Pay-for-Performance Program Gets the Boot

By Ed O'Keefe
Thursday, October 8, 2009

Christmas came early for some federal employees and their unions Wednesday as lawmakers delivered one of the biggest items on their wish list, repealing a controversial pay-for-performance program.

The repeal of the National Security Personnel System came as part of a compromise House and Senate members announced in their negotiations over the Defense Department authorization bill. The Defense Department will maintain more performance management and hiring flexibility than other federal agencies, but it must halt NSPS by the start of 2012 and it cannot enact a new pay-for-performance system without submitting detailed proposals to Congress for approval.

George W. Bush's administration pushed for NSPS, and Congress approved the system for Pentagon employees in 2003. Roughly 30 percent of the Defense Department's civilian employees now fall under NSPS jurisdiction, according to the Pentagon.

But many employees, federal unions, outside experts and lawmakers of both parties have long argued that the program is ineffective, confusing and detrimental to employee morale.

"It's a big day for us," said John Gage, president of the American Federation of Government Employees. He thanked lawmakers for repealing what he called "a terrible idea."

"It was just bad for employees and bad for the country. It wasn't a motivator for federal employees. It wasn't fair or open. It was a gimmick," Gage said.

Lawmakers "could have punted on this issue," said William R. Dougan, president of the National Federation of Federal Employees. Instead, "the committee took bold action, and I believe it was the right thing to do."

"The system didn't work," said Rep. Stephen F. Lynch (D-Mass.), one of the lead House negotiators advocating for repeal. The new arrangement will ensure that Congress maintains a voice in how the Pentagon measures employee performance, he said.

Moving forward, the Pentagon has three options, said Robert Tobias, director of the Institute for the Study of Public Policy Implementation at American University. He was part of a task force that recommended NSPS reforms earlier this year.

"They can decide to roll everybody back [off NSPS], they can create something new and seek new legislation to get it passed, or they could work with [the Office of Personnel Management] and John Berry, who's interested in creating something government-wide," Tobias said.

Berry, the OPM director, has said he prefers a single, government-wide pay system, but acknowledges that creating such a plan could be difficult. His office would not comment on the NSPS decision Wednesday.

The compromise announced Wednesday includes several other important changes for current and retired federal employees.

Members of the Civil Service Retirement System will be able to work part-time toward the end of their career without jeopardizing their pensions. Also, in a big change for members of the Federal Employees Retirement System, workers will have sick leave credited to them when they retire. That provision will be phased in over the next four years.

Agencies will also be able to hire back federal retirees under certain conditions and these workers will be able to receive a new salary while keeping their pension.

"Altogether these improvements will bolster the morale of current employees and strengthen the federal government's ability to attract and retain the high-quality workforce required to meet our national challenges," House Majority Leader Steny H. Hoyer (D-Md.) said in a statement.

Rep. James P. Moran Jr. (D-Va.), who has long pushed for changes to FERS, agreed. "This is the first major achievement for federal employees since 2000," he said.

Labor Nominee Still Waiting

Though most of President Obama's nominees have won easy approval from Congress, a handful have waited around much longer for final vote. Among them is M. Patricia Smith, the New York state labor commissioner nominated in April to serve as the U.S. Labor Department's solicitor of labor.

The Senate Health, Education, Labor and Pensions Committee approved her for the job along party lines on Wednesday, but Republicans said they will place a hold on her nomination and revive their concerns on the Senate floor before a full vote.

At issue is Smith's testimony before the committee in May about New York's Wage Watch program. Republicans say her testimony was contradicted by documents staffers later obtained about the program, which was launched in January by the New York State Department of Labor to root out companies that do not pay proper wages. Smith told senators that state officials developed the program, but the documents showed that a union and a public interest entity partially financed by unions were also involved. She described the program as an educational effort, but the documents show state and union officials described it as an enforcement program.

"If it was her intention to mislead the Senate, then I must oppose her nomination," said Sen. Mike Enzi (R-Wyo.). "If she unintentionally gave inaccurate statements to the Senate, then I question her ability to manage a large operation since she does not have a clear understanding of what is taking place in her own department, despite the speeches she gave."

Democrats dismissed Republican concerns.

"Smith's misstatement was certainly a regrettable error, but it wasn't an attempt to hide anything from the committee," said Sen. Tom Harkin (D-Iowa).

Also on Wednesday, the committee unanimously approved Regina Benjamin to serve as U.S. surgeon general, Joseph A. Main to serve as assistant secretary of labor for mine safety and health, and William E. Spriggs to serve as the Labor Department's assistant secretary for policy.

Staff researcher Eric Yoder contributed to this column. Joe Davidson is away. He will resume writing this column when he returns. Contact Federal Diary at, and read Ed O'Keefe's blog, the Federal Eye, at

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