Pay-for-Performance Goes on the Defensive

By Joe Davidson
Thursday, April 2, 2009

The Defense Department's National Security Personnel System -- President George W. Bush's signature personnel initiative -- was on the defensive yesterday as a House subcommittee examined its questionable future.

Because the Pentagon has such a big foot, not just on the international military front but also in civilian workplace issues, what happens to NSPS could have far-reaching implications across the government.

NSPS, now in its third year of implementation, replaced the traditional General Schedule -- better known as GS -- pay and classification system for certain Defense Department employees. The new system included a pay-for-performance component that the Bush administration wanted to see replicated throughout Washington. It has been the target of sharp criticism by employees and their unions.

With Defense commanding more than a quarter of the total federal civilian workforce and with more than 205,000 employees under NSPS, it can serve as a model or an anti-model for other agencies.

It is a model for exactly what should not be done, in the view of most federal employee unions. "It is a system that is completely untenable and should never have been pursued" -- that's the kindest thing John Gage, president of the American Federation of Government Employees, can say about it.

Although President Obama said he would strongly consider a repeal of the system, its executive officer, Brad Bunn, said a planned top-to-bottom review of it, conducted by the Pentagon and the Office of Personnel Management, would give the new administration the information it needs to decide what becomes of NSPS.

Gage and other union leaders who want to deep-six the system submitted their testimony only in writing to the House Armed Services readiness subcommittee. That made the hearing a relatively tame affair, with speakers taking a middle-of-the-road, let's-see-what-happens approach.

For example, Darryl Perkinson, president of the Federal Managers Association, seemed to endorse NSPS when he said, "FMA managers and supervisors believe a switch to pay-for-performance is necessary not only to compete with the private sector for talent, but to encourage and reward high performance." He went on to note that the average pay raise for NSPS employees "has far exceeded" increases given to General Schedule workers.

Yet, he also listed problems with NSPS, including a lack of rules for "fair deployment of pay-for-performance," "acute frustration among employees" with the "cumbersome nature" of the rating process, and the "negative impact NSPS has on agency recruitment."

Under questioning and somewhat reluctantly, Perkinson said that as a manager at the Norfolk Naval Shipyard, he would prefer to return to the GS system.

As Perkinson noted, much of the NSPS criticism has focused on the fairness, or lack of it, in the way workers are evaluated. A Government Accountability Office report released at the hearing credited the Pentagon with taking steps to ensure that NSPS is fair, credible and effective but said that more needs to be done.

One telling remark in the report, which was also noted in an earlier GAO study, is that the more time employees are under NSPS, the less they like it.

"Employees who had the most experience under NSPS showed a negative movement in their perceptions," the report says.

To make matters worse, GAO found that "DOD does not have an action plan to address the generally negative employee perceptions of NSPS."

This type of information led Rep. Ike Skelton (D-Mo.), chairman of the committee, and Rep. Solomon P. Ortiz (D-Tex.), chairman of the subcommittee, to call on the Pentagon to stop moving employees from the General Schedule to NSPS.

The Pentagon did impose a moratorium on the transfers last month when it announced a thorough review of NSPS. The review hasn't started yet, in part because OPM's new leadership has not yet taken office.

That point should be resolved soon. The nomination of M. John Berry, Obama's pick for OPM director, was approved by the Senate Homeland Security and Governmental Affairs Committee yesterday.

While Bunn spoke of the "rigorous and robust method for appraising and evaluating employee performance" and the "safeguards in place to ensure employees are treated equitably and fairly," he also acknowledged that "employees are questioning whether the ratings are fair."

The GAO offered three reasons for the skepticism.

First, the department does not have a third party analyze employee ratings before making them final, which means it can't tell if they are discriminatory before they are released.

The process lacks transparency -- a frequently heard complaint -- and NSPS guidelines indicate a majority of employees should be rated a 3 on a five-point scale. That guidance "may discourage rating officials from making meaningful distinctions," and that could undermine employee confidence, GAO said.

While the subcommittee was discussing a Defense personnel system that many employees detest, the full House was passing legislation more to their liking.

One measure requires that unused sick days for an employee under the Federal Employees Retirement System to be counted toward the worker's annuity computation.

Another provision allows someone who returns to government employment to redeposit his or her annuities in the federal retirement program. "This legislation will entice experienced federal employees to return to government service at a time when our nation needs its best and brightest the most," said Rep. James P. Moran Jr. (D-Va.), sponsor of the legislation.

The House also approved a measure that would automatically enroll federal workers in the Thrift Savings Plan and offer them a Roth savings option.

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