it can't attract and retain an adequate number of people, then you have to go to the private sector. You don't have a choice but to do that. And sometimes the government hasn't adequately invested in its human capital, in its own people, and that has served to undercut its capabilities, and there is an opportunity cost there. So I think it is multidimensional. Mr. Danny Davis. Thank you very much, Mr. Chairman. Senator Voinovich. Madam Chairman. Mrs. Davis. Now I would like to call on Ms. Norton for questions. Ms. Norton. Thank you, Madam Chairman. Mr. Walker, I appreciate your testimony. I myself perhaps by training, particularly when embarked on a new adventure, I am impressed by the power of precedent. You spoke in your testimony of existing flexibilities that the Federal Government has had. I would be most interested in how those existing flexibilities might inform this far more contentious notion of pay for performance. For example, you even say in your GAO report that the GAO has been leading by example, and you cite examples of that-- broadbanding, voluntary early retirement, recruiting, and a number of other examples. Of course, those are not nearly as contentious as telling people they are going to be paid by what somehow somebody says they have performed, especially when we were told in a prior hearing that this is really a case study for use on the entire workforce. So I would like to know what you have done to look at the flexibilities that the government already has, whether they have been evaluated, and what they tell us already about flexibility and how it is working in the Federal Government. Mr. Walker. Well, first, I do not believe that agencies are coming close to using all the flexibilities that are available to them, but there are various reasons why they may not. In some cases, they may not understand them. In some cases, they may not have the funding. For example, student loan repayment, which Congress passed, GAO has the second largest student loan repayment program in the Federal Government, yet we only have 3,200 employees, which is very small as compared to most departments and agencies. Yet, we have the second largest student loan repayment program in the Federal Government. In addition to that, we have done a number of things in the recruiting area to use some of the flexibilities with regard to retention bonuses, recruiting bonuses, things of that nature that are available to others, and others may not have done that. We have broadbanding. That is something that we were granted in 1980. Most agencies don't have that. I think that is something that---- Ms. Norton. Mr. Walker, has anybody looked at anybody's version of the flexibilities for outcomes to see whether they work or not? I recognize what you are saying, that agencies for various reasons haven't always implemented them. But we have got flexibility. We are now going to even greater flexibility. I am trying to find out whether GAO or anybody else has looked at what flexibility has done for us already. Mr. Walker. We are doing some work in that regard, and I imagine that OPM can probably comment on what they are doing. There are case studies out there. There are case studies where there have been demonstration projects in the past, where people have been granted certain flexibilities and have used them, and I think it is important that they help to inform the Congresss' decision going forward. Ms. Norton. Should this be a demonstration project? You certainly start with the SES at the smaller and top element of the government. Again, going back to my own experience, when I had to undertake huge changes in an agency, the reason I think it succeeded was that we didn't do it all at one time, that we did what we called a pilot project, in this case in various regions, learned from that project, kept from making the mistakes writ large. Is it your recommendation that pay for performance be implemented straight out throughout the SES or that some smaller version or pilot project which would allow us to discover mistakes be started once we have the appraisal system that you think is the prerequisite for starting it all? Mr. Walker. Well, first, I think that we need to learn from the demonstration projects we have already had, and that is one of the things that we are looking at, and hopefully OPM as well--those that have been given some flexibilities, what have they done? Ms. Norton. I am talking about pay for performance. Mr. Walker. I understand that. I am talking about that, too. There are situations where others have been given flexibility in that regard, and we ought to study that. Ms. Norton. And we have no outcome from that that has already been evaluated? Mr. Walker. We are doing some more evaluation, but some has already been done. I think the SES is the logical place to start. Ms. Norton. With the whole SES? Mr. Walker. I think it is also important that you have modern, effective, and credible performance appraisal systems for the SES before you implement it as well. And I am not convinced that many Federal agencies have that. My view is that if you can end up incorporating statutory safeguards that must be considered by OPM before they could approve an agency being able to use it either for their SES but especially for the rank-and-file, if you could do that as a condition of being able to operationalize additional pay for performance authority. It would be very substantive. Ms. Norton. Now, you said certified--I think you used the word ``certified''--appraisal systems or performance management systems. What do you mean by ``certified''? Mr. Walker. I mean that OPM would have to certify that in their view the statutory conditions have been met. Let me give you an example in the case of GAO. For us, we have developed a modern, effective, and credible performance appraisal system that is based on competencies, tied to our strategic plan, and for our broad-based workforce, the competencies were validated by the employees before we implemented it. It is not perfect. It is a huge change from the last prior system. But our employees actively participated. They validated the competencies, and, therefore, I think that is something that is desirable and a best practice. Ms. Norton. The validation, the notion of validation studies and validation seems to me is going to be absolutely critical, or else this system--we know what this workforce is. It is highly educated. It is conscious of its rights. And one of the first outcomes could be a whole bunch of grievances in court suits if, in fact, there is not a validated system put in place. Thank you very much, Madam Chairman. Senator Voinovich. Senator Carper. OPENING STATEMENT OF SENATOR CARPER Senator Carper. Thanks, Mr. Chairman. To General Walker, welcome. Good to see you again. Thank you for joining us. To our House colleagues, to Representative Davis and to Representative Davis and each of the other Representatives, we welcome you and thank you for coming to this end of the Capitol. As an old Governor, I was one who was interested in trying to introduce pay for performance for our State employees in Delaware. I suspect former Governor Voinovich had some interest in Ohio along those lines as well. Interestingly enough, it was our legislature which generally blocked our efforts. We made some progress but not to the extent that we wanted to. There are some States and probably some cities that did better than we did in the 8 years I was Delaware's chief executive. Delegate Norton was talking about pilot projects and that sort of thing. I wonder if there are some pilot projects out there that you might be aware of within State or local governments so we can almost use them as a pilot project because of their role as laboratories of democracy. Are you aware of any that are especially---- Mr. Walker. Not off the top of my head, Senator, but I will tell you that is something that we can look into, if we are not already. One of the things that we are doing increasingly at GAO is trying to partner with State and local officials, especially the auditor generals, State auditors and county and city auditors, to try to share knowledge and information. And this is one I could follow up on. Senator Carper. You may know, there is an organization of State budget directors and State personnel directors as well who have a lot of interest in these kinds of issues. Let me just ask, to back up a little bit, if you could give us a road map of sorts. What might be the appropriate next steps for us as legislators as we consider pay for performance, something that actually rewards good performance but something that tries to provide safeguards for employees? Mr. Walker. My view is start with the SES with some type of standards that would even have to be met within the SES. Look to some demonstration projects, and provide for additional demonstration projects for broad cross-sections of the workforce within the Executive Branch, and also the Legislative Branch, GAO specifically. But, again, they should have to demonstrate that they have these safeguards before they end up implementing the pay-for-performance system. We have done that at GAO. We have them for most of our workforce. It is not a promise. We believe in the Missouri principle, ``Show me,'' and we can show you. And so I think if you do that, what will happen is that we will see what works and what doesn't work. We will learn some valuable lessons. One of the concerns that I have is if you go too fast on pay for performance before people have their systems in place, then you can end up having a bunch of disastrous experiences which could taint the whole concept. And I believe the concept is right. I believe we need to place increased emphasis on pay based on skills, knowledge, position, and performance, but we need to be careful how we do it, or else we are going to get off to a bad start, and that is not going to be in anybody's interest. Senator Carper. Last year, we debated and voted on some proposals by Senator Voinovich and Senator Akaka with respect to flexibility for Federal agencies, in the context of the creation of a new Department of Homeland Security. Could you make some comments on what we did legislatively, what kind of extra flexibility that gives to Federal agencies and how that might be used? Mr. Walker. Well, as you know, Senator, not only did you provide certain additional flexibility to the Department of Homeland Security, which was controversial and contentious. If you will recall, that was kind of the last thing that got resolved in the legislation. Senator Carper. I recall that. Mr. Walker. Yes, I am sure. I didn't have much hair that I could lose, but some may have lost some as a result of that. But, in any event, in addition to that there were provisions that Chairman Voinovich proposed that were adopted governmentwide and they provided additional flexibilities. I might note for the record that some of those were ones that GAO had already demonstrated could be successfully implemented, such as the ability to provide voluntary early- outs and buyouts to realign the workforce rather than to downsize the workforce. So I think it was a positive step forward. Senator Carper. All right. Good. Thanks very much. Senator Voinovich. Congressman Davis, do you want to call on your next witness? Mrs. Davis. Yes. Mr. Van Hollen. STATEMENT OF CHRIS VAN HOLLEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND Mr. Van Hollen. Thank you, Chairman Davis, Senator Voinovich. Welcome, Mr. Walker, It is great to have you with us today. As you may know, I represent an area of the Washington suburbs where we have lots of Federal employees, and so this whole topic is, of course, of great interest to them and to myself. Just to follow up on Congresswoman Norton's comments with respect to demonstration projects and phasing this in, we had a hearing on our Subcommittee recently where we got into the pay- for-performance issue, and one of the things that came out, as I understood it, was that even now we are talking about phasing in these new performance standards and linking them, obviously pay to performance. But there is really not any set of sort of uniform standards now that we can apply. Is that right? Mr. Walker. That is correct. I think the one thing that agencies need to do that doesn't require any legislation at all is to develop modern, effective, and credible performance management systems and to put them in place. There is no legislative action necessary for that to happen. Mr. Van Hollen. And that is my point. Why not as a first step at least get the standards in place before we establish the next link, which is to tie it to pay? I mean, let's at least get these performance measures in place on a uniform basis. That in itself is going to be a large task. I appreciate the fact that you have done it at GAO. I think that is terrific. But I think we should begin to do it in the agencies, give that time, give people time to adjust to those performance standards before you take the next step. And I wonder if you could respond to that. Mr. Walker. Well, and my point on that is I think you can do that reasonably expeditiously among the SES, and I think that it would make sense for you to be able to allow for some additional demonstration projects with appropriate statutory safeguards that would have to be met. For other agencies to do it as a test, for a broad cross-section of their workforce, I do think that would be appropriate. But, again, I think that the agency should have to demonstrate that they have these systems and controls in place before they should be allowed to implement any additional pay flexibility. But ultimately I think this flexibility should be broad-based throughout the government. Mr. Van Hollen. I guess my point is, the administration has introduced legislation on this issue, but they have got a lot of freedom right now to do a lot of things without the legislation that they have not done. And it just seems to me to make sense to allow people to become comfortable with the standards before you begin the linkage. Mr. Walker. They do, but in fairness, Congress last year, for example, passed a 4.1-percent pay raise, but only funded 3.1 percent. There was a 1-percent unfunded mandate which somehow has to be made up. And in addition to that, that 4.1 percent was given to every Federal worker, no matter what their skills, knowledge, performance, and position was, even people that were unacceptable performers, which is a very small percentage. Unacceptable performers got the same thing as the top person in the agency. That is just wrong. And so ultimately we need to move towards a more modern, effective, and credible system, but we need to be careful how we do it. Mr. Van Hollen. Right. Well, I am not sure the fact that the full 4 percent wasn't originally provided is the reason the administration can provide for not going forward. After all, they never requested the 4.1 percent for the civil service. And, in fact, in this year's appropriation, they have only requested 2 percent. So I think it is difficult for them to point to that as a reason they are not moving forward. Let me just ask you one other question with respect to the Senior Executive Service because, on the one hand, I understand the reasons for moving forward with the Senior Executive Service first. On the other hand, sometimes with other jobs in the Federal Civil Service, it is easier to measure performance. Sometimes at higher levels, certain types of jobs--Deputy Assistant Secretary for the Near East or South Asia--it is harder to measure the performance, more difficult than, for example, if you are measuring against a procurement contract and savings in that kind of area. What do you think the dangers--and this is true of a Republican or a Democratic administration. But obviously, in the Senior Executive Service you have much more interaction between the political appointees and the members of the Senior Executive Service. How do you analyze the dangers of really just compensating people based on willingness to support a particular political position within an administration? This is a danger in either administration. I just would like you to evaluate that. Mr. Walker. I would recommend that you do it using a competency-based approach, which actively involves employees and their unions as appropriate in developing what those competencies ought to be. I think you also have to not only have an appropriate performance appraisal system, I think you have to have things like paneling processes, which are comprised primarily, if not exclusively, of career officials that will end up taking that information and others to try to make recommendations on pay, promotions, and other types of human capital issues. So I think there are a number of things that can and should be done. In most cases, we have already done them at GAO, and selected other people may have as well. Mr. Van Hollen. Thank you, Mr. Chairman. Senator Voinovich. I would like to point out to Members of the House and Senate here this morning that Mr. Walker has to be at a hearing on the House side at 10:30. Mr. Walker. And I do not believe in cloning. [Laughter.] Senator Voinovich. Senator Lautenberg, would it be all right with you if we excused him, or would you like---- OPENING STATEMENT OF SENATOR LAUTENBERG Senator Lautenberg. Yes, if he agrees with us, absolutely. [Laughter.] I understand that Mr. Walker takes a somewhat cautious view of the quick conversion to commercial or to the private sector side. And I will just say, Mr. Chairman--I commend you for holding this hearing--that I have spent much of my life in the corporate world and I built a large company and saw people hard at work. I then came here and saw people work for a lot less money, who were equally committed, dedicated folks. I think we have to keep that in mind before we arbitrarily decide that we can put out everything on the cheap and hire the lowest-cost labor that we can find. That is no way to do things. So I concur, Mr. Chairman, as long as I can put my statement in the record as if read. PREPARED STATEMENT OF SENATOR LAUTENBERG Mr. Chairman, I commend you for holding this hearing and for your recognition of the looming human capital crisis in the Federal Government. Today's joint hearing is about people. Civil servants are the backbone of our government and we should remember that the skills, talent, and professionalism of the men and women in the Federal workplace are the best in the world. The overwhelming majority of civil servants are dedicated to their jobs. Many of them could make more money in the private sector but they work in the government because they see public service as a higher calling. It's crucial that we all hold civil servants accountable for the jobs they do. But it's also important that we avoid demeaning and denigrating them. Too often, administration officials, political appointees, and Members of Congress take potshots at career Federal employees who can't defend themselves and that does nothing but lower morale. As a former businessman, I appreciate the administration's need for flexible recruiting, hiring, and retention policies. But as a public official I am equally aware of the fact that ``flexibility'' should not mean undermining basic civil service job protections. The Civil Service was created as a remedy to the rampant political excesses and abuses of the previous system. While the Civil Service may need to be modernized, at its core it has served this country well over the years. I must say that I am very concerned about the administration's announced intention to ``complete'' 127,500 Federal jobs by September 30, 2003. I am particularly concerned about the administration setting an arbitrary quota and an impossible deadline for privatization, and then deliberately withholding from agencies the financial resources they need to conduct the public/public competitions. I get the impression that the administration has determined in advance the way these competitions should go, and that's to the private sector. We need to address the way in which we plan to balance privatization--the contracting out of Federal jobs--with Federal employee recruitment, retention, and morale. Beyond the issue of deciding what to contract out, there is something even more fundamental: That's giving agencies the personnel and the other resources they need to do their jobs. If we don't do that, we are just setting them up to fail. I'll give you an example of what I mean: We have created the Department of Homeland Security (DHS) but the administration has repeatedly submitted appropriation requests that are--frankly-- insufficient to enable DHS to achieve its mission to protect Americans here at home. Government should be as efficient as possible but we simply can't expect government to do its job ``on the cheap.'' There is an old saying, ``You get what you pay for.'' To continue recruiting and retaining skilled and dedicated civil servants, the Federal Government needs to offer competitive wages, health benefits, and retirement plans. Many people correctly point out that taxpayers are the owners of the Federal Government and deserve the most effective and efficient government possible. I agree, but I would also point out that Federal employees are taxpayers, too, and they have ``invested'' even more than their taxes--they have invested their working lives. They deserve to be treated fairly and with respect. Doing so will maximize all taxpayers' value. Mr. Walker. Mr. Chairman, I am happy to answer any questions for the record or meet with any Member on this issue if they so desire. And I appreciate your understanding. Senator Voinovich. Thank you very much, and I think Senator Lautenberg is very valuable in this because of his experience in the private sector. He has some insight into it that a lot of us don't have. Thanks for being here again. Mr. Walker. Thank you. My pleasure. Senator Voinovich. Our next witness is the Hon. Dan G. Blair, Deputy Director of the Office of Personnel Management. Dan, I want to welcome you back to the Senate. Prior to his appointment with the Bush Administration, Mr. Blair served as senior counsel to Senator Fred Thompson, former Chairman of the Governmental Affairs Committee. He brings nearly two decades of experience in personnel and government management to his position, and we are glad to have you here this morning. Dan, you may proceed with your statement. TESTIMONY OF HON. DAN G. BLAIR,\1\ DEPUTY DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT Mr. Blair. Thank you, Mr. Chairman, Madam Chairman, Members of the Subcommittees. Thank you very much for the invitation to testify this morning. