By Joe Davidson
Tuesday, June 23, 2009

Uncle Sam is forever trying to figure out how to get right pay systems for his employees. In this evolving, if not exhausting, world of federal worker pay, we have these intriguing developments:

A letter from the Obama administration, which took office with heavy backing from federal unions that fervently object to the government's pay-for-performance systems, tells Congress the administration "strongly supports the concept of rewarding excellence with additional pay."

Despite pleas from key members of Congress, the Pentagon announces it will continue moving employees into a pay-for-performance system known as the Defense Civilian Intelligence Personnel System (DCIPS).

The U.S. Court of Appeals for the District of Columbia rules in favor of union objections to pay raises given to Securities and Exchange Commission employees.

Let's start with the letter President Obama's Office of Management and Budget director, Peter Orszag, sent to several members of Congress. Speaking of rewarding excellence with additional pay smacks many federal workers as a euphemism for the much-maligned pay-for-performance systems. Of course, excellent performance can be rewarded under the GS, or General Schedule, system that covers most federal workers, but that gets little attention.

The pay-for-performance system has been plagued with complaints of favoritism, racial discrimination and poor planning. The Office of Personnel Management and the Defense Department are reviewing the government's largest pay-for-performance operation, the National Security Personnel System for civilian Pentagon employees. The administration has stopped the move of employees to NSPS during the review.

Orszag disappointed administration supporters in federal unions and their backers in Congress when he said that the administration won't suspend other conversions. "The Administration does not feel that it is necessary at this time to put an across-the-board hold on further advancement of other pay-for-performance systems in the Federal government," his May 29 letter said.

Orszag specifically mentioned DCIPS as one that would not be put on hold. His letter was followed June 12 by one from James R. Clapper Jr., the undersecretary of defense, who told the chairmen of the House Permanent Select Committee on Intelligence and the House Armed Services Committee that despite their wishes to the contrary, the Pentagon would continue placing employees in DCIPS.

"We believe this decision is necessary in order to maintain the trust of our workforce and bring them under a common personnel system," Clapper wrote. He made no mention of those workers who don't trust that pay system.

Congress is working to get the last word in this debate. Last week, the House Armed Services Committee passed a measure that would stop the Defense Department from placing new or current employees in its pay-for-performance systems.

"The committee has expressed its objection to the continued implementation of this unique intelligence personnel management system [DCIPS], which essentially establishes another defense personnel system," said a committee report Thursday. "As with NSPS, the committee stresses that implementation of DCIPS should be suspended as well."

That measure was sponsored by Rep. Carol Shea-Porter (D-N.H.), who pointed to the "increasingly negative reviews" NSPS collects like dust under Rip Van Winkle's bed.

In the court case, judges agreed June 12 with the National Treasury Employees Union that the SEC improperly gave workers a raise before labor negotiations were completed. The decision said the SEC unilaterally imposed a new pay-for-performance system without adequately accounting for wage increases that were to have been granted under the system it replaced.

The notion of rewarding superior work is not unknown under the GS system, though it's never called pay for performance. Quality step increases "can be granted to recognize employees in the general schedule who have received the highest available rating," says the privately published Federal Employees Almanac.

Orszag did note the quality step increases in his letter, but he went on to say "alternative pay systems may have the potential to improve individual and agency effectiveness by tying objective staff performance rating and pay more directly to agency goals and achievements."

Nonetheless, he hinted that current pay-for-performance systems may not survive the Obama administration review in their present form. "The Administration will not support any pay system that is unfair or has the effect of suppressing wages or discriminating against employees," Orszag wrote.

That's exactly the arguments federal unions raise against pay for performance.

Contact Joe Davidson at federaldiary@washpost.com.