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Blair appears in the Appendix on page 97. --------------------------------------------------------------------------- On behalf of OPM Director Kay Coles James, I am pleased to provide the Subcommittees with an overall assessment of the state of the Federal workforce. I have a rather lengthy written statement, and with your indulgence, I will gladly summarize. So, where do things stand today, some 2 years after GAO first put the Federal workforce on its high-risk list? Back then, almost all the news was bad. We saw an impending retirement wave which threatened a debilitating brain drain as well as the risk of outstripping the capacity of agencies to find skilled applicants to take their place. Now there is some good news to report. While the number of retirement-eligible employees remains high, we haven't seen the mass exodus that was predicted. Indeed, separation rates have declined. Further, our recent human capital survey showed that over 90 percent of our employees think that their work is vitally important, and a similar percentage said they believed their work contributes to their agency missions. Hence, the importance of the President's Management Agenda and its priority in placing the strategic management of human capital as first on the list. The President directed OPM to take the lead responsibility for assessing how well the departments and agencies managed their most vital asset--their people. We measure our success by the progress agencies make in placing the right people in the right jobs and managing them in ways that help achieve mission goals. OPM, the Office of Management and Budget, and GAO collaborated this past year in adopting the ``Human Capital Standards for Success'' \2\ to help agencies address their human capital management more strategically. These are the standards we use to score agency performance each quarter, and the scoring process has eliminated agency efforts to better manage their workforces. As a result, most agencies recognize the need to assess the strategic value of their position and the competencies required to perform that function. Managing the workforce effectively is recognized as a means to achieving mission goals. --------------------------------------------------------------------------- \2\ The information referred to submitted by Mr. Blair appears in the Appendix on page 109. --------------------------------------------------------------------------- To aid the agencies, OPM developed a human capital and accountability framework to help agencies better understand exactly what we are looking for when we are assessing them. We use it as a tool in assessing the agencies as well as making it widely available as a self-assessment tool. This shared framework has made our discussions more focused and more productive. While red scores still predominate on the scorecard, the scores reflect the need for agencies to operate better. Agencies spent their first years concentrating on linking human capital practices to mission results. Workforce planning strategies are being used to identify and anticipate skills gaps, and agency leadership is taking ownership of the initiative. Aligning human capital strategies with departmental mission goals has been challenging, yet progress has been made. While green is the ultimate goal, achieving yellow status indicates significant progress. Agencies that have shown progress include the Department of Energy and the Department of Labor for successfully linking performance expectations for managers to agencies' strategic plans and mission objectives. Their performance appraisal systems are designed to make meaningful distinctions by rewarding high performance. Other agencies have also shown improvement in workforce planning, identifying competencies for mission-critical occupations, and other human capital strategies. Just as the GPRA, Government Performance and Results Act, directs agencies to track organizational performance, we believe the government must adopt compensation practices designed to spur and measure individual employee performance. Indeed, performance-oriented pay is embraced by the merit system principles which call for appropriate incentives and recognition for excellence in performance. To bolster these efforts, the administration has proposed allocating $500 million to the new Human Capital Performance Fund to allow agencies to give extra pay raises based on an employee's superior performance or possession of skills critical to the agency's mission. The Fund provides an incentive for agencies to begin making meaningful distinctions in and rewarding superior individual performance. While progress is needed in developing robust performance appraisal systems, the Departments of Energy and Labor show it can be done. Further signs of progress can be found in last year's Homeland Security Act, which included a number of significant governmentwide human capital reforms. Thank you, Mr. Chairman and Members of the Subcommittees, for work that you performed in obtaining enactment of those very important legislative initiatives. Included in these reforms were the ability for agencies to replace the rule of three with category ranking and hiring assessment and for limited direct hire ability for critical and shortage occupations. Further, the workforce shaping tools of voluntary early retirement and governmentwide buyout authority will help agencies address skills and balances. The most attention, however, will be paid to the actions of the OPM Director and the Department of Homeland Security Secretary in designing new pay and personnel systems to bring together the employees of the 22 agencies that now make up the Department of Homeland Security. Your letter of invitation also asked that we address specific legislative proposals. First, I am pleased to report that OPM supports many of the provisions of the Federal Workforce Flexibility Act of 2003, S. 129 and H.R. 1601. We recognize that the proposal builds on the Managerial Flexibility Act from the last Congress, and we look forward to working with you in the Congress on this important legislation. We also look forward to working with you to refine the proposed Senior Executive Service Reform Act of 2003, noting that the basic features of the proposal were included in the President's budget for fiscal year 2004. Again, thank you for your leadership and the opportunity to address these important issues. I am pleased to answer any of your questions. Senator Voinovich. Thank you very much, Mr. Blair. OPM's recent human capital survey of Federal employees pointed out something that was rather astonishing to me, and that is that only 27 percent of Federal employees feel that poor performers are dealt with. As you know, S. 129 and H.R. 1601, the Federal Workforce Flexibility Act of 2003, includes a provision to provide special training to managers to help them deal with poor performers. I suspect, however, that legislation alone will not solve the problem. I would like to know what you have done across the board to provide managers with the tools, resources and knowledge to effectively handle poor performers. Mr. Blair. Well, I think training, as you recognize, is a very important component of any performance management system, and training in government oftentimes has lagged behind what our expectations should be. Given that, the Director is very committed and has put forth in the scorecard efforts ways of rating and ranking the agencies--not ranking, but rating the agencies in terms of what they are doing in performance and what they are doing to train managers to perform better. This is extremely important if we are going to have a successful performance management system. Senator Voinovich. Well, you heard the testimony from David Walker. The administration is talking about going forward, and if you have only 27 percent of Federal employees that feel that poor performers are being handled properly, how in the world can you possibly go to a new system that is going to provide pay for performance across the Federal Government? Mr. Blair. Well, let's recognize that right now our pay systems have very little performance component to it. There is very little incentive for agencies or for managers to exercise vigorous performance management because we don't back it up with real money or real dollars. The creation of the Human Capital Performance Fund actually puts real dollars behind what our efforts will be and says that we want you to rank your employees, we want you to look at individual performance and assess it accordingly, and if you are performing in a superior manner, we are going to pay you for it. Our systems don't allow us to do it right. There is no incentive to do so. Senator Voinovich. Well, you heard the testimony from David Walker talking about the effort that they made in GAO to get ready for pay for performance, and then his comments about the posibility of conducting some demonstration projects to test this concept in other agencies. And we were just talking about the Senior Executive Service. The general opinion is that across the board, apart from the SES, there is no infrastructure in place to really do pay for performance. And what I just heard from you is that if we simply provide this additional money, all of a sudden, voila, we are going to have a pay-for-performance system because there will be incentive for it. The President has announced this initiative. I would like to know specifically what do you have in place to handle this system in the event that it would become a reality. Mr. Blair. Well, we have this scorecard process in place in which we are assessing agencies on how well they perform performance management. It is a key component in an agency's effort to get from red to green. We are in the process of doing that. In addition, the Homeland Security Department last year, in order for agencies to raise the total aggregate compensation cap, they were asked to--OPM and OMB were asked to develop regulations in order to certify the agencies can make those meaningful distinctions. So processes are already beginning to be in place, but you have to remember that in order to move to a system like this, you have to provide the incentive. The Human Capital Performance Fund doesn't jettison the General Schedule. The General Schedule remains in place. Step increases remain in place. And the President has also provided 2 percent across the board. And so it builds on the present General Schedule system. However, we strongly believe that we need to put more than just words behind our efforts at better performance management, and that is why we say let's dedicate some real dollars to it. And that is what the Human Capital Performance Fund would do. Senator Voinovich. Well, I would like to see the letters and recommendations to the departments. I would like to see the standards that you have set for whether or not agencies have pay-for-performance systems in place and whatever else you have done to prepare for this, because this is a major undertaking to go forward with it. I have been through it. And unless you have had some real significant training for people in that process, you are setting it up for failures. I guess the suggestion here, and you might carry it back to Director James, is that a lot of us believe--and this is in a bipartisan basis--that we are not prepared to go forward with this system, perhaps even in the Senior Executive Service. We might have to just pick out certain areas in the Senior Executive Service where we have really validated that they do have a real performance-based pay system in place before we would move forward with it. Mrs. Davis. Thank you, Mr. Chairman. I have to agree with you. I almost feel like we are getting the cart before the horse. And I may be wrong on that, but I am anxious to see what you do have in place. And I have a lot of questions here with regard to the $500 million Human Capital Performance Plan, and I am going to submit them for the record because I don't have time to ask them all. But just for instance, the compensation that OPM would allot to the different agencies would depend on the strength of the plan that the agency puts forth, which to me is contrary to the whole performance-based merit system that you are talking about for the individual's work because it wouldn't have anything to do with the individual's work. It has got to do with the plan, the strength of the plan that the agency comes forward with. And you heard me ask the question to Mr. Walker about the chief human capital officers, and I would be curious if you could get back to us on what OPM has done for guidance, if you have been involved at all with the guidance, and when you expect them to come out. Mr. Blair. We will be putting out further guidance on that. In addition, the legislation calls for the council to be up and running by May 24, I believe, and we are on schedule to meet that deadline. Mrs. Davis. You are. As far as the SES goes, in our hearing last week we heard testimony that they would prefer that--the SES would prefer that we not do a one-band pay schedule, but they would prefer to see something like a three-band. Is it the administration's policy--do you believe that they would be looking at reducing the pay of some of the SES with that one-- -- Mr. Blair. Well, under the proposal as it is written, no member of the SES would receive a reduction in pay the first year. And we certainly are not about in our proposal stripping or taking away current safeguards. We want to make sure that there are safeguards in place, and we believe that we can do so by regulation to ensure against arbitrary and capricious behavior on the part of agency managers. But let's remember the context in which this proposal is being made. We are talking about pay compression, and we are talking about giving significant raises to members of the Senior Executive Service. The quid pro quo here is that the raises are going to be based on performance and merit, and we need to tell it to the American people that, yes, in order to justify these raises, we can justify them based upon the good performance and that these executives are helping their agencies meet their critical mission goals, and we think that is very important. It shouldn't be across-the-board pay raises. Mrs. Davis. Let me get to an issue that I don't know if you can answer or not, but on the monster.com website, there is a very interesting section on diversity and inclusion. It mentions that in 2001 women earned 76 percent of what men earned, according to the Bureau of Labor Statistics. Further, it mentions that though the gap has been closing, it is still a reality in the American workplace. This has been attributed to the fact that most women do not negotiate their compensation, though they are better at negotiating for others than they are for themselves. Does the Federal sector have as abysmal a record as the private sector in the pay gap area for women? And if not, has this been indicated in the recruiting materials that are available to potential hires, not just the equal opportunity information that you have to give? Mr. Blair. I believe GAO may have done some work on this issue back in the late 1980's and early 1990's in looking at female-dominated occupations. I can't exactly remember the work they did in this area. I do know that in the Federal Government we have an abundance of what we call internal equity within our system, and that means that we look at the job and we pay the job according to not who you are but on what you do. And so we can provide for the record information on what the pay gap--if it exists in the Federal Government, what that would be, and for possible reasons for that. Mrs. Davis. I would like to see that diversity across the board, not just women but diversity totally, because I do hear from folks that we just don't have enough in the Federal workforce, and I haven't seen any reports on it so I can't speak to it. Thank you, Mr. Chairman. Senator Voinovich. Congressman Davis. Mr. Danny Davis. Thank you, Mr. Chairman. Mr. Blair, you began your testimony with the good news that there had been a decline in separation from what was projected 2 years ago. Has there been any effort to determine why this declination is occurring beyond the fact--I mean, you did mention that the economy had been flat and that may have had some impact. But has there been any effort to determine other factors that may have attributed to this decline? Mr. Blair. Well, I think we can look at the events of September 11 and people realizing the work that they were doing was important, and it contributed to the agency's mission. We saw in the human capital survey that overwhelming numbers, large numbers of Federal employees believe that the work that they did contributed immensely to the work of their agencies. So I think that is good news, and projecting retirement rates in the future always has an element of chance to it. A flat economy means that there aren't the opportunities out there. However, the flip side of that is that once the economy starts to become robust again, are we going to find ourselves facing a huge retirement wave? And one of the things we did also find out in our human capital survey is that we don't do a good job in government of rewarding good performance. And so those are some of the things that we are trying to change in government. I think things have improved for the better over the last 2 years. The attention that the House and Senate have paid to this issue, the attention that GAO has paid to this issue, the President's Management Agenda listing the strategic management of human capital as first on the list, I think all put together it spells good fortune for us. That said, we have a long ways to go, and we are working hard making sure that we have further improvements. Mr. Danny Davis. Mr. Walker in his testimony stated that OPM plays a central role in helping agencies tackle the broad range of human capital challenges. Are the agencies coming to OPM seeking guidance and really asking for your assistance, help, and direction? Mr. Blair. We are going out there and giving it. We recently restructured at the Office of Personnel Management, and effective March 1, we have an OPM which is structured with the intent to more effectively deliver our goods and services to our customers. And we view chief among our customers as the agencies and departments that we serve. We have a new division for Human Capital Leadership and Merit System Accountability which is the driver of the President's scorecard. At the same time, they are also the ones out advising agencies who are seeking help on better ways to effectively manage their human capital. Mr. Danny Davis. So you are saying you are going out to them more than they are coming to you? Mr. Blair. We are going out to them and they are coming to us. As a matter of fact, we have had requests in over the past year to the Director from different agencies on specific HR issues, and we have sent out strike forces to the agencies to help them address those in terms of hiring or in terms of performance management. And so it is a two-way street. We see the communications as improving, and that is what we are there for, is to help them improve, to better improve their performance. Mr. Danny Davis. Does OPM have its own performance management system in place? Mr. Blair. Yes, we do. We have a performance management system in which we evaluate our executives. In addition, I am the second-level review on a number of employees' evaluations, and so employees are given their expectations at the beginning of the year; mid-year, managers get back with them to tell how they are doing. Keep in mind, however, that managers and supervisors and front-line employees are constantly in communication, and so if there is a particular problem or a particular success, that may be followed up in writing. In addition, at the end of the year, evaluations are given at that time. Mr. Danny Davis. Let me just ask you, the administration indicated that it wanted to contract out 850,000 Federal employee jobs and diminish collective bargaining in some instances. Do you see this impacting one way or the other the ability to recruit the human capital that we need? Mr. Blair. Well, I think to perform effective outsourcing, you are going to need to have in place good contract managers. If you are going to be involved in labor negotiations and labor relations, you need to have people who are skilled in labor- management, skilled in backgrounds associated with labor- management relations. We are open for employment at the Federal Government. As far as competitive sourcing is concerned, those are issues that are best addressed by my colleagues at the Office of Management and Budget. However, I know that is being done pursuant to the FAIR Act, which asks that agencies identify those jobs which are not inherently governmental. And so this is the atmosphere in which we are operating, and I think that we are doing a good job. We are doing a good job of making improvements, and we want to keep on that track. Mr. Danny Davis. Thank you very much. Senator Voinovich. Delegate Norton. Ms. Norton. Thank you very much, Mr. Chairman. Mr. Blair, I need to know where you come down on the GAO testimony that we have just heard. You heard Mr. Walker--and I am going to look directly now at his testimony and report--that he apparently agrees with the administration, and I am quoting from him, ``We must move beyond this outdated, one-size-fits- all approach to paying Federal employees,'' etc. Then he says, ``However, agencies should be required to demonstrate to OPM's satisfaction that they have modern, effective, credible, and validated performance management systems before being able to adopt broader pay-for-performance systems for non-SES personnel.'' Now, do you agree that should also be the case for SES personnel as he testified? Mr. Blair. Well, we have performance management to a better degree in the SES, but what the President proposes to do is to say that future pay raises for the SES will be performance- based. Remember, the Senior Executive Service is comprised of approximately 7,000 individuals in a workforce of 1.8 million people. It gives us a better laboratory, if you want to use a better word, so to speak, in which we can really implement a pay-for-performance system. Ms. Norton. But you agree there should be a validated system of accountability before pay for performance? Mr. Blair. I am not sure what we mean by ``validated.'' Is that certified or---- Ms. Norton. I asked him what ``validated'' meant. Were you here when I asked him what ``certified'' meant? And he is going to leave it to you, if you listened to him, to indicate what ``certified'' is. So if you don't know what it means, that really makes me wonder whether or not we are going to be---- Mr. Blair. Well, that is why I wasn't using those terms. Let me just---- Ms. Norton. What terms would you use, Mr. Blair? Mr. Blair. Well, I would say that we can certainly develop within a regulatory scheme a performance management system which can effectively guide agencies in the way that they evaluate and compensate their Senior Executive Service. Ms. Norton. But you are using this system as a kind of demonstration project for the entire Federal workforce. You are seeing if it works here, and then you are going to take as much of it as you can and apply it to the Federal Civil Service System if you can. Mr. Blair. Well, I would almost say--I would be stronger than that in saying that if we can't effectively do it for our senior executives, then it doesn't bode well for the rest of the workforce in applying performance management principles. Ms. Norton. So it is a test case, it is your pilot project. Mr. Blair. It is a foundation. Ms. Norton. Given the state of the Federal workforce today, my colleague just indicated we had to fight--the Chairman has talked about pay for parity, had to fight to get it in the last budget, the retirements, the difficulties with recruitment. If you look at the Civil Service Reform Act of 2003, in order of priority which do you think should come first: Increasing the pay gap, dealing with the pay range, or pay for performance? Mr. Blair. I kind of feel like you are asking which of our children is our most favorite. It is---- Ms. Norton. In other words, you regard them as of equal importance to do---- Mr. Blair. I think that they are all equal at this point. We want to be able to work with the Committees in both the House and the Senate to see that we can work towards these reforms. I am not prepared at this point to identify a priority because things may change in the next few months. But I think that it shows--the introduction of this legislation at the hearing today and hopefully continued progress on this front shows Congress' continued commitment to improving the way that we effectively manage our workforce. Ms. Norton. Well, one of the things you have to do is put yourself in the place of the workforce you are talking about, and if you are talking about taking the pay cap off, before you even talk about that, you are talking about giving increased pay to only a relatively small number of people. One might want to consider the effects on the workforce itself, not simply what---- Mr. Blair. Well, let's remember the context in which that is being proposed though: That executive pay has been linked to congressional pay over the years, and when Congress has denied itself a pay raise, it has effectively capped the top rates for the SES. The result has been over the years that the six levels have been compressed, and in a number of the localities around the country many levels are being paid at the same rate despite varying degrees of difficulty and responsibility. That is the reason for the SES pay proposal, is to more effectively manage the SES through the use of pay, and by making those distinctions. Ms. Norton. I can understand that, and, of course, that is a real problem that we have to deal with, and I couldn't agree with you more. I am going to ask you if you would write to the Chairman, considering your answer to me, on a certified performance management system, what the OPM regards as certification so we can be clearer on validation and certification. Mr. Blair. Certainly. Ms. Norton. Finally, let me just say, Madam Chairman, I am on the Select Committee on Homeland Security, and I see you have at page 13 of your testimony, I think quite appropriately, a discussion of what you are having to go through to design a new pay and personnel system, as you say, to bring together the employees of the 22 agencies that now make up the Department of Homeland Security. I do not envy you. Let me ask you, in light of that, wouldn't you at least recommend that you put off dealing with SES pay on top of all the pay problems you are going to have to deal with in bringing 22 agencies together. Do you think all of this should be taken on at one time plus pay for performance in this new agency? Mr. Blair. I think it is incredibly important that we take on the two proposals that I mentioned, and we will meet all our statutory obligations required under the Homeland Security Act. We can't allow other pressing issues to remain an excuse for the status quo, and the status quo is that we, in the past year, have awarded over $5 billion in an across-the-board pay adjustment of which performance was not a component at all. I think that is inexcusable, and I don't find a way to justify it. Neither does the administration. And so that is why we are proposing to move aggressively in incorporating pay-for- performance proposals across the board. We would like to do it for the SES, and we would like to do it by virtue of enactment of the Human Capital Performance Fund. At the same time, we are moving aggressively forward in meeting our responsibilities in homeland security. As I said, as we meet today our design team is meeting at OPM in hammering out these very important issues. Ms. Norton. Thank you, Madam Chairman. Mr. Blair. Thank you. Mrs. Davis. Mr. Van Hollen. Mr. Van Hollen. Thank you, Madam Chairman. Just to follow up on this issue of to what extent the Executive Branch is prepared to move forward with pay for performance in terms of performance appraisal and evaluation systems, you single out in your testimony two departments--the Department of Energy and Department of Labor. Getting back to Congresswoman Norton's question about validation, are those two performance systems that you have evaluated them and you determined that they meet whatever criteria you set forth? Is that right? Mr. Blair. We have looked at the Department of Labor, and they have done a good job at better linking performance expectations for their managers to the strategic plans. This is really a follow-on to the efforts that were first identified in the Government Performance and Results Act in which we asked agencies to identify their mission goals and to evaluate how well they are doing it. Really, the next step in this is to have that cascade down through an agency and making agencies link their senior executives and have them link their goals to the overall agency mission and strategies, and from there to carry that down to the front-line agencies as well. Mr. Van Hollen. Right. Mr. Blair. And to evaluate that, and that is what we would like to do. That is our intent, and we see some agencies making progress in that area, specifically the Department of Labor and the Department of Energy. Mr. Van Hollen. OK. But as I understand it, you singled them out really for that first part then, linking their agency mission with different personnel decisions. Mr. Blair. Exactly. Mr. Van Hollen. Not the next step, which is the individual performance pay appraisals. Is that right? Mr. Blair. They appear to have done a good job of linking their senior executives, but the front-line managers, they are still in the process of doing that. But remember that under the current system we don't have incentives for agencies to do that, and we talked earlier about are we putting the cart before the horse. Well, you need to put the carrot before the horse in order to get the horse to move, and that is what we are trying to do with the Human Capital Performance Fund. Right now, if an agency doesn't have an incentive, if there is no incentive existing to have a robust performance management system, then why will agencies do it other than being told that they have to do it? One of the best ways of incentivizing organizations like this is to put real money with real results and real actions behind it, and that is what we are trying to do. Again, we didn't jettison the current pay structure for Federal employees. The General Schedule remains in place. Step increases remain in place. Given that, however, we are saying if you possess skills of immense value to your agency, if you perform admirably at your job in a superior fashion, the current structure of classification doesn't allow you to move from a GS-14 to a GS-15 because what you are doing is still at the skills level of a GS-14, but you are doing it in a very exemplary way, why don't we reward you? And our current system doesn't allow us that flexibility. The Human Capital Performance Fund would. Mr. Van Hollen. Let me just follow up, Mr. Chairman, then I will finish. It seems to me we would want to have at least in place the performance criteria for everyone to look at, to become comfortable with before you take the next step, which is to make the linkage between the pay, and I think you said that it is a terrible thing we haven't moved in this direction, but it seems to me the administration has a lot of flexibility and leeway to do a lot of this on its own without passing legislation. If you wouldn't mind, if the Chairman wouldn't mind requesting, I would be very interested in you providing the Committee information as to what performance criteria the Department of Labor and the Department of Energy have in place that you think provide a model, as I understand it, for the rest of the Federal agencies. Mr. Blair. We will be happy to provide that. Mr. Van Hollen. I would be very interested in seeing that, if you wouldn't mind, Mr. Chairman. That is all. Thank you. Mr. Blair. Thank you. Senator Voinovich. Mr. Blair, you, I think, heard from all of us that there is a little skepticism about going forward with pay for performance, and I think that it would be wise for you to carry that message back. In fact, I am going to be sending a letter off or calling Kay and talking to her about this. Unless there is some major effort made to identify next steps and a more complete plan, this is not going to happen this year. I hope that came across to you, and I know that you have got this goal in mind, but we don't think agencies are ready. And I think at this stage of the game it would be good to drop back and put together what the plan is. Even for the Senior Executive Service, there is some issue about whether or not they have a verifiable system in place. What are there, 8,000 or 9,000 members in the Senior Executive Service? Mr. Blair. Roughly 7,000. Senator Voinovich. Yes, that they in some instances in some of those agencies there are not real pay-for-performance systems in place. So it is a question of identifying agencies that are ready. Maybe we need to conduct some demonstration projects on this. If you feel that the Department of Labor and some others have a good system in place and they are ready to do this, perhaps those could be appropriate demonstration projects. That is just a little humble recommendation that you ought to fall back and regroup the troops on this and maybe come back with a different proposal. Mr. Blair. Well, I want to emphasize that our concern is that we don't maintain the status quo, that the status quo is unacceptable in terms of awarding $5 billion in pay raises, none of which are performance-based, or that you have your top executives all making the same amount of money and you can't use your most strategic tool, which is pay, in order to recognize differentiations in performance levels. I think we are all on the same scorecard--not scorecard--song sheet there, and we will work with you. But I can't overemphasize that we think that more progress needs to be made on the human capital front. I know that you agree with us on that, and that we want to begin taking the next steps of incorporating performance as a key element in the way we pay our employees. Senator Voinovich. Well, one of the provisions of the bills that we have creates broadbanding of the Senior Executive Service which would provide a lot more flexibility and enhance the whole concept of pay for performance. But I think the worst thing that could happen is to get started with this thing, and then have it become a disaster to which everybody points and says, ``I told you so, it wouldn't work.'' For those of us that have been through the mill--and I have on a couple of occasions as mayor and governor--this is something you really have to spend a lot of time on to do it right. Thank you very much for coming here today. Mr. Blair. Well, thank you, sir. Mrs. Davis. Mr. Chairman. Senator Voinovich. Yes, I am sorry. Mrs. Davis. I would just like to make a comment. Being a horsewoman myself, if you give that horse the carrot and you don't hook the cart up properly, you have a problem. [Laughter.] Senator Voinovich. OK. Thank you very much. Mr. Blair. Thank you very much. Senator Voinovich. Our third panel of witnesses is composed of four individuals who represent the interests of Federal employees at a variety of levels. During the past few years, I have worked closely with these and other Federal employee groups to ensure that their voices are heard in the debate over personnel reform. During my 18 years as Mayor of Cleveland and Governor of Ohio, I developed a firm belief that in order to have reform truly take root in any organization, the front-line employees must be involved in the decisionmaking process. This kind of employee empowerment is essential at the Federal level as well. Our witnesses are Bobby Harnage, National President of the American Federation of Government Employees; Ms. Colleen Kelley, President, National Treasury Employees Union; Ms. Carol Bonosaro, President of the Senior Executives Association; and Ms. Karen Heiser, Treasurer, Chapter 88, of the Federal Managers Association. We are pleased to have all of you here today. I think you have all been here to hear the other witnesses' testimony, and my feeling is that, in terms of pay for performance, we have really given it a whole lot of attention. If in your testimony you want to mention it, that's fine, but I sure would like to hear what you think about these three pieces of legislation that we have introduced, because we have pretty much spent all of our time on pay for performance. I will now call on Bobby Harnage. Bobby, we are glad to have you here with us today. TESTIMONY OF BOBBY L. HARNAGE, SR.,\1\ NATIONAL PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES Mr. Harnage. Thank you. It is my pleasure. I appreciate the invitation. On behalf of the more than 600,000 Federal employees represented by AFGE, I thank you for the opportunity to testify today. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Harnage appears in the Appendix on page 113. --------------------------------------------------------------------------- I will focus my remarks on two items. The written testimony, as it goes quite in detail on your question, so I will deal with two items, the provisions of the bills providing various expansions and managerial authorities, and the larger issue of how to resolve the government human capital crisis. Federal employees will view these legislative proposals from the vantage point of a workforce under siege. The administration is pursuing an aggressive policy of mandatory privatization quotas aimed at up to 850,000 jobs. It is not only ignored but constantly criticized for principles of comparability that is supposed to go in Federal pay. It has tried to define the traditional civilian/military pay parity three times at the same time that it has reintroduced big bonuses for political appointees and proposed letting management spend 20 percent of the meager amount set aside for salary adjustments any way it wants. The administration has stripped various Federal workers of their collective bargaining rights, and insisted on taking away five chapters of Title 5 from the law that covers Homeland Security. Finally, they have questioned the patriotism, loyalty, and love of country of the members of my union. Will the authority to pay slightly bigger recruitment and retention bonuses to a few lucky employees and embark on a huge demonstration project undo these unmistakable messages of hostility and encourage new people to come build a career at Federal agencies? Not likely. Allowing larger bonuses and demos and streamlined critical pay is not objectionable unless one considers the proposals in the context of either solving the self-inflicted human capital crisis or the more pressing needs of Federal employees and agencies. We believe that the financial incentives for recruitment and retention in the legislation are at best incomplete and at worst misplaced. Salaries are too low, not just for prospective employees or for employees who threaten to leave if they do not get a bonus. Salaries are too low for all Federal employees. There is a law on the books that will solve the pay problem. It merely has to be enforced and funded. FEPCA, passed just over a decade ago, introduced a very long list of pay flexibilities--and I list those in my testimony--in spite of the insistence of today's would-be reformers that it is a rigid or inflexible system. Indeed, FEPCA introduced the existing recruitment and retention bonus authority that has almost never been used because it has never been funded. The legislation also takes the limits off the number of workers covered by demos. AFGE strongly opposed this measure. It effectively allows entire agencies to be under alternative to Title 5. It has taken away congressional right to approve such changes. It also undermines the very idea of demos, since without limits on the number of workers they cover, there will not be an adequate baseline against which to compare the outcome of the demos. We support the provisions of the legislation that provide training for managers and other employees. We applaud the recognition that failure to deal with poor performers is not a matter of any absence of authority, but rather a problem of either reluctance or poor training. Further, it recognizes dealing with poor performers as a management problem and a discipline problem, not a pay system problem. It is well known that DOD is shopping legislation that will allow it to waiver parts of Title 5 and impose a pay-for- performance system on its workforce. They are eager to get these authorities before the outcome of the grand experiment at DHS is done. Federal employees recognize these efforts as hostile to their interest and understand that DOD pay-for- performance schemes will require substantial financial sacrifice for them and their families. The government human capital crisis is not like the weather. It did not just happen. It was a result of misguided policies, and a reversal of those policies is what is necessary to solve it. To that end, AFGE recommends the following: Require full funding and implementation of FEPCA's comparability provisions as a trigger for the exercise of the expanded bonus authority in the proposed legislation; enact legislation that would put an end to privatization quotas that would guarantee Federal employees the chance to compete in defense of their jobs, and that would prohibit OMB's controversial rewrite of A-76 to go forward; pass legislation already introduced in the House and the Senate to improve the funding formula for Federal employees' health insurance; resist the temptation to jump onto anti-employee pay-for-performance bandwagon whether for DOD, DHS, or any other Federal agencies or department. Pay for performance is a recipe for mismanagement, discord and discrimination, and will undermine the merit system principles. This concludes my testimony, and I would be glad to answer any questions you might have. Senator Voinovich. Thank you. Ms. Kelley. TESTIMONY OF COLLEEN M. KELLEY,\1\ NATIONAL PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION Ms. Kelley. Thank you, Chairman Voinovich, Chairwoman Davis and Members. On behalf of the 150,000 Federal employees represented by NTEU, I appreciate the opportunity to appear before you today. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Kelley appears in the Appendix on page 144. --------------------------------------------------------------------------- The message often received by today's workforce is that they are not valued. Many believe their pay is inadequate, but they do not see a fair pay setting process on the horizon. Based on experience, they believe their agencies will not receive sufficient funding for training. They also know that on any day their jobs may be contracted out from under them. It is no wonder the government has a hard time recruiting and retaining employees. Although the fiscal year 2003 Federal pay raise was recently settled, it came only after a very long and public fight that again sent the wrong message to the Federal workforce. Today is April 8, 2003, and the full 4.1 percent pay raise that employees should have received in January has still not arrived in Federal employee paychecks. There is no question again as to what message this sends. In its 2004 budget, the administration continues to show a lack of concern for what failure to properly compensate public employees means for the future of public service. Ignoring bipartisan calls for pay parity, the administration recommended a 2 percent Federal pay raise. The message again that this sends to civilian employees, even to those on the front lines of securing our Nation's borders, is that their work is not as important, not as valued, and not as vital as that of their military counterparts. Instead of pay parity, the administration proposes a $500 million human capital performance fund. Funding for this gimmick comes at the expense of the 2004 Federal pay raise, and would give managers unfettered discretion to give incentive pay to a fraction of the Federal workforce. Benefits, too, are key to the government's ability to attract and retain the workforce. The Federal health program is in crisis. This year's 11 percent premium increase marked the fifth year in a row of steep rate increases. Many employees have been forced to give up their health insurance and those considering employment with the Federal Government are turned off. Private sector employees continue to pay on average less for their health insurance in terms of percent of premium and in terms of cost. Employee training is another critical piece of the pie. Unrealistic funding levels have restricted the ability of agencies to adequately train their employees to perform their missions effectively. Without proper training everyone loses. Customers do not receive the best service and employees do not find their work rewarding or challenging. The administration's march to contract out 850,000 Federal jobs through arbitrary quotas is another disincentive to Federal employment. One-size-fits-all quotas are being forced down agencies' throats without thought to their impact on the government's ability to recruit and retain employees. Employees have told me that the message their agencies convey is this: We may hire you; we may train you; we may even promote you; but when it comes time to meet our contracting out quotas, we may eliminate your job in order to meet our targets. These blind quotas erode the morale of the Federal workforce and disrupt agency operations. With regard to S. 129, the Federal Workforce Flexibility Act of 2003, NTEU is not opposed to the use of demonstration projects. We believe, however, that the collective bargaining process must be used to ensure that both management and employees understand the nature of the project and are committed to its success. The legislation also proposes the expanded use of bonuses. Expanding the availability of these incentives makes little sense without the resources to accomplish the goal, and, NTEU has concern about expanding critical pay authority. NTEU believes that properly compensating the Federal workforce would make further critical pay authority unnecessary. We welcome provisions drawing attention to the government's need to properly train its employees. Again, however, the bill does not address the resource problems that have prevented agencies from providing training to their employees. Proposals to enhance annual leave for certain new Federal employees need further review. If Congress believes that annual leave limits are a barrier to hiring, then the system should be reformed for all employees. In summary, NTEU thinks the messages we must send employees are these. We want you to come to work for the Federal Government. We want you to be successful. We want to appropriately compensate you for what you do. We value what you do every day for the American public, and we want to treat you with the dignity and the respect that you deserve. I, and all of NTEU look forward to working with all of you in the House and the Senate toward this end. I thank you again for the opportunity to appear today, and would be glad to answer any questions you might have. Senator Voinovich. Thank you. Ms. Bonosaro. TESTIMONY OF CAROL A. BONOSARO,\1\ PRESIDENT, SENIOR EXECUTIVES ASSOCIATION Ms. Bonosaro. The Senior Executives Association appreciates both the invitation to testify and the Subcommittee's interest in and concern for Federal human capital management. We are especially grateful to Senator Voinovich and Representative Tom Davis for their legislative efforts to address civil service issues, both in this and the last session. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Bonosaro with attachments appears in the Appendix on page 155. --------------------------------------------------------------------------- We welcome the proposal contained in the President's budget with regard to SES compensation because this is the first time in 10 years that an administration has addressed this issue. That proposal and the Senators' bill can alleviate pay compression which has reached the point, as you know, where 70 percent of all career executives are now paid the same. We look forward to resolving this issue indeed after many years of effort. What we seek, however, with regard to executive pay, is stability, so we need not keep returning to this issue as we have over 20 years, and due process rights for career executives to ensure that the merit system is protected. Thus we recommend some tweaking, if you will, to ensure that the administration's and the Senators' proposals meet these objections. I think particularly because of the view of the SES as a proving ground, it is especially important that we maximize the possibility, the likelihood of success of pay for performance, and minimize the possibility of, for example, politicizing the career executive corps. The safeguards must be in the statute, not just in regulations. Specifically we recommend that you eliminate the cap on locality pay so that executives can receive the full locality pay adjustments and we prevent further pay compression based upon the new locality cap; that you reform the Homeland Security Act language which calls for certified performance systems so that only OPM and not OMB promulgate the implementing regulations; that once certified, certifications cannot be removed for a 4-year period; that if an agency loses its certification, pay that was set while the system was certified will not be reduced; and the certified system cannot force a distribution of performance ratings. I think that is especially important. It is only fair that each individual executive be evaluated on his or her merits and accomplishments, and not on the basis of some normal curve. We recommend that you include all bonuses and awards for executives in the high-3 computation for retirement annuities, thus creating a true pay-for-performance system; provide that SES and all equivalent executives automatically receive the same annual increase to base pay that the General Schedule receives each year regardless of the cap. Such annual increases should not be at the sole discretion of supervisors. Raise the base pay cap each year by the amount of the annual comparability increase, irrespective of what Congress does for its own pay or that of the Executive Schedule; replace the wide proposed SES pay range with three overlapping pay bands; the lowest base pay within band one would be the current minimum for ES-1, an amount sufficient to give a reasonable pay raise to a GS-15/10 promoted into the SES. And executives would receive promotions to pay bands two and three based on demonstrated capabilities, attained executive experience and level of responsibility. Pay band three would be set so that its highest base salary is Executive Schedule 3. Finally, we would like you to require the following safeguards on SES pay: Establish a minimum pay increase of at least 5 percent for those promoted from the General Schedule into the SES--that would then become the executive salary floor; provide executives denied a salary increase for performance reasons the opportunity to appeal to their agency Performance Review Board under the same process used currently for appealing performance appraisals--the boards would be required to have a majority of career members; limit any reduction in pay within a pay band only to reasons related to conduct or performance, and to an amount not more than 3 percent of base pay in any calendar year; provide executives the opportunity to appeal pay reductions based upon performance to the agency's Performance Review Board, and those based upon conduct to the MSPB; finally, provide an executive who is demoted to a lower pay band the right to an MSPB appeal. Even with these recommendations, however, we have one overriding concern. That is, if agencies have total flexibility to set base pay, pay rates may inevitably be influenced by budgetary considerations, namely insufficient funds for appropriate raises. FAA executives have already experienced that situation. In tight budget times their performance based system has not been funded and awards not paid, while annual increases in awards remain funded for lower-level employees. What will you do to ensure that result is not repeated across the entire Senior Executive Service corps? In closing, we hope to work with the Subcommittees and the administration to implement these recommendations. We surveyed our members about the administration proposal and provided the Subcommittee with a compilation of those comments which I will appreciate being placed in the record along with my full statement.\1\ Those observations from the government's highest ranking career employees express substantial concerns with regard to the administration's proposal, concerns which we think can be addressed with the reasonable changes we recommend. --------------------------------------------------------------------------- \1\ The survey referred to appears as Attachment II of Ms. Bonosaro's prepared statement in the Appendix on page 172. --------------------------------------------------------------------------- And finally, we also hope to work with the Subcommittees for full consideration of our other proposals which are detailed in my full testimony. Thank you. Senator Voinovich. Thank you very much for being here. Ms. Heiser. TESTIMONY OF KAREN HEISER,\2\ TREASURER, CHAPTER 88, FEDERAL MANAGERS ASSOCIATION Ms. Heiser. Thank you, sir. Chairman Voinovich, Chairwoman Davis, Members of the Subcommittees, my name is Karen Heiser. On behalf of the 200,000 managers and supervisors in the Federal Government whose interests are represented by the Federal Mangers Association, thank you for inviting us to present our views at this very important joint hearing regarding the human capital challenges facing the Federal Government. --------------------------------------------------------------------------- \2\ The prepared statement of Ms. Heiser appears in the Appendix on page 190. --------------------------------------------------------------------------- I am currently the Organizational Development Manager at Watervliet Arsenal in New York, the U.S. Department of the Army. My statements are my own in my capacity as a member of FMA, and do not represent the official views of the Department of Defense or the Army. The inability to make public sector more attractive has made it increasingly hard for the Federal Government to recruit and retain the high-caliber workers it needs to sustain a strong civil service. One such deterrent is the scrutiny of Federal functions and the lack thereof for contractor work. While previous administrations have taken credit for creating the smallest Federal Government, the illusive nature of the government's less visible and less accountable shadow workforce of contractors makes it nearly impossible for policy makers to know if the current course of downsizing and contracting out is in the Nation's best interest. The General Accounting Office listed strategic human capital management across government to its list of ``high- risk'' areas over 2 years ago. In a recent update GAO noted ``Importantly, although strategic human capital management remains high risk governmentwide, Federal employees are not the problem.'' As part of legislation creating the Department of Homeland Security, several positive reforms were enacted governmentwide that will help agency recruitment and retention efforts while highlighting the critical nature of human capital planning. On behalf of FMA, I would like to thank you, Chairman Voinovich in particular, for your hard work on the inclusion of these important provisions. Two specific notes of concern to FMA. It is worth noting that the provision to provide Federal employees compensatory time off for official travel was left out of the final bill. OPM regulations do not permit comp time for credit hours unless travel occurs during working hours. Given that most meetings are scheduled during work hours, and travel to and from those meetings often takes place outside working hours, FMA asks for reconsideration of this provision. Another issue of particular concern to FMA is the current statutory cap on overtime pay for managers. Between 1994 and 2001 the nonpostal Executive Branch civilian workforce was reduced by more than 452,000 positions. Much of the reduction was arbitrary and not related to workload. One result of this is overtime. The current cap is outdated and serves as a disincentive to potential and current managers, as those above GS-12, Step 6 are paid less for overtime than for regular work hours, and managers and supervisors often earn less on overtime than the employees they are supervising. Mr. Chairman and Madam Chairman, you have introduced legislation that would allow managers to use a variety of compensation tools such as recruitment, relocation and retention bonuses, and give agencies streamlined critical pay authority to fill key positions. These are sensible reforms that would begin to address the workforce problems that will only worsen with the forthcoming retirement wave. As an expansion of the direct hiring authority granted to agencies, FMA recommends that full-time equivalent ceilings be made more flexible for agencies to fill highly-needed positions without the burden of arbitrary FTE caps. Student-loan repayment has long been identified as a recruitment and retention bonus that would help attract and retain high performing employees. FMA would like to see this benefit also extended to those seeking graduate degrees. The ``GOFEDS'' legislation would increase the student loan forgiveness benefit by relieving Federal employees of the obligation to pay income tax on the money provided by their agency. Thank you again, Mr. Chairman, for your leadership in introducing this bill. In terms of managing this new approach to human capital, whatever it looks like in its finished version, the numbers and roles of Federal human resources professionals needs to be assessed. Additional training may be necessary to prepare these HR experts to chart future human resources needs and steer personnel and funding accordingly. Often times, however, agencies do not have adequate funding for such incentives, even those that currently exist. Annual appropriations should include additional line items for recruitment and training. The public sector should ``walk the talk'' in appreciating that the most valuable organizational asset is the workforce itself, and in recognizing that ``you get what you pay for.'' Agencies must also be prepared to invest in their employees by offering skill training throughout their career. FMA has long recognized the need to prepare career-minded Federal employees for the demand of the 21st Century workplace through its establishment of the Federal Management Institute, FMA's educational arm which sponsors valuable professional development seminars and workshops. FMA recently teamed with Management Concepts to offer the Federal Managers Practicum, a professional certificate program designed for Federal managers, and as the official development program for FMA, the Practicum helps managers develop critical skills and enhance their capabilities. History has shown that training dollars have been a low priority in many agency budgets. In fact, in the rare event that training is available, those monies are often usurped to pay for other agency priorities. Toward the end of reversing this ideology, FMA supports including a separate line item for training and agency budgets, to allow Congress to better identify the allocation of annual training funds. The Federal Government must once and for all take the issue of continuous learning seriously. There needs to be a developmental component for every position to facilitate performance management and effective succession planning. For agencies to perform at optimum levels, employees must have clearly defined performance standards. These standards should be directly linked to the agency's mission, customer service goals, and its annual performance plan and/or strategic plan. FMA supports implementing a more comprehensive governmentwide appraisal system, with a pay-for-performance component. Any system adopted must be rooted in long-held merit principles and should not be used to undercut fair and appropriate annual increases for Federal employees. In conclusion, ``do more with less'' when less has been based on numbers and not efficiency has eroded the remaining employees' morale and dedication, and the reputation of the Federal Government as an employer. And again, simply put, there are fundamental services that should be deemed core to the government. While calls are heard daily to further examine the performance of employees of the Federal Government, there continues to be silence in response to suggestions that the same level of oversight be focused on its contractors. Government leaders must now take the side of the Federal employee. Senator Voinovich. Your time is up, Ms. Heiser. Ms. Heiser. Thank you, sir. I will be available for questions if you wish. Senator Voinovich. Thank you. Have we made any progress? Most of you talked about FEPCA and outsourcing. The administration has announced its goal of 850,000 jobs for public-private competition, and I suspect that a figure was arrived at by taking the percentages that were originally announced. I was under the impression that there had been some backing off from those percentages, and that the secretaries of the departments were basically told that they ought to shape their workforce without first looking to competition. Health insurance is another issue that we have talked about. From my observations of the private sector, the cost for employees has gone up a lot more because the Nation's whole health insurance system is out of control. That is a whole other subject, that the system is not working. I know in my State, when we went to HMOs and to another system, we reduced the employee contribution from 12 to 10, and now the governor's talking about increasing it to 20. So that is going on around the country. The impression that I get is some of the things in this legislation you think are good, but you are kind of reluctant to be supportive of some of it because of what you perceive the administration's attitude is toward Federal employees. Is that it in a nutshell? Does anybody want to comment on that? Ms. Kelley. I thought it interesting, sir, that Mr. Blair-- -- Senator Voinovich. What things do you think that they could do rapidly to--besides having honest to goodness dialogue with you on the new Homeland Security Department--help create an environment where you might be more supportive of some of this legislation. Ms. Kelley. Well, that would be a good start, and we would welcome the conversation on Homeland Security. But in addition to that, fully funding pay raises, proposing an appropriate pay raise for civilian employees. Just right out of the box that would send a very different message than what has been received recently. The issue around the human resource performance fund and regardless of what they say, that money is money that can and should have been part of the civilian pay raise that was proposed for January 2004, and the idea that for a change, funding is being provided for a flexibility like this, because that of course is usually the issue, the flexibilities are provided but no funding. So this time the funding is provided at the expense of the civilian workforce and with no criteria or rules around how that money will be distributed. One of the things that amazes me is they say they need this to reward performance for those who are performing above the acceptable level. They have a lot of other processes in place to do that, that are not used today, one of which is high quality increases or quality step increases, whatever you call them in your agency, HQIs or QSIs. These are raises that every agency has the authority to use. They do not need legislation to do it. They can give these to as many or as few employees as are meeting the criteria, and most agencies are not even using them at the average rate they are being used average across the government, which I understand now is at between 4 and 5 percent of the workforce. And the agencies that NTEU works with, we are working with them to try to get them up to the 4 and 5 percent range. So they have this tool, and they do not use it, and I have never heard them say it is because it is not funded, although I guess they could say that. But now to see this human resource performance fund created with no rules, and to have money just being able to be delivered by managers with no criteria, no credible performance appraisal system, no infrastructure, no nothing, really adds insult to injury, when regardless of what they say, it was at the expense of the proposed January 1 pay raise. Senator Voinovich. Carol, you commented that the legislation would address the problem of SES pay compression. Ms. Bonosaro. Well, with the kinds of recommendations we have made as safeguards, we would be, obviously, a lot more comfortable with it. As the administration has noted it would not deal with compression suffered by every executive within the current system, which did not occur because of performance, but rather because of congressional freezes, nonetheless, we are prepared to support that, provided those safeguards are indeed part of it. Senator Voinovich. Do you believe that from your observation over the years, there are adequate, credible performance evaluation systems across the board? On a scale of 1 to 10, if you looked at them for the 7,000 SES employees, where would you say agencies stand in terms of having adequate performance evaluation systems in place? Ms. Bonosaro. I would point a couple of things out, I suppose. First, there are a lot of differences across agencies that we are familiar with. That the IRS has gone through the most elaborate process of trying to develop something that is very clear, that relates to levels of responsibility, levels of effort, and that is shared up front with their executives, so they know in the end what they have to do vis-a-vis the bonus system, which is part of SES compensation right now. I understand other agencies, such as VA, for example, have gone through a fair amount of work with regard to their performance systems. On the other hand we do have just a couple of levels within some of the agency performance management systems, and their appraisals and rating levels are not automatic indicators of how bonuses will be paid. There are separate systems in place. So it is very different across government, and I think it is very hard to come down and give you a precise answer about where we stand. Senator Voinovich. It would be interesting for me if you would contact your membership at various agencies and provide me with their opinions about where they think agencies stand in terms of managing performance evaluations. Ms. Bonosaro. We will be happy to do that. We will do a quick survey and turn that around and get that back to you. Senator Voinovich. Thank you. Congresswoman Davis. Mrs. Davis. Ms. Bonosaro, you stated in your written statement I think that you would not support a certified performance appraisal system as a condition for increasing the salary caps unless the bonuses and awards were made a part of the annuity computation, and that without this treatment of the bonuses and awards it would not be, ``true pay for performance compensation system.'' Since awards and bonuses have never been made a part of the retirement computation for employees in or out of the general schedule, why do you believe so strongly that they must be included in the retirement pay to go to pay for performance? Ms. Bonosaro. We are now placing base pay in the situation that bonuses and awards were previously, in saying it is not going to be automatic that you are going to have an annual adjustment each year. Adjustments have not been automatic in any event, given the caps within the SES, as we know. Their base pay will be at jeopardy and therefore, arguably, I think it is reasonable to say that the work that folks do that enables them to in fact go even beyond that and earn bonuses and awards, would demonstrate that we are really taking the performance business seriously and it will have real meaning to you, and not just in terms of this year, but in terms of your annuity. Mrs. Davis. You also said in your testimony that the regulations on the pay-for-performance process must not come from OMB but must come from OPM. I was just curious what the reasoning is behind this, because do you believe that the President should not have any control in his administration? If you are concerned about political influence at OMB, I think you would probably have the same thing at OPM. So I am just curious as to why. Ms. Bonosaro. Yes, we are concerned about that, to be frank. But on the other hand, OPM has certainly got the personnel expertise, and we think they should be left to that job. Certainly the President has exercised authority up until now, it is true, with regard to the pay rates for the SES. But in any event, we think that this is a function that appropriately belongs to OPM and should stay there. Mrs. Davis. Just another quick one, and your testimony led me to a few questions. That is why I am coming to you with so much. You said that if we put this appraisal system, if it is approved, that it needs to be in there for 4 years regardless? I think I heard you right on that. So what if OPM comes back and says that the agency is not implementing it correctly, there is problems. Does that mean that OPM, that we are stuck for 4 years and nothing can be changed? Ms. Bonosaro. What we are concerned about, I think obviously there is the opportunity for OPM to go to the agency, and given the fact that you have presidential appointees in that agency as well as OPM, presumably they should have some influence to get the system running properly. But in any event, what we are concerned about is that an agency might be viewed as having given too many outstanding ratings in a given year, and see their certification evaporate for that reason alone, to be frank. Our primary concern is that each executive be indeed judged on his or her merits, and that we do not have that kind of driver. So our view is also that, with the 4 years, that might span administrations from time to time as well. Mrs. Davis. Thank you. I am going to go to my colleague. Ms. Norton. Ms. Norton. Thank you very much, Madam Chairman. I think listening certainly to the GAO and to your testimony, and especially reading it closely, that we should put aside any notion that the employee organizations are simply opposed to any change. Indeed, many of the employee organizations have raised the issue of a human capital crisis generally in the workforce with retirements and early retirements, with problems in recruitment, quite apart from the clear problems with the existing workforce and its own anxieties. I think the problem we are faced with is how to use an approach that avoids worsening a problem we are trying to fix, and perhaps doing what successful reform generally requires, and that is looking at a win-win approach. The reason I asked Mr. Blair, for example, whether he saw any order of priority in the SES 2003 act, was because I was looking for some sensitivity that employees would be looking perhaps at one part of the act and maybe management, meaning the administration, at another part of the act, and maybe if you looked at both of them you could develop a win-win approach. But instead he said, well they are all the same and they have equal priority. We just heard testimony from Ms. Bonosaro, for example, that there is great concern, as anyone would expect, in pay compression, the pay cap. But clearly the administration's priority is pay for performance. One begins to wonder if you can get what you want if you do not look at what this huge workforce wants and try to find some way to get a win-win. I am looking at your testimony. Sometimes they are rather small things. Sometimes they are clearly larger things. For example, Chairman Voinovich mentioned health insurance. One begins to wonder if in fact there was some movement on what is a critical problem, which is the increasing amount of one's pay in effect that goes to health insurance, whether or not the workforce would be more open to changes that the administration may want. Or they can be smaller problems. He mentioned that one. It can be things that may seem smaller such as the one that was just discussed, OMB as the agency that looks at pay for performance, and not OPM. Well, any Federal worker will tell you that is a big no-no. OMB is a White House agency, is a political agency. OPM comes out of the old civil service system, and its job is to look at everything in light of merit principles. So if you are trying to find some way to ease the anxieties of the workforce, after all you have appointed the OPM Director just as much as you have appointed the OMB Director, there is administration policy. One might look, if you are looking for a win-win, at the agency whose job it is to put into play something that is a complete departure, and break away in the merit system which is pay for performance. I am just trying to go off of your testimony. Now I am looking at Mr. Harnage's testimony. Says on page 4, ``Does not find the provisions highly objectionable in and of themselves,'' and then goes on to say, ``unless one considers them in the context of far more pressing needs of Federal employees and agencies, again, a suggestion that there may be some way to make these proposals less objectionable if they are too objectionable.'' I have already indicated to Mr. Walker, that all you are going to get is a blizzard of grievances and court suits and the rest, so what have you accomplished with all of the lowered, with all of the problems that brings for employees and for employers. So I am looking at Ms. Kelley's testimony in which she says that the NTEU is not opposed to the use of demonstration projects, and in fact, continues to believe that demonstration projects are a valuable method of experimenting with new pay and work arrangements. Again, it looks like we are not dealing with black and white here, but we are dealing with something that says, hey, in order to do particularly massive reform, you have got to look at all the parties and they all have to think they are getting something out of it. Or let's take the problem of new employees, where your testimony indicates that you have difficulty with these new employees getting all of these bonuses, all of these incentives, while employees who have been waiting in line do not get anything. There has been testimony here about training and the failure to offer training. If existing employees thought they were getting training, even as one was trying to deal with the fact that 40 percent of the government can retire in 5 years, maybe one could come to some kind of understanding that everybody is getting something out of personnel reform and even pay for performance. I must say for the record, about the last way I would begin pay for performance is giving $25,000 bonuses to political appointees. It is all down hill from there. You have to begin from the ground up. People who are political employees, they come at lower pay than they may get in the private sector, but then they leverage that to humongous pay within a year or two. So I guess my question really goes to approach. Mrs. Davis. Ms. Norton's time has expired about 2\1/2\ minutes ago. Ms. Norton. Yes, but other people went over their time, Madam Chairman, and I would like an answer. I finished my question. My question was not a series of small questions about this and that. I am looking for an approach that gets us to something other than what we have here, which is apples and oranges, and nobody is going to eat them together. So I would like to know whether there is an approach that can bring you together with the administration, that focuses on win-win. Ms. Bonosaro. I would like to respond to that just because it also will enable me to follow up on something Mrs. Davis asked. I think you are quite right, and I was reminded as you were talking of the start of the Senior Executive Service, when those of us who were in the old Super Grade system were enticed in, if you will, because the SES was a system that, while it indeed had far greater risk than the system we were in, also carried the potential for a greater reward. And that is the reason why we are suggesting, for example, if you are going to eliminate all the ranks within the SES and really change the structure and create pay bands, let us entice in folks and say, but gee whiz, there is going to be an additional reward, and that is that the bonuses, the awards you get, can count towards your high-3, for example. If we are going to move in to the pay-for-performance system, let us at least adopt the kind of safeguards that we have talked about so that people can feel more assured that merit principles indeed will still apply. So I think there is a way to have a win-win. Mrs. Davis. If the others would like to respond? Mr. Harnage. Yes. I have not had the opportunity to read Carol's entire statement, but her oral statement, I certainly think we can embrace. There are three matters that Chairman Voinovich touched on that I think deals with where you are coming from. One is the administration has not slowed down on its quotas for privatization, and 850,000 jobs comes from the FAIR Act, the FAIR list and the percentage of jobs that have to be competed under this administration's quota system and their de-rewrite of the A-76 has currently taken place in OMB. He made a very good point that on the health insurance in his State they have gone from 8 percent to 12 percent, and then they might be going to ask the employees now to make a 20 percent contribution. Federal employees have been making 28 percent contributions for years, so that is just an indicator that this would be an incentive for recruitment and retention. Even if the State increased it to 20 percent, the legislation we have asked for just brings the Federal employee to that same level. Then finally in the $500 million slush fund that is being created by the administration--and the Subcommittee needs to understand that in 1997 NTEU and AFGE wrote to the then administration asking to sit down and work on pay with what the problems were, identify the problems and find the solutions. We never got around to that. We went from year-to-year battles here in Congress to try to get pay to what it should be. Same thing with this administration. Within a month of taking office, Colleen and I wrote to this administration, asking to sit down and work on pay. Their response was more or less they were too busy. We are more than willing to sit down and work with anybody. I prefer working with Congress, and I will tell you why. I am still looking for $200 million. When the administration came up with a 2 percent across-the-board increase and a $500 million slush fund, the figure is 2.7 percent. Therefore there is $200 million missing somewhere. So if they are going to treat pay that way, I am not too sure sitting down with them would be too fruitful, but they in effect, even with their slush fund, where some employees are going to get that $500 million and some employees are just going to get the 2 percent increase. There is $200 million that should be in that-- somewhere in that pay scheme it should be 2.2 percent or it should be a $700 million slush fund. But we are more than willing to work with anybody that will work with us on coming up with a solution to the pay, and my concern is that FEPCA never has been fully implemented and so we do not know whether it would work until we first tried it. As both of us pointed out in our testimony, there is all kinds of incentives and managerial flexibilities in FEPCA that have yet to be fully utilized, such as the step increase, the step increase as both a penalty and a reward. You can withhold a step increase if an employee's performance is not of an acceptable level. That is rarely done, but nevertheless, that is a tool. In the same token if you have a high performer you can give them a quality step increase. That is a step increase in addition or sooner than they would have otherwise gotten on. Rarely used today. Senator Voinovich. Thank you. We have another panel here, and it is 12 o'clock. Representative Van Hollen. Mr. Van Hollen. Thank you, Senator. I will be very brief. I just want to make an observation, get a quick reaction. It is striking, as all of you in your comments have said, you do not oppose to use of financial incentives and bonuses to award for performance. I mean Mr. Harnage has made that clear, so I think it is important that no one is dragging their feet. What is striking--and I appreciate all your testimony, and look forward to going through it in more detail--is the amount of flexibility and a lot of the opportunities that already exist under the law to provide rewards. Ms. Bonosaro, in your testimony you say not only does the Senior Executive Service have a performance system, that it is currently a model pay- for-performance system. So the question really is the question of resources. It is not that they do not have the ability, the administration does not have the ability to provide bonuses right now. It is a question of whether or not the funds are separately provided for this purpose. With respect to the SES, it is a question not of performance measures being in place and the system being in place, it is just the fact that you have these caps in place. I would just like to get a very quick response from all of you to that observation, that it is not a question of lack of flexibility and the ability to provide bonuses. It has been a lack of resources to make the system work Ms. Bonosaro. I think that the one thing that we know is yes, indeed, there are a lot of flexibilities within government right now. I have not heard anyone really satisfactorily explain yet why they are not all used. We know in some cases they are not always--personnel do not always know about them. Certainly they are not always funded. Sometimes there is simply a lack of will, so that there are a whole variety of reasons. The one thing I think we would be concerned about is, if because of the view of the lack of performance management systems being at the rate they should be, that therefore we do not resolve the issue of pay compression within the SES. I really think that cannot wait. Ms. Kelley. I would say, Congressman Van Hollen, it absolutely is an issue of resources. In fact, Senator Voinovich and I have had this conversation many times, where I have said, ``Please do not provide any more flexibilities to the agencies until the resources are provided because all it does is make the list longer and longer of things that are not being used by the agencies.'' As far as setting priorities--and I think this goes to Delegate Norton's question about process, how we prioritize, in order to do that, you have to have a two-way conversation, an ongoing conversation. We do not have that with the administration. Therefore, our discussions take place at these forums and in the media because there is not an ongoing conversation to try to figure out the really tough questions about priorities and how to create a potentially win-win situation, which is very different from working through all of the flexibilities we have with you, Chairman Voinovich, because we have these conversations one-on-one, over and over throughout the year before legislation is ever introduced, because you are interested in working with us to figure out what the employee issues are and how they can be addressed. That is the way that I think we can make much more progress on behalf of the employees, the American public, and the agencies, not the way that we do business today, but that is how we do it today. Mr. Harnage. I think you are right on target. OPM's own survey indicated that less than 1 percent of the current workforce received incentives, cash awards, and the reason for that is that they were not funded. The agency, in order to give one employee a cash award, had to take money away from other employees or simply not fill a position. So that is the first problem. It is not an incentive and it is not a reward for performance if you are not receiving the pay that you are entitled to to begin with, and as we have said, we have got to bring FEPCA up to par, and then any incentive that you give is in fact a performance award. The second thing that you have to watch out for, if you recall,just a couple of years ago we had to get a legislative change in the VA system on nurses' pay because we found hospital directors were balancing their budget on the backs of the nurses. Instead of giving them the pay increases they were entitled to, they were diverting that money to other parts of the budget. So we changed the pay system of the nurses just 2 years ago. Let's not create a monster here of all civil service. Ms. Heiser. I would concur with my colleagues that the incentive awards program as it currently exists needs some further examination in terms of the tools that are available and the effect that it could have were it properly funded. But I would put to you that first and foremost, as we have said, the appraisal systems really do need to be revised. Pass/fail does not accomplish our objectives--we have to look at why performance appraisals are done. Pass/fail should not be kept-- the carrot before the horse is not a good example in this case because hay is not going to be the motivator for people to do a good job of performance management. The driver for performance management needs to be organizational improvement and employee development. That is the way to start with this whole program. I would also take some umbrage with the idea that a $5 billion annual increase is wasted because it is not based on performance, and I would put to you that if we assume safely Federal employees are performing, then it certainly is based on performance and not wasted money. Thank you. Senator Voinovich. We thank the panel very much for your testimony this morning, and we will take it into consideration. Obviously we have some systemic problems that we have had for several years. Senator Voinovich. Our fourth panel of witnesses includes some of the Nation's top experts from the public, private, and non-profit sectors, academia, and the military. I am pleased to have met many of you at Harvard's Executive Sessions on the Future of Public Service and that you agreed to serve on my Washington-based human capital working group. Hannah Sistare is the Executive Director of the National Commission on Public Service. Hannah, I want to welcome you back to the Senate. I enjoyed working with you during your time as Senator Thompson's Governmental Affairs Committee Staff Director. Again, I apologize to the fourth panel for the delay. I hope you have enjoyed the testimony of the witnesses. It certainly gives you a little perspective for your clean-up role. Dr. Steven Kelman is the Weatherhead Professor of Public Management at the John F. Kennedy School of Government, Harvard University. Steve, glad to have you here. Steve has had a lifetime of public policy work, both as an educator and as a public servant, most recently as Director of the Office of Federal Procurement Policy at OMB during the Clinton Administration. Max Stier is the President and CEO of the Partnership for Public Service. Max, I want to congratulate you on the good job that you are doing with the Partnership. It looks to me like we have to do a few other things to attract and retain good people of public service, if we have listened carefully to what the other witnesses had to say. Jeff Taylor is the President and CEO of Monster. It was good to meet with you, Jeff, up at the Kennedy School, and I am eager to hear what you are doing to improve the ``USA Jobs'' website. We are fortunate to have Major General Robert McIntosh, U.S. Air Force Reserve (Retired), Executive Director of the Federal Officers Association of the United States, and appreciate you being here today. We will start off with Ms. Sistare. TESTIMONY OF HANNAH S. SISTARE,\1\ EXECUTIVE DIRECTOR, NATIONAL COMMISSION ON THE PUBLIC SERVICE Ms. Sistare. Thank you very much, Chairman Voinovich, Delegate Norton and Representative Van Hollen. The National Commission on the Public Service, and our Chairman Paul Volcker, thank you for your interest in their recommendations for the reform and the renewal of the public service. They are encouraged by action in the House and the Senate to tackle this critical challenge. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Sistare appears in the Appendix on page 218. --------------------------------------------------------------------------- The title of the Commission report,\2\ ``Urgent Business for America'' reflects their conviction that we must seize the opportunity at hand for reform. Our 13 commissioners are of all political persuasions and from both political parties. They came together with a shared concern about the declining level of public trust in government and its correlation to the public's negative view of government performance. They were troubled by surveys indicating that Federal workers are frustrated in their efforts to get the job done and have difficulty seeing how their efforts contribute to the government's critical missions. --------------------------------------------------------------------------- \2\ The Commission report entitled ``Urgent Business for America, Revitalizing the Federal Government for the 21st Century,'' report of the National Commission on the Public Service, January 2003, submitted by Ms. Sistare, is retained in the files of the Subcommittee. --------------------------------------------------------------------------- The Commission began its work examining the challenges confronting Federal employees and the difficulty in attracting and retaining the Skilled Workforce 21st Century government demands. Soon, though, they were convinced that to be fully effective, Federal workforce reforms must take place within a modernized government structure. The Commission's vision is greater consolidation of related and overlapping agencies into mission-centered departments brought together in an environment of more administrative and personnel flexibility, but with strong political leadership. The commissioners were convinced that organizational cohesion and mission clarity would enhance the morale of the Federal workforce and improve government performance. The goal was not smaller government, but government that works better. The Commission does not take lightly what it will require to make this work. Some critical ingredients are: An Office of Personnel Management and OMB with the resources to support these systems; strong leadership from well-qualified and well- trained political leaders, career executives and managers; and as Paul Volcker repeatedly stresses, strong oversight by the Executive and the Congress. To optimize Congressional oversight, the Commission recommends that Congress itself reorganize its own committees around the key missions of the reformed Executive Branch structure. Recognizing that this reorganization will be the work of years, the Commission recommended that Congress pass legislation reauthorizing the Executive reorganization authority that Presidents had, in one form or another, from 1930 to 1984. Now, the Commission anticipated this authority would be exercised within a framework established by the Congress. They recommended including the requirement that personnel systems be governed by the established merit principles of government employment. They also envisioned significant consultation in the development of reorganization plans with Congress, Federal workers and other affected parties. The purpose of the expedited consideration, once a proposal reaches Congress, is to protect a broadly and well-considered reorganization plan from being pulled apart by partisan or individual turf battles. On the issue of pay, the Commission recommends that the government pay reflect current market conditions so government can retract and retain talent it critically needs. The market for the workforce, generally, was seen to be the private sector. The market for government's senior leadership was seen to be the nonprofit workforce, and this latter group includes Federal judges, political appointees and Members of Congress. The Commission was particularly concerned with the damaging impact of declining real pay for Federal judges. As I indicated, the Commission was concerned about the perception and reality of government performance and was critical of the current GS system under which time on the job becomes the major determinant of pay. Some, including Members and witnesses here today, have voiced concern that a pay-for-performance system is beyond the capabilities of the Federal Government and will be abused by managers. In response, Paul Volcker would point out that clarity and cohesion of mission is what gives managers the ability to establish performance objectives and measures. Once agencies have credible performance measures, it is possible to judge individual and group performance in a transparent, nonsubjective way. The whole process becomes much less daunting and visibly fair. I believe the Commission would applaud the administration for getting the ball rolling and would also agree with the Comptroller General on how to proceed. Furthermore, as Secretary Donna Shalala--former Secretary Donna Shalala--noted in her recent testimony before the House Government Reform Committee, you have to have credible people in both political and career management positions for the system to work. And here again, ongoing, effective training plays a critical role. The Commission had completed its work prior to the introduction of the legislative reforms before the Subcommittees. However, the members of the Commission would enthusiastically applaud the proposals' goals of enhancing recruitment, retention and training, linking training to performance plans and strategic goals, encouraging flexibility in personnel systems, alleviating pay compression for the SES and other senior-level employees, encouraging mid-career entrants, and improving the presidential appointments process. The Commission would add, act with urgency. Thank you. Senator Voinovich. Thank you. Mr. Kelman. TESTIMONY OF STEVEN J. KELMAN, Ph.D.,\1\ WEATHERHEAD PROFESSOR OF PUBLIC MANAGEMENT,, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY Mr. Kelman. Chairman Voinovich, Chairman Davis, Senator Durbin, and Congresswoman Norton, I am not going to talk about pay for performance. I will talk briefly about both attracting talented young people into government--as a teacher of young people considering careers in public service, I am interested in that--and creating workplaces for those people to come into government that will help us retain them and also workplaces that deliver results for the American people. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Kelman appears in the Appendix on page 229. --------------------------------------------------------------------------- First of all, I want to assure you I do have some good news, Senator Voinovich. The government still retains an ability to recruit and attract talented young people. This year, half of our graduating students in the Master of Public Policy program at the Kennedy School at Harvard have applied for the Presidential Management Internship program, and recently we were very happy to find out that 40 of our students, out of a graduating class of 180, have been accepted into the Presidential Management Internship program. One more piece of good news, a student of mine, who has been accepted into that program, Amy Dain, came by my office last week to tell me that within 1 week of her receiving her PMI notification, she had received communication from three government agencies, three different agencies, seeking to recruit her and find out if she was interested. So I think that is a real tribute to your efforts to create interest in human capital issues, to those of the Comptroller General, to Director James and her team at OPM that we are making some progress in that area. Amy said to me that the three communications she got included agencies she might not have thought of working for otherwise. It has opened up some new opportunities for her. Senator Voinovich. You had out of how many? Mr. Kelman. Out of 180 students, about 90 applied to the PMI and 40 have been accepted. Senator Voinovich. And the fact is they moved very quickly. Once they were designated, the agencies did not wait around. They were after them right away. Mr. Kelman. Correct. So good news. Let me briefly comment on some of the provisions of the proposed legislation. I essentially support everything in S. 129. The one provision I wanted to call particular attention to is the provision in Section 302, allowing using non-Federal service time as a base for annual leave. The idea behind this, this is one small step in making it easier for people to enter the Federal Government in mid-career. Hannah pointed this out, the Partnership for Public Service has been very interested in this. Young people no longer see themselves as working in one place throughout their careers, and we need to make it easier. A source of talent for the Federal Government is people wanting to come in, maybe only for a few years, mid-career, as one of several jobs. We make that much too hard now in the government. Another student of mine who is graduating this year, who was a Teach for America person before he came to the Kennedy School, was looking at a job in intelligence at the FBI that he wanted to apply for. The job said, ``Open to current or formal Federal employees only.'' He cannot apply for that job. I think that is bad news, from the perspective of the public. I think he would have been a very good person for that job. The Partnership for Public Service has made a number of excellent proposals in this area. One is to set up a mid-career Presidential Management Internship program. I think that is a great idea. Let me, finally, with regard to hiring good talent, make one suggestion for an additional provision for S. 129, that the bill include a provision to amend Title 5, which currently states that hiring and promotion decisions should be made on ``knowledge, skills and abilities,'' and add the word ``accomplishments.'' Right now the current language is too bureaucratic, too formulaic, time served, things like that. I think we send a good signal about an orientation toward results by adding that word ``accomplishments''--knowledge, skills, abilities and accomplishments--into the statute. Last, just a word about the other thing, once we get these people into the workforce, creating workplaces that inspire them, continue their commitment to public service. The kinds of things that you did, actually, Senator, as Mayor of Cleveland, with your work on total quality management, I think that a lot of the work here is going to have to be done at the agency level. I think there are some contributions the Hill can make-- oversight hearings, looking at ways that agencies are developing nonbureaucratic, more empowering ways of doing business for their employees. I would urge you to urge OPM to establish a Presidential Management Internship Advisory Council to the President's Management Council, to allow young, talented employees to interact with deputy secretaries and give them ideas for how to improve the Federal workplace. Finally, in terms of creating good workplaces, never forget the Hippocratic adage ``Do no harm.'' Because I think that probably one of the biggest sources of counterproductive agency practices that create too much bureaucracy, too much hierarchy, is the kind of what I call ``management by scandal'' approach that, unfortunately, a lot of current congressional oversight encourages. So I would urge you, as elected officials, to realize that every time the pursuit of scandal creates more rules, more bureaucracy and so forth, you are really decreasing the attractiveness of Federal service to young people. My student, Amy Dain, describes what she is looking for in a Federal job as follows: ``I am looking for a job where I will be able to learn, where I will be challenged, where I will find mentors who will show me the ropes, introduce me to decisionmakers and open doors and opportunities for me, where I will be able to work in a team to seek solutions to complicated problems, where I will be supported in taking risks, where I will have a sense of making a meaningful contributions to issues I find important and relevant and where I will find a warm community.'' Let us work towards a situation where she will not be disappointed. Thank you. Senator Voinovich. That is wonderful. Thank you very much. Mr. Stier. TESTIMONY OF MAX STIER,\1\ PRESIDENT AND CHIEF EXECUTIVE OFFICER, PARTNERSHIP FOR PUBLIC SERVICE Mr. Stier. Thank you very much, Mr. Chairman, Madam Chairwoman Davis, Senator Durbin, and Congresswoman Norton. It is a pleasure being here. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Stier appears in the Appendix on page 239. --------------------------------------------------------------------------- We have heard all morning, and now coming into the afternoon, about the human capital crisis. It is truly, I think, best viewed as a multi-tiered problem that is going to need a multi-tiered set of solutions. One approach that we would propose to organize these sets of problems is to see them as a succession of three major barriers: The first barrier literally being lack of information, lack of information about government jobs, public service, and the value of those jobs and government service; The second being a broken hiring process, which right now takes too long, is too difficult and is nontransparent; And the third, as Steve mentioned, are the jobs themselves, which are not always representative of a high-performing work environment which is so critical on the retention side and on the recruitment side. So I would like to talk, in my oral remarks, about some of the things that can be done in each one of those barriers to address them. The first piece is what we have learned from our polling is that the most effective way of telling the story of government is through the story of Federal workers, individual workers. And in that light, we have created the program called the Service to America Medals, which recognizes excellence in the Federal service. Eight Federal workers were honored last year. This is done in conjunction with the Atlantic Media Group, and we are doing the same this year. You will notice, and hopefully--I am sure many of you take the Metro--you will see the ad campaign that we have up. I also have one of the brochures here from the ``Service to America Medals,''\2\ and I cannot help but take this time as an opportunity to ask all of you to find great Federal workers to nominate for this program, either in your district or otherwise in your experience. --------------------------------------------------------------------------- \2\ The brochure entitled ``Service to America Medals,'' submitted by Mr. Stier is retained in the files of the Subcommittee. --------------------------------------------------------------------------- Last year, we had a nomination from a member. It is a fabulous program that really makes a difference both for the workers themselves, but also, most importantly, for telling the American people the story of the Federal Government and public service. The second piece I would like to highlight is the fact that, by and large, the relationship between the Federal Government and our college and universities has been broken. To respond to that, we started a program with the Office of Personnel Management called ``A Call to Serve.'' To date, there are 400 universities that have signed on, 60 Federal agencies, to raise the profile of the Federal workforce on college and university campuses. One of the productions that we have created for that network is this ``Red, White and Blue Jobs'' handbook, again, to address the real inadequacy right now. Most young people know a lot about private-sector options, but not about public- sector options. And if I could, I would ask that both of these brochures be added to the record.\1\ --------------------------------------------------------------------------- \1\ The brochure entitled ``Red White & Blue Jobs, Finding a Great Job in the Federal Government,'' submitted by Mr. Stier is retained in the files of the Subcommittee. --------------------------------------------------------------------------- The third piece on the first barrier, the lack of information on the recruitment side that I would like to focus on, is the issue of student debt. Obviously, Chairman Voinovich, Senator Durbin, your leadership with the GO FEDS legislation, I think, is very important. What we know today is that two-thirds of graduates from our colleges and universities have student debt. The size of those debts have increased exponentially. And even where there is interest in public service, oftentimes, young people do not have the choice to pursue it because of those debts, and I think the GO FEDS legislation is an important step in addressing that problem. The second barrier of the broken hiring process is one that has, again, multiple components. There is a pledge to applicants that we have designed in conjunction with the Office of Personnel Management which I think is very important to see enforced that includes making sure that job vacancy announcements are in plain English and that the process is an easier one. I would also note that there are many very quick things that could be done: Internships, for example--the private sector uses them as a critical talent pipeline into their organizations. The Federal Government does not do a very good job about that. In fact, it is very difficult to convert superb interns into full-time employees. There is a distinction made between interns that are brought in under a government program versus a nonprofit program like by the Hispanic Association of Colleges and Universities, and those kind of changes could be made very easily and would result in a lot of good talent and, in particular, diverse talent coming into the Federal Government. I am rushing here, and so I will jump into the third barrier, which is fundamental and, in many ways, the hardest nut to crack, which is the job themselves. Here, again, I would suggest that the starting point ought to be with the management and leadership. We can note, from the OPM survey, which was very well done, that only 43 percent of Federal employees hold their managers and leaders in high regard. That is a problem. Your suggestion on starting with the SES, I think, is the right one, and we strongly support the proposal that is before these Subcommittees. We would also suggest that an additional element that ought to be included is a requirement that agencies conduct regular employee surveys, and this can be done agency-by-agency, with some joint element, so that you can do governmentwide work, but we believe that is absolutely essential. And then, finally, I would note that it is very important for us to focus on the flexibilities and the improvements that have already been passed, in particular, the Chief Human Capital Officer Act--wonderful legislation. Implementation is really the name of the game right now, and we need to make sure that it is done right. Thank you very much. Senator Voinovich. Thank you, Max. Mr. Taylor. TESTIMONY OF JEFF TAYLOR,\1\ FOUNDER AND CHAIRMAN, MONSTER Mr. Taylor. Chairman Voinovich and your esteemed team, I want to thank you for an opportunity to come here today. I have a mission to help people love their jobs, and a big part of this for me has been to try to educate to the government about the window of opportunity that I see, and this is really competing with the private sector for talent. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Taylor appears in the Appendix on page 254. --------------------------------------------------------------------------- I decided I would do kind of time line because I think it shows where the opportunities are. And with the advent of the Internet and the worldwide web and the invention in 1993, we really launched our next mass media, radio, television and now the Internet and, for the first time, a reason for a PC on every desk top, and maybe more importantly, an affordable medium to communicate. The result, when you overlaid that on top of a tech boom and a telecommunications boom, was 1999 tech and dot-com euphoria, and with that, a booming economy, entrepreneurial fever, unprecedented venture capital and IPOs, so advantaged private-sector businesses. You ended up with 3.9-percent unemployment, rapid pay acceleration and stock options, as currency, which then gave the advantage to the job-seeker or the employee. So I look at this. In fact, there is a measurable shift in 1999 and the beginning of 2000, where employees really started, for the first time in 100 years, to take control of their own lives and companies were in a panic. Then, we have April 2001. We have the dot-com and the tech bubble is really exposed. I talk about the ``Emperor has no Clothes,'' and by summer of 2001, we had dot-coma. I know we are not supposed to laugh in this, but that is kind of funny, come on. [Laughter.] So here we are today, it is 2003. The treadmill has slowed. I call it ``the eye of the storm.'' This is kind of the calm. It is the reprieve in business and for government that you never really get--6 percent unemployment, give or take 8.5 million people out of work. Recently, President Harry Truman--well, maybe in relevant form--said, ``If your friends are out of work, it is a recession. If you are out of work, it is a depression.'' And I think that what we have now is longer job search cycles, extended benefits that we have provided, which are running out. A stable job is in fashion maybe for the first time in 10 years. Employee or talent attitudes are more realistic than they have been, and I look at employers momentarily are regaining control, but there is very little dry powder. The economy has basically put us in a position where the private-sector companies do not have much to go on. So here is the opportunity. I think the government needs to capitalize on the economic slowdown to seize talent in the private sector. You have e-Gov initiatives right now, very positive. You have new initiatives with TSA and Homeland Security. I look at the positives. There are many new jobs that are going to be created. Go USA sentiments from the tragedy and terrorism of September 11 comes the pride of America, and for the first time in recent memory, for me, an opportunity to think about working for the government and some of the stability factors that are there in a new way. Candidates have an open mind. A recent Monster survey of 51,000 job-seekers on Monster, 80 percent indicated that they would consider working for the government. In a Monster survey of our campuses--we partner with over 1,400 campuses--86 percent of students said they would think about working for the government. So I look at the Internet as a new mass medium. It is inexpensive distribution. It is fast adoption by the target groups for the government, and I look at early successes as a way to prove this. Through a partnership with Monster, through NCS Pearson, TSA needed security people fast. We posted the jobs on Monster. We had over 6 million job-seekers view those jobs, 1.7 million applicants, 417,000 went through assessment. They hired 61,000 people through the Monster interface in a very short window of time. We have 66,000 people that are placed in the ready pool. So what I am trying to show is it is not just the Internet, but your new partners in the private sector can actually be an answer for some of these recruiting challenges. I look at the challenges that you have ahead are equally daunting. The aging workforce, it has been well-covered. But it is not just the talent, it is the knowledge that is going to leave your ranks and your agencies. Insular recruiting, which has been a dynamic way that you have recruited, is really going to fail because there are not enough candidates. Your outside systems, and what I will call ``old habits,'' I have got to challenge, I guess. According to a recent survey done by MSPB, it is just being printed now, 300 Federal human resource specialists were interviewed. Ninety-six percent used the USAJOBS site to recruit, 30 percent used agency bulletin boards, 6 percent used the newspaper, zero used the Internet job boards that are out there. Monster, for one, had 20 million unique visitors in our highest month, which was in January, coming 54 million times a month. This is the private sector that is ready to go to work for the government. Thirty percent of government agencies still do not accept electronic applications. Many agencies have no staffing automation, and this can create 4- to 6-month backlogs. Ultimately, the vacancy announcement, the description itself is daunting. And if you would share, this is a description--could you bring that up here into the light, just so you see--this is a description on Monster for the Army for one position, and you can see that it is a little longer than your average private- sector position. So two last things: The brand and culture concerns, although I am amazed at the war kind of power of the United States, and the spirit, and the branding that is going on right now, I think we have to transfer that to a new war which is happening, which is the war for talent. And I look at the window closeing. In 2008, the private-sector competition will reenergize. Economists predict 4-percent unemployment by 2010. The Bureau of Labor says 10 million jobs will go unfilled by 2010. Private-sector fuel, it will go back to venture capital, rapid pay acceleration. The window will close. I am predicting the worst labor shortage ever in our lifetime that will start in 2008. If we do not act on some of the things I have talked about, in my judgment, baby boomer exit, 10-year shortening, broadened skill shortages, e-commerce to e-business transition, where all businesses will change, and ultimately the free agent world is going to create an incredible scenario for the government, and it is going to be very difficult to hire. The window from 2002 to 2005 is where I am suggesting that we look. We have already burned 1 year. Senator Voinovich. Thanks very much. General McIntosh. TESTIMONY OF MAJOR GENERAL ROBERT A. McINTOSH, USAFR [RET.],\1\ EXECUTIVE DIRECTOR, RESERVE OFFICERS ASSOCIATION OF THE UNITED STATES General McIntosh. Chairman Voinovich, Chairwoman Davis, Senator Durbin, and Delegate Norton, it is certainly a pleasure and an honor for me to be here representing the 80,000 members of the Reserve Officers Association. I am going to shorten my 5-minute remarks in the interest of time, but I do have a couple of things I need to cover. --------------------------------------------------------------------------- \1\ The prepared statement of General McIntosh appears in the Appendix on page 259. --------------------------------------------------------------------------- S. 593, the Reservists Pay Security Act of 2003, is a significant step toward resolving the pay hardship issue for a portion of the Reservists who have been mobilized to support Operation Iraqi Freedom. The bill would entitle any employee of the Federal Government who is called to perform service as a member of the uniformed services to receive civilian pay in the amount, which taken together with his military pay, would be no less than the basic pay he would then be receiving if no interruption in his civilian employment had occurred. Simply put, the bill would ensure that, at least financially, no harm would be done to a mobilized Federal employee. There are approximately 120,000 Federal employees who serve as members of the Reserve components. A significant number of these, between 12,000 and 13,000, are currently mobilized, and of course that is of the total number being mobilized of 220,000 Guardsmen and Reservists for Iraqi Freedom. As we noted, we predict there will be more Reservists and Guardsmen activated over time in many contingency operations in the future, and certainly we look toward several over the few years in the part of the world we are now engaged. More importantly, however, this bill is an opportunity for the Federal Government to lead the way and to set the example for other employers of members of the Guard and Reserves. There are already many employers--city, State and private--who pay all or some part of the difference between their employees' civilian salaries and their military compensation. There could be more. If we are to encourage employers to help protect their employees' financial well-being when they are serving their country, the Federal Government must lead the way and set the example. If the Federal Government does not do the right thing, what kind of a message does it send to those employers whose connection is more tenuous? The Federal Government, whose actions in this regard can only be legislated, must lead by example and encourage the private sector to do what cannot, and ought not, to be legislated in the private sector. There is more to this issue than Federal mobilized employees and their families, but we must start here, now at home, as it were. This provision is a first step in demonstrating a practical and meaningful way that the contributions of our Reserve forces are fully recognized and appreciated by the Nation. Thank you. Senator Voinovich. Thank you very much. It is interesting that my staff director for this Subcommittee was mobilized with the U.S. Navy for the conflict in Iraq. I just inquired about what his leave situation is, and what he is going to receive. I think he has cobbled together some vacation time and some other things, but after that is over, he will be getting his lieutenant junior grade pay, which is substantially less than he is making in his staff position here. You all were very patient to hear the testimony of the other witnesses, and it seems to me that there are some fundamental things that need to be addressed if we are going to capitalize on, as Mr. Taylor suggests, this window of opportunity that we have. At this stage of the game, it does not appear that pay comparability health care costs, or concerns about outsourcing have negatively impacted on our recruiting. Would anyone like to comment on that? In other words, Steve, your Harvard graduates are coming to work for the Federal Government. But I remember when I was up there talking to a couple of your students, one of the things they said to me was, when they looked at the Federal service they were wary about the outsourcing of Federal jobs. They were thinking about, instead of coming to work for the Federal Government, going to work for the companies that are getting the outsourced work. I would just like you to comment on that, if you would, or anybody else. Mr. Kelman. It is interesting that they said that to you. I actually have not heard that. When I talk to my students about why are you thinking why might you work in the government, why might you not work in the government, probably the two single biggest issues that come up again, and again, and again, one is student loan repayment because the students have very high debt burdens, and they are often getting job offers that are much higher in the private sector. So one is student loan repayment, and then the second is quality of work, and Max and I have both been talking about this. There is a not necessarily fully unjustified perception that too many jobs in the Federal Government are too bound up by rules, and procedures, and clearances, and so many things that make it harder for an individual to feel that he or she is making a difference. I almost hear that more than I hear even student loans. Student loans is a very big issue for our students, but what is the quality of the work going to be once I get on the job is a theme that comes up again, and again, and again. Ms. Sistare. The surveys that the Center for Public Service at Brookings has conducted confirm what Steve says. Even at the Schools of Public Administration, most of the students are looking to go perhaps to State and local government or more likely to the nonprofit sector and, again, it is the job that the students are primarily looking for. They are interested in pay and the other benefits, but the ability to make a difference really makes a difference for them. Senator Voinovich. That is really interesting because, over the years, the Federal Government was always more attractive than State and local government, and in the last decade or so there has been a shift to go to work for State and local governments. Mr. Stier. Chairman Voinovich. Senator Voinovich. Yes? Mr. Stier. I just wanted to add to that, though, that I think this, again, is a multi-tiered problem. Clearly, it is fabulous that people at the Kennedy School are coming to the government or are interested in the government in greater numbers, but you will expect that in a School of Public Policy. There are a lot of people out there that the government needs, whether it is IT workers or engineers or scientists, who simply are not informed about the opportunity to come to government or the value, and even when they are, you run into the student debt issue. Senator Durbin is a lawyer. We recently did a poll of third-year law students. Two-thirds said that they could not make the choice to go into public service or public interest because of their debts. It is extraordinary how big of an issue that is. And then once they are interested, and if their debts are not a problem, the hiring process is often an enormous deterrent. And so, again, this is a multi-tiered set of issues, and while all of these factors are going to influence it, even in this day talent is always going to have choices. Even when there is an economic slowdown, the real top talent has choices, and we need to make sure, obviously, that we get the very best, and therefore make sure that all of these elements line up in the way they need to for the government. Senator Voinovich. So the thing is, if you were going to really do something quickly to handle this problem, you would deal with the loan situation. I think there is legislation that would increase the aggregate maximum from $40,000 to $60,000 and the annual cap from $6,000 to $10,000. Would that help? Mr. Stier. I think the loan situation would absolutely help. I think that working on making the hiring process a faster, easier system would absolutely help, and then making sure, once they get to those jobs, that high performers and innovators are supported, and then starting off with the outreach would do the trick. Senator Voinovich. Right. But the fact is right now, to take advantage of the situation we must address the loan situation, get OPM to really concentrate on this very complicated hiring process, shortening it up and making it easier to get people in. And then once we have done those things, we should consider the quality of the jobs. Mr. Stier. Correct. Senator Voinovich. But now the thing is you have to go out and land them. Mr. Taylor. Could I just make one comment here? Is that I do not think we are educating the general private-sector population about the possibilities. I think if you look at this like a funnel, we are about to open the funnel up, and we are letting too many employees out of the Federal Government, and we do not have enough input coming in. So we need to make that process easier, but we also need to work on our branding to position the organization, the Federal Government as a whole, all agencies, to bring new talent in. You do not have enough young workers coming in here to basically feed the system. We recently won the Federal contract to run USAJOBS, and we are able to take our back-end systems and basically start to fix some of the systems and make it so it will work, but we are still going to have to tell the general population that we have got jobs out there, and we are going to make it easier for them to go through that process. Senator Voinovich. Max is helping with branding it on the college campuses. Mr. Taylor. He sure is, right. Senator Voinovich. And a lot of people are cooperating with him. How long is it going to take you to launch that new website? Mr. Taylor. We are ready. So we need a formal announcement, probably about the end of this month. We really just got the contract at the end of January. Senator Voinovich. That is fast action. I have to say that I asked my staff in Cleveland to compile a list of Federal jobs, because people call, and ask, ``What jobs are available,'' and it is a nightmare. I do not know how many pages of information that we had, but in terms of being user friendly, it was awful, just awful. Mr. Kelman. One very operational suggestion to OPM, a big deterrent is that because of the traditional ``rule of three,'' which is now eliminated, students had to give an entire, not just a resume, but this enormous amount of information just to apply for a job. In the private sector, that does not happen. You apply for the job with a simple resume, and then if they are interested in you, you start getting more information. In the Federal Government, we have had to do everything up front, and students look at this and say, ``It is going to take me 20 hours just to apply for this job, where for a private- sector job, I just give them a resume.'' I hope that OPM is going to be dealing with that and that the agencies will deal with that. Senator Voinovich. Jeff, are you dealing with that at all? Have you made the recommendation to them, that even when they get the website up, they still have to deal with that long list of stuff that you just showed us? Are they aware of that problem? Mr. Taylor. We are actually working with the OPM Office on a number of different dynamics. Obviously, as part of the process of putting a website up, we have had a chance to question some of the stuff that is going to actually be in the content of the website, but there is a fairly complex process surrounding this, and I think we are going to do it in phases. I think Ms. Norton likes that kind of ``pilot project'' approach, and I am looking at USAJOBS as our pilot project to try to help the Federal Government to attract the talented workers. I think what you will see is, just when we launch, there is going to be a whole new set of steps, and working with Max and the Partnership, we are actually trying to get a theme out there to really expedite the whole process of applying for a job and also how we respond back to them so they know what is happening in the process. Senator Voinovich. Great. I have taken too much of your time, Congresswoman Davis. Mrs. Davis. Thank you, Senator. Ms. Sistare, you said that, and I am not sure I have got your words exactly, but urgency to get with it on this pay for performance, I guess it is. Ms. Sistare. Well, urgency to address the problems of the public service. Mrs. Davis. But you said, if I heard you correctly, that you did agree with the Comptroller General that we should not just jump into it; we should have set things in place, and I forget what he called it. Ms. Sistare. The Commission's report is more of an architectural drawing than a blueprint, but the commissioners did feel strongly that performance needed to play more of a role in government and then the rewarding through pay, and I think they would applaud the administration's effort to get it going, but you do have to have a system in place. You do have to have measures. You have to have confidence in the system. As Secretary Shalala said, you have to have people trained to run the system. Mrs. Davis. So you agree we need to do a little bit of work before we jump into it. Mr. Stier, your organization is actively promoting Excellence in the Federal Workforce. Do you see any inherent contradiction in the President's proposed management reforms and his attempt to privatize more Federal jobs with what you are doing? Personally, if I was looking for a Federal job, I would be very nervous because of privatization. Mr. Stier. I think that one of the key issues right now is an informational one, to make sure that the American public, as Jeff said, really understands the value of public service and the opportunities that are there. We did a set of focus groups, and one of the things that we found was that, basically, people in the labor market had no idea about government jobs. When we gave them a list of government jobs, many of their perceptions about the government changed. You asked the question about privatization. The issue of privatization, in fact, has been an ongoing one for the government for many years. I believe that upwards over 300,000 jobs were shed from the Federal workforce during the 1990's and, in fact, some of the workforce imbalances we are seeing today are a result of some of that privatization that occurred. I think that it is absolutely essential that the message go out that Federal Government jobs are incredibly valuable, that they offer not only something for the country, but for the individuals that are taking them, and that it is a chance to really make a difference. I believe that you can, in fact, have an environment in which the value of public service is maintained in the context of still allowing some jobs to be open for competition, and I think that the employee groups are open to that as well. I think where the difficulty comes is when you start seeing quotas that are set that are not really based on any particular jurisdiction, and it is also, I think, really essential to focus on the fact that where there are competitions, it does not mean that these jobs are being privatized. In fact, in many instances, public-sector workers win those competitions, and that is something that, I think, ought to be used as a demonstration of the great work that the public sector, in fact, is doing. So, again, I think that they do not necessarily have to be in contradiction. Unfortunately, currently, they are, at times, in contradiction. Mrs. Davis. General McIntosh, the administration is concerned about paying Federal Reservists their differential because many times they would be out, at least it is my understanding, many times they would be out in the field, and they would be making more than their commanding officer, and there is some concern that would be bad for morale and the like, and then they would be out there with other Reservists who are not getting the differential from the private sector. How do you address that? General McIntosh. Well, certainly, today we have those differences in individuals because we have people in the field whose companies are paying the differential because they are such strong supporters of the Guardsmen and Reservists. We had the same situation in Desert Shield and Desert Storm. And, of course, those who did not get differential pay or had their own businesses or were professionals, some of them lost their businesses. In Desert Shield/Desert Storm, where we had a little higher number mobilized than we do today, we had no negative feedback from the field, in terms of morale, and people talking in the foxhole about difference in pay. That did not come up. It was not an issue. The troops did not talk about it, and I would really question the logic of saying that would be a problem. Mrs. Davis. Well, serving on the House Armed Services Committee and last year on the Personnel Subcommittee, I heard that a lot, and I wish we could pay everybody, private sector and the works, but I thank you for your service. Thank you, Mr. Chairman. Senator Voinovich. Senator Durbin is the Ranking Member of our Subcommittee. OPENING STATEMENT OF SENATOR DURBIN Senator Durbin. Thank you. I will be very brief because I know Congresswoman Norton has been waiting too. Let me ask you this, Major General McIntosh. It is my understanding that 10 percent of the Guard and Reserve in the United States today are Federal employees. General McIntosh. The data we have looked at, our estimates built on estimates, show about that 120,000 of about a 1.1- million force. Senator Durbin. So it is a significant portion. General McIntosh. Very significant. Senator Durbin. Second, it is my understanding that some 6 or 7 percent of those who have been activated for Enduring Freedom in Iraq are also Federal employees. General McIntosh. That number is emerging, Senator, but it is approaching that percentage, that is correct. Senator Durbin. I think it goes back to an earlier point that has been made over and over again in different ways, and that is whether or not a career with the Federal Government is going to result in treatment comparable to other jobs in life. And the point that you made is that States, counties, cities and many private corporations have decided that if you are willing to make the sacrifice to serve your country in the Guard and Reserve, and you are activated, that they are going to make certain that your family does not suffer in the process. This just strikes me as a reaffirmation of the fact that Federal public service should not be a disincentive to serving our country in the Guard and Reserve. It should be consistent with it and an incentive. I understand, as you said, there are disparities in how troops are treated in the field. I hope that this notion that we have to play to the lowest common denominator instead of to the middle ground or higher common denominator does not argue against this. I have used the example of a friend of mine back in the Midwest, leaving a job with the FAA as an air traffic controller, facing the prospect of being activated and taking a position serving his country, that it would cost him roughly $30,000 a year. Now, that is a very dramatic hit, in terms of income, and he is going to do it one way or the other, but whether the person is working for Congress on Capitol Hill or working for the Federal Government, I hope that we will consider this Reserve pay security as a way to approach this, and I thank you for being here today to tell us about your support for that. General McIntosh. Thank you, Senator. I would like to make a comment. I have been in and out of the Reserve, going from reserve to active, and back and forth, for a 37-year career, and I have yet to hear one troop in the field talk about the difference in pay, relative to a Reservist serving side-by-side with an active component. The other thing I would say, these two gentlemen to my right, I was just handed a note, their companies pay differential. So, as a retired Reservist and someone who cares about our Guard and Reserve and the defense of the country, I would just like to personally thank you on the record. Senator Durbin. Thank you. Let me ask you, I have raised this question about student loans as long as I have been around this Subcommittee. I have not been as passionate an advocate as my colleague, Senator Voinovich, has been on the general human capital question. He has become our Senate expert, as he has devoted a major part of his public career to this issue. And we have managed to put some money into congressional appropriations to deal with the staff on the Senate side--I do not know, Congresswoman Norton, whether it is the same case on the House side yet--for student loan forgiveness. Let me just ask if any of you would like to comment on one of the quandaries and one of the difficulties. If you were putting student loan forgiveness into the package as part of an incentive for recruitment and retention, where do you draw the line? That has been the tough thing. We have had people on Capitol Hill in different offices who have said, ``Wait a minute. This employee has been with us for 2 years, has a significant student loan, has a significant monthly payment. There is no talk about this employee leaving,'' but what would it take then for retention for me to provide student loan forgiveness? Do I give it to everyone who has a student loan who works in my office, only if they say they might leave, only if it is an incentive to bring them? Where would I draw this line? Because it is becoming ubiquitous. Student loans, as I know from my own family experience, turn out to be an issue that younger people face as a reality. Do you have any thoughts on that, Dr. Kelman? Mr. Kelman. I guess I would say this is not something that should be addressed in legislation. That is the thing I feel most strongly. This is a very workplace level, I mean, this is what we pay managers for, to make decisions like this. I guess I would say that we should maximize the flexibility that an organization has to use whatever limited pot of student loan forgiveness money to be used most effectively. My quick inclination is that the only thing that legislation should say is that it is up to the organization to determine how whatever limited pot is available is used. Senator Durbin. Mr. Stier, do you have any thoughts on that? Mr. Stier. I think that Steve is exactly right. It really is a management issue, and really it should be viewed, again, as a tool, and I think your emphasis that it is not only a recruitment tool, but a retention tool, is quite important. Because, indeed, they are really two sides of the same coin, and I think it is important for a manager to see the panoply of different benefits that they can give to get and keep the talent they need as good managers. Now, that said, one would hope that, particularly in the government context, that the managers would be held accountable, and one would hope that, as part of their own evaluation, you would look to how they are doing in terms of recruiting and retaining talent in their organizations. There are Federal entities that do that--the Bonneville Power Administration is one of them--to great success. And I think that is one of the really key elements, Mr. Chairman, that you had asked about earlier. If you have to start someplace, one of the key places is really starting on making sure we have a management and leadership corps here that can get the job done. There are a lot of things we could do with that. There is a Commission recommendation about creating a technical line, in addition to a managerial line, in the SES. That is something I think would be very valuable to explore, to make sure that you are actually selecting managers for their management competencies and not simply because you want to give them a raise, and in fact they deserve a raise. So make it an option so that people can get the money they deserve and still maintain the competencies that you need. Senator Durbin. I would just close with this. I think the student loan forgiveness issue is a generational issue that we have to deal with because I think many of us in Congress making the decisions on student loan forgiveness never lived through what kids are living through today. Mr. Stier. Right. Senator Durbin. Maybe we can identify with our children who are living through it. My daughter is, in just a few weeks, completing her 28-year educational training. [Laughter.] And it turns out that, and God bless her, she has done wonderful things, but it turns out the meter has been running, and when she finishes, as we discussed over the weekend, she has to think about a job she can take where she can pay back that student loan. Mr. Stier. Right. Senator Durbin. It is just a fact of life, and if you do not deal with it, then, frankly, you are going to deal the Federal Government out of the picture. Mr. Stier. Right. Senator Durbin. Thank you all for your testimony. Senator Voinovich. Thank you. Congresswoman Norton. Ms. Norton. Thank you, Mr. Chairman. Just to you, General McIntosh, quite apart from issues of fairness, I am almost frightened by the extent to which the defense of the United States today is dependent upon the Guard and Reserves. So if, for no other reason, if we want to continue to recruit people to defend our country, we have got to begin to deal, in some way, with the questions you raise. One thing we have not faced is the extent to which the Reserves and the Guards are race- and class-based; people who have gone to get expertise, to get training opportunity that they did not have in this society. My son would not have gone into the Reserves or the Guard because he is a middle-class boy that went to college. There are such people who go into the Guard and Reserve. But one of these days we are going to look and see who goes and who does not go, and I think we will come particularly to understand that we owe them much more than the waving of the flag, and even in the bills that we put forward, and certainly we have got to begin to deal with this differential problem in some way. I have a question for Ms. Sistare and Dr. Kelman. I believe you were here and heard testimony of the previous panel that we are not using the flexibility we have. There may be a number of reasons for that, but one reason that clearly came out was the win-lose situation that the agency faces, that there is one pot of money, and if you go to reward employees, even with the existing flexibility, you are taking it out of that pot, and more often than not, taking it from other employees. And rather than do that, people simply do not move on the flexibility at all. I am asking you whether you think pay for performance and other changes involving pay would be better implemented and better received if, in fact, there were additional resources to accomplish this departure from what has been the norm in the merit system. Ms. Sistare. I think, definitely, the Commission definitely feels that adequate funding of any of these kinds of programs, including training, which has not been adequately or consistently funded over the years, is absolutely necessary to its being effective. Mr. Kelman. I very much appreciated what you said before about trying, as a general matter, during the earlier colloquies, to look for win-win solutions. It has been really tough in this area, and it has been very frustrating looked at from Boston to see all of the partisanship and so forth that has taken place here. I think, inevitably, money is not going to be unlimited. There, inevitably, are going to be some choices and sometimes tough choices. Obviously, more money greases things. I guess I am personally inclined partly to agree with Ms. Sistare that, for me, actually a priority for additional funds, in addition possibly to some versions of pay for performance--I do not want to go into great lengths of my own views on this, I have sort of mixed views, but be that as it may--I think more money for training, which our friends on the Appropriations Committees, both in the House and Senate, usually is the very first thing that gets taken out of any agency's budget I think is extraordinarily ``penny wise and pound foolish.'' I guess we are in a tight budget environment, and, yes, it would be wonderful to have all of this money to give out and, yes, that would make things easier, but I also think we have to choose priorities, for whatever pot of money we have, what is going to do the most to create a public service that attracts and retains good people. I think, at the end of the day, there are going to be some tough choices. We are not simply going to be able to say let us give more to everybody. So I like the idea of trying to look for win-wins. I think we should do it to the maximum extent we can, but also funds are limited. Mr. Stier. Congresswoman, I think, bottom line, that the Federal Government has insufficiently prioritized the Federal workforce, and that includes not only resources, but clearly focusing on good management. I think we have dug ourselves very much into a hole that we need to fill in and to do better with, and that in the long term, those kinds of investments, as we have seen from a lot of private-sector data and public-sector exploration, pay off. And so I do believe that we do need to see more resources, and I think, ultimately, for pay for performance to work. A lot of the skepticism that was raised is the right skepticism, but it is the right goal for us to be trying to achieve, and we should be figuring out how to get there through a win-win strategy such as the one that you were suggesting we need to pursue. Ms. Norton. And, Dr. Kelman, when I said win-win, that does not mean that dollar-for-dollar you get as much here as you get there. Win-win also means lose-lose; that everybody loses something usually, as well. And I will tell you what win-lose is. If you are trying to do something in the workforce that has not been done in 100 years, and you begin by giving $25,000 to political appointees, that is win-big lose. Or you begin by saying pay for performance and no additional money, but it comes out of your pot, that is win-lose. Now, I am just looking for not--give me an equal amount of money here. If the world were so simple, that would not be win- win, it would be an inexhaustible supply of resources, and we would have no problems. This takes deeper thinking than I am seeing come forward. And simply saying, ``well, you are not always going to get more money, gets us back to where they are.'' Let me ask you a question, Dr. Kelman, further. I think you or somebody cited a very good example that brings to mind something that some of us are working on. Was it you, Dr. Kelman, that cited the example of a brochure that says ``only former and current employees''? Mr. Kelman. Yes, it is actually a job announcement. Ms. Norton. Let me try that one on win-win. Because I would agree, you see, I am looking for some way to streamline and modernize the gargantuan civil service system, while being fair enough to employees so that they are stakeholders also in that system, and I have never seen any system, particularly systems I know in the private sector, that worked any other way. I am still a professor of law at Georgetown, but when I was a free citizen, I was on the board of three Fortune 500 companies, and I never saw them do anything except on a win-win basis. Some of those companies were unionized and some were not, but they did understand how to get personnel on-line with you, and if you did not, you did not have a system. So I agree that if you are a bright, young person, and you see you have to already have been a government employee, it makes you pretty cynical. Some of the employees that would be most valuable to us are people at mid level who have considerable expertise. Both of you, Mr. Taylor and Mr. Stier, in effect, are talking about some of those employees. One of the things some of us are considering is a bill that would invite people at mid level to apply, but it would be open to employees who are not Federal employees and to employees who are Federal employees. Mr. Kelman. You mean apply for like a Presidential Management Internship---- Ms. Norton. Oh, no. Mr. Kelman. No. What are you thinking? Ms. Norton. Mid level. I am talking about attracting people at mid level. You know that some of those people are in the private sector. You know for sure some of them are in the private sector. You know some of them are kind of fed up with the private sector. They would like to do some public service work. You want to bring them in. You even want to bring them in at mid level. But the reason--and I have no idea--you have this brochure that says ``former and current employees only'' is because there is perceived to be a competition between these two kinds of employees. Why not eliminate the competition, and say those of you at mid level, whether you are in the government or out of the government, whether you are, I do not know, a GS-12 in the government or you come from Metropolitan Life Insurance Company, you can compete for this series of jobs; would that be something---- Mr. Kelman. Oh, absolutely. No, I mean, it would make no more sense to exclude current Federal employees from competing for jobs than it is to limit it. So, no, obviously both groups should be there, and I guess the worry has been that with more and more people, younger people, are not looking any more in the same way as our generation did for one career your whole life, whatever, just stay in an organization, they are moving around a lot, that the government is cutting itself off from a potential source of talent. And some people who want to have, as you indicated, a period of doing public service, but maybe, for whatever reason, feel they cannot do it their whole career, give them a chance, but certainly not at the expense of saying we are going to exclude the existing Federal employees. Mr. Taylor. I would like to make the comment that on that 7- or 8-foot-long job description, right near the bottom it says, ``Do not E-mail or fax or call on this position. Only mail your resume.'' And so what happens at the mid level for talented individuals is, by the time that system works for that person, it could be 3 or 4 months, in some cases I have had Federal applicants come up to me at these different conferences and say 9 or 10 months later they get a call back that says they are interested in talking to you. Well, you are 7 months into a new job when you get that request. So it is a balance here is that it is, for Federal employees, they understand the process and the expectation. So they are the perfect candidate for the job, which is why there is a lot of insular trading of employees back and forth between the agencies. To get somebody from the outside in the private sector, we are going to have to clean up some of these systems, get the momentum going, which is a lot of what Max has been working on with the Partnership, and working with Monster, so that we can get these candidates in, in a timely fashion, get them responded to so we keep them warm and ready to go to work. Mr. Kelman. I once actually asked Jeff what percentage of the jobs advertised on Monster are entry level versus nonentry level, and I think you told me it was like over 90 percent are nonentry-level jobs. Mr. Taylor. Entry-level jobs, like very senior executive jobs, are not listed, for the most part. Entry-level jobs, most companies, whether it is hubris or not, think that entry-level workers will come to them in droves anyway. That is really changing, as we speak, as more campus recruiting takes center stage. Ms. Norton. The Chairman has a vote. I want to say to General McIntosh and to the Chairman, one of the reasons why I am so attuned to what you had to say is that I have people in Iraq, people who are second per capita in Federal income taxes. They have nobody here in the Senate and only me in the House, and I do not intend to see one more denial to them. And I want to say to you, Mr. Taylor, there are some agencies where you can only apply on-line. So we have got to have the balance, too, because not everybody in the world is computer literate, and we are not only applying for those kinds of jobs. We need equity for those who are technically competent---- Mr. Taylor. Absolutely. Ms. Norton [continuing]. And those who might be competent to come to the Federal Government, but are not on-line. Thank you very much, Madam Chairman. Mrs. Davis. Thank you, Ms. Norton. I thank you all. It has been a very long hearing, and thank you for your patience. If there are no further questions, there may be additional questions for the record, which we will submit to you in writing. And for the information of my colleagues, the hearing record will remain open until the close of business Thursday afternoon. With that, this hearing is adjourned. [Whereupon, at 1:09 p.m., the Subcommittees were adjourned.] A P P E N D I X ---------- [GRAPHIC] [TIFF OMITTED] T7717.001 [GRAPHIC] [TIFF OMITTED] T7717.002 [GRAPHIC] [TIFF OMITTED] T7717.003 [GRAPHIC] [TIFF OMITTED] T7717.004 [GRAPHIC] [TIFF OMITTED] T7717.005 [GRAPHIC] [TIFF OMITTED] T7717.006 [GRAPHIC] [TIFF OMITTED] T7717.007 [GRAPHIC] [TIFF OMITTED] T7717.008 [GRAPHIC] [TIFF OMITTED] T7717.009 [GRAPHIC] [TIFF OMITTED] T7717.010 [GRAPHIC] [TIFF OMITTED] T7717.011 [GRAPHIC] [TIFF OMITTED] T7717.012 [GRAPHIC] [TIFF OMITTED] T7717.013 [GRAPHIC] [TIFF OMITTED] T7717.014 [GRAPHIC] [TIFF OMITTED] T7717.015 [GRAPHIC] [TIFF OMITTED] T7717.016 [GRAPHIC] [TIFF OMITTED] T7717.017 [GRAPHIC] [TIFF OMITTED] T7717.018 [GRAPHIC] [TIFF OMITTED] T7717.019 [GRAPHIC] [TIFF OMITTED] T7717.020 [GRAPHIC] [TIFF OMITTED] T7717.021 [GRAPHIC] [TIFF OMITTED] T7717.022 [GRAPHIC] [TIFF OMITTED] T7717.023 [GRAPHIC] [TIFF OMITTED] T7717.024 [GRAPHIC] [TIFF OMITTED] T7717.025 [GRAPHIC] [TIFF OMITTED] T7717.026 [GRAPHIC] [TIFF OMITTED] T7717.027 [GRAPHIC] [TIFF OMITTED] T7717.028 [GRAPHIC] [TIFF OMITTED] T7717.029 [GRAPHIC] [TIFF OMITTED] T7717.030 [GRAPHIC] [TIFF OMITTED] T7717.031 [GRAPHIC] [TIFF OMITTED] T7717.032 [GRAPHIC] [TIFF OMITTED] T7717.033 [GRAPHIC] [TIFF OMITTED] T7717.034 [GRAPHIC] [TIFF OMITTED] T7717.035 [GRAPHIC] [TIFF OMITTED] T7717.036 [GRAPHIC] [TIFF OMITTED] T7717.037 [GRAPHIC] [TIFF OMITTED] T7717.038 [GRAPHIC] [TIFF OMITTED] T7717.039 [GRAPHIC] [TIFF OMITTED] T7717.040 [GRAPHIC] [TIFF OMITTED] T7717.041 [GRAPHIC] [TIFF OMITTED] T7717.042 [GRAPHIC] [TIFF OMITTED] T7717.043 [GRAPHIC] [TIFF OMITTED] T7717.044 [GRAPHIC] [TIFF OMITTED] T7717.045 [GRAPHIC] [TIFF OMITTED] T7717.046 [GRAPHIC] [TIFF OMITTED] T7717.047 [GRAPHIC] [TIFF OMITTED] T7717.048 [GRAPHIC] [TIFF OMITTED] T7717.049 [GRAPHIC] [TIFF OMITTED] T7717.050 [GRAPHIC] [TIFF OMITTED] T7717.051 [GRAPHIC] [TIFF OMITTED] T7717.052 [GRAPHIC] [TIFF OMITTED] T7717.053 [GRAPHIC] [TIFF OMITTED] T7717.054 [GRAPHIC] [TIFF OMITTED] T7717.055 [GRAPHIC] [TIFF OMITTED] T7717.056 [GRAPHIC] [TIFF OMITTED] T7717.057 [GRAPHIC] [TIFF OMITTED] T7717.058 [GRAPHIC] [TIFF OMITTED] T7717.059 [GRAPHIC] [TIFF OMITTED] T7717.060 [GRAPHIC] [TIFF OMITTED] T7717.061 [GRAPHIC] [TIFF OMITTED] T7717.062 [GRAPHIC] [TIFF OMITTED] T7717.063 [GRAPHIC] [TIFF OMITTED] T7717.064 [GRAPHIC] [TIFF OMITTED] T7717.065 [GRAPHIC] [TIFF OMITTED] T7717.066 [GRAPHIC] [TIFF OMITTED] T7717.067 [GRAPHIC] [TIFF OMITTED] T7717.068 [GRAPHIC] [TIFF OMITTED] T7717.069 [GRAPHIC] [TIFF OMITTED] T7717.070 [GRAPHIC] [TIFF OMITTED] T7717.071 [GRAPHIC] [TIFF OMITTED] T7717.072 [GRAPHIC] [TIFF OMITTED] T7717.073 [GRAPHIC] [TIFF OMITTED] T7717.074 [GRAPHIC] [TIFF OMITTED] T7717.075 [GRAPHIC] [TIFF OMITTED] T7717.076 [GRAPHIC] [TIFF OMITTED] T7717.077 [GRAPHIC] [TIFF OMITTED] T7717.078 [GRAPHIC] [TIFF OMITTED] T7717.079 [GRAPHIC] [TIFF OMITTED] T7717.080 [GRAPHIC] [TIFF OMITTED] T7717.081 [GRAPHIC] [TIFF OMITTED] T7717.082 [GRAPHIC] [TIFF OMITTED] T7717.083 [GRAPHIC] [TIFF OMITTED] T7717.084 [GRAPHIC] [TIFF OMITTED] T7717.085 [GRAPHIC] [TIFF OMITTED] T7717.086 [GRAPHIC] [TIFF OMITTED] T7717.087 [GRAPHIC] [TIFF OMITTED] T7717.088 [GRAPHIC] [TIFF OMITTED] T7717.089 [GRAPHIC] [TIFF OMITTED] T7717.090 [GRAPHIC] [TIFF OMITTED] T7717.091 [GRAPHIC] [TIFF OMITTED] T7717.092 [GRAPHIC] [TIFF OMITTED] T7717.093 [GRAPHIC] [TIFF OMITTED] T7717.094 [GRAPHIC] [TIFF OMITTED] T7717.095 [GRAPHIC] [TIFF OMITTED] T7717.096 [GRAPHIC] [TIFF OMITTED] T7717.097 [GRAPHIC] [TIFF OMITTED] T7717.098 [GRAPHIC] [TIFF OMITTED] T7717.099 [GRAPHIC] [TIFF OMITTED] T7717.100 [GRAPHIC] [TIFF OMITTED] T7717.101 [GRAPHIC] [TIFF OMITTED] T7717.102 [GRAPHIC] [TIFF OMITTED] T7717.103 [GRAPHIC] [TIFF OMITTED] T7717.104 [GRAPHIC] [TIFF OMITTED] T7717.105 [GRAPHIC] [TIFF OMITTED] T7717.106 [GRAPHIC] [TIFF OMITTED] T7717.107 [GRAPHIC] [TIFF OMITTED] T7717.108 [GRAPHIC] [TIFF OMITTED] T7717.109 [GRAPHIC] [TIFF OMITTED] T7717.110 [GRAPHIC] [TIFF OMITTED] T7717.111 [GRAPHIC] [TIFF OMITTED] T7717.112 [GRAPHIC] [TIFF OMITTED] T7717.113 [GRAPHIC] [TIFF OMITTED] T7717.114 [GRAPHIC] [TIFF OMITTED] T7717.115 [GRAPHIC] [TIFF OMITTED] T7717.116 [GRAPHIC] [TIFF OMITTED] T7717.117 [GRAPHIC] [TIFF OMITTED] T7717.118 [GRAPHIC] [TIFF OMITTED] T7717.119 [GRAPHIC] [TIFF OMITTED] T7717.120 [GRAPHIC] [TIFF OMITTED] T7717.121 [GRAPHIC] [TIFF OMITTED] T7717.122 [GRAPHIC] [TIFF OMITTED] T7717.123 [GRAPHIC] [TIFF OMITTED] T7717.124 [GRAPHIC] [TIFF OMITTED] T7717.125 [GRAPHIC] [TIFF OMITTED] T7717.126 [GRAPHIC] [TIFF OMITTED] T7717.127 [GRAPHIC] [TIFF OMITTED] T7717.128 [GRAPHIC] [TIFF OMITTED] T7717.129 [GRAPHIC] [TIFF OMITTED] T7717.130 [GRAPHIC] [TIFF OMITTED] T7717.131 [GRAPHIC] [TIFF OMITTED] T7717.132 [GRAPHIC] [TIFF OMITTED] T7717.133 [GRAPHIC] [TIFF OMITTED] T7717.134 [GRAPHIC] [TIFF OMITTED] T7717.135 [GRAPHIC] [TIFF OMITTED] T7717.136 [GRAPHIC] [TIFF OMITTED] T7717.137 [GRAPHIC] [TIFF OMITTED] T7717.138 [GRAPHIC] [TIFF OMITTED] T7717.139 [GRAPHIC] [TIFF OMITTED] T7717.140 [GRAPHIC] [TIFF OMITTED] T7717.141 [GRAPHIC] [TIFF OMITTED] T7717.142 [GRAPHIC] [TIFF OMITTED] T7717.143 [GRAPHIC] [TIFF OMITTED] T7717.144 [GRAPHIC] [TIFF OMITTED] T7717.145 [GRAPHIC] [TIFF OMITTED] T7717.146 [GRAPHIC] [TIFF OMITTED] T7717.147 [GRAPHIC] [TIFF OMITTED] T7717.148 [GRAPHIC] [TIFF OMITTED] T7717.149 [GRAPHIC] [TIFF OMITTED] T7717.150 [GRAPHIC] [TIFF OMITTED] T7717.151 [GRAPHIC] [TIFF OMITTED] T7717.152 [GRAPHIC] [TIFF OMITTED] T7717.153 [GRAPHIC] [TIFF OMITTED] T7717.154 [GRAPHIC] [TIFF OMITTED] T7717.155 [GRAPHIC] [TIFF OMITTED] T7717.156 [GRAPHIC] [TIFF OMITTED] T7717.157 [GRAPHIC] [TIFF OMITTED] T7717.158 [GRAPHIC] [TIFF OMITTED] T7717.159 [GRAPHIC] [TIFF OMITTED] T7717.160 [GRAPHIC] [TIFF OMITTED] T7717.161 [GRAPHIC] [TIFF OMITTED] T7717.162 [GRAPHIC] [TIFF OMITTED] T7717.163 [GRAPHIC] [TIFF OMITTED] T7717.164 [GRAPHIC] [TIFF OMITTED] T7717.165 [GRAPHIC] [TIFF OMITTED] T7717.166 [GRAPHIC] [TIFF OMITTED] T7717.167 [GRAPHIC] [TIFF OMITTED] T7717.168 [GRAPHIC] [TIFF OMITTED] T7717.169 [GRAPHIC] [TIFF OMITTED] T7717.170 [GRAPHIC] [TIFF OMITTED] T7717.171 [GRAPHIC] [TIFF OMITTED] T7717.172 [GRAPHIC] [TIFF OMITTED] T7717.173 [GRAPHIC] [TIFF OMITTED] T7717.174 [GRAPHIC] [TIFF OMITTED] T7717.175 [GRAPHIC] [TIFF OMITTED] T7717.176 [GRAPHIC] [TIFF OMITTED] T7717.177 [GRAPHIC] [TIFF OMITTED] T7717.178 [GRAPHIC] [TIFF OMITTED] T7717.179 [GRAPHIC] [TIFF OMITTED] T7717.180 [GRAPHIC] [TIFF OMITTED] T7717.181 [GRAPHIC] [TIFF OMITTED] T7717.182 [GRAPHIC] [TIFF OMITTED] T7717.183 [GRAPHIC] [TIFF OMITTED] T7717.184 [GRAPHIC] [TIFF OMITTED] T7717.185 [GRAPHIC] [TIFF OMITTED] T7717.186 [GRAPHIC] [TIFF OMITTED] T7717.187 [GRAPHIC] [TIFF OMITTED] T7717.188 [GRAPHIC] [TIFF OMITTED] T7717.189 [GRAPHIC] [TIFF OMITTED] T7717.190 [GRAPHIC] [TIFF OMITTED] T7717.191 [GRAPHIC] [TIFF OMITTED] T7717.192 [GRAPHIC] [TIFF OMITTED] T7717.193 [GRAPHIC] [TIFF OMITTED] T7717.194 [GRAPHIC] [TIFF OMITTED] T7717.195 [GRAPHIC] [TIFF OMITTED] T7717.196 [GRAPHIC] [TIFF OMITTED] T7717.197 [GRAPHIC] [TIFF OMITTED] T7717.198 [GRAPHIC] [TIFF OMITTED] T7717.199 [GRAPHIC] [TIFF OMITTED] T7717.200 [GRAPHIC] [TIFF OMITTED] T7717.201 [GRAPHIC] [TIFF OMITTED] T7717.202 [GRAPHIC] [TIFF OMITTED] T7717.203 [GRAPHIC] [TIFF OMITTED] T7717.204 [GRAPHIC] [TIFF OMITTED] T7717.205 [GRAPHIC] [TIFF OMITTED] T7717.206 [GRAPHIC] [TIFF OMITTED] T7717.207 [GRAPHIC] [TIFF OMITTED] T7717.208 [GRAPHIC] [TIFF OMITTED] T7717.209 [GRAPHIC] [TIFF OMITTED] T7717.210 [GRAPHIC] [TIFF OMITTED] T7717.211 [GRAPHIC] [TIFF OMITTED] T7717.212 [GRAPHIC] [TIFF OMITTED] T7717.213 [GRAPHIC] [TIFF OMITTED] T7717.214 [GRAPHIC] [TIFF OMITTED] T7717.215 [GRAPHIC] [TIFF OMITTED] T7717.216 [GRAPHIC] [TIFF OMITTED] T7717.217 [GRAPHIC] [TIFF OMITTED] T7717.218 [GRAPHIC] [TIFF OMITTED] T7717.219 [GRAPHIC] [TIFF OMITTED] T7717.220 [GRAPHIC] [TIFF OMITTED] T7717.221 [GRAPHIC] [TIFF OMITTED] T7717.222 [GRAPHIC] [TIFF OMITTED] T7717.223 [GRAPHIC] [TIFF OMITTED] T7717.224 [GRAPHIC] [TIFF OMITTED] T7717.225 [GRAPHIC] [TIFF OMITTED] T7717.226 [GRAPHIC] [TIFF OMITTED] T7717.227 [GRAPHIC] [TIFF OMITTED] T7717.228 [GRAPHIC] [TIFF OMITTED] T7717.230 [GRAPHIC] [TIFF OMITTED] T7717.231 [GRAPHIC] [TIFF OMITTED] T7717.232 [GRAPHIC] [TIFF OMITTED] T7717.233 [GRAPHIC] [TIFF OMITTED] T7717.234 [GRAPHIC] [TIFF OMITTED] T7717.235 [GRAPHIC] [TIFF OMITTED] T7717.236 [GRAPHIC] [TIFF OMITTED] T7717.237 [GRAPHIC] [TIFF OMITTED] T7717.238 [GRAPHIC] [TIFF OMITTED] T7717.239 [GRAPHIC] [TIFF OMITTED] T7717.240 [GRAPHIC] [TIFF OMITTED] T7717.241 [GRAPHIC] [TIFF OMITTED] T7717.242 [GRAPHIC] [TIFF OMITTED] T7717.243 [GRAPHIC] [TIFF OMITTED] T7717.244 [GRAPHIC] [TIFF OMITTED] T7717.245 [GRAPHIC] [TIFF OMITTED] T7717.246 [GRAPHIC] [TIFF OMITTED] T7717.247 [GRAPHIC] [TIFF OMITTED] T7717.248 [GRAPHIC] [TIFF OMITTED] T7717.249 [GRAPHIC] [TIFF OMITTED] T7717.250 [GRAPHIC] [TIFF OMITTED] T7717.251 [GRAPHIC] [TIFF OMITTED] T7717.252 [GRAPHIC] [TIFF OMITTED] T7717.253 [GRAPHIC] [TIFF OMITTED] T7717.254 [GRAPHIC] [TIFF OMITTED] T7717.255 [GRAPHIC] [TIFF OMITTED] T7717.256 [GRAPHIC] [TIFF OMITTED] T7717.257 [GRAPHIC] [TIFF OMITTED] T7717.258 -