The Department of Homeland Security has agreed to pay Northrop Grumman Corp. as much as $175 million over three years to help develop, manage and run the new agency's personnel system.

The deal, reached late last month, requires the defense contractor to provide a wide range of services, including drafting procedures for a new labor relations system, researching pay and performance appraisal systems, training managers and employees and finding ways to consolidate the dozens of computer systems now used to carry out human resources functions at the 180,000-employee department.

Juli Ballesteros, a spokeswoman for Northrop Grumman, said the company has experience in the human resources field, including contracts with the Defense and Treasury departments for $281 million and $114 million, respectively.

"We've been doing human resources systems for quite a number of years," she said.

Ronald J. James, chief human capital officer at Homeland Security, described the arrangement as a partnership in which the agency sets the direction and the contractor taps private sector expertise beyond the government's reach.

"The ultimate test will be, 'Does this help us do our mission better? Does it ultimately end up treating our employees better, more fair?' " James said.

While it is not unusual for federal agencies to hire contractors to help with human resources work, the stakes are higher at Homeland Security, created last year in a merger of 22 agencies, because its new personnel system may serve as a template for change at other departments.

Two years ago, Congress gave the Bush administration freedom from decades-old civil service rules in devising a personnel system that could dramatically change the way Homeland Security employees are paid, deployed and disciplined. Administration officials say the department needs a more flexible workforce to adapt to changing needs and protect the nation.

Federal employee union leaders, already upset by their limited influence on the process, fear that handing design duties over to a contractor will further curtail unions' role in shaping a personnel system that will affect tens of thousands of their members.

Colleen M. Kelley, president of the National Treasury Employees Union, said that Homeland Security officials are not living up to congressional mandates that unions be consulted in the development of the new system.

"[A]ny new system that excludes in meaningful ways the voices of front-line workers in DHS is doomed to fail," Kelley said in a statement.

James, the Homeland Security official, said the department is committed to involving employees and will be briefing unions on the contract.

Other union officials called the contract a misuse of $175 million, saying the work could be done more cheaply in-house.

"It's amazing," said Mark Roth, general counsel for the American Federation of Government Employees. "They combined 22 agencies, each with their own personnel office, and they are going to a defense contractor . . . to create and evaluate their own program. Why don't they just take the money and burn it?"

AFGE President John Gage said awarding such a contract was especially troubling when tight budgets forced the department to impose a temporary hiring freeze at the Border and Transportation Security directorate, which is responsible for maintaining the security of the nation's borders and transportation systems.

"We have real, live homeland security issues that require staff, equipment and materials," Gage said. "I can't understand where the money is coming from."

James said, "If we are serious about our people -- our most important asset at the department -- we need to make sure that we provide the best system, a 21st-century system, not a system that's 50 years old, and that we strike off in a new direction."

The department's proposed personnel rules would replace the 15-grade General Schedule pay system with a new performance-based salary system, restrict union bargaining rights in key areas and streamline the process used by employees facing discipline. Officials have said they hope to issue final rules by year's end and phase in the system over several years.

James said contractors will play a less prominent role in the long run. "Once this is up and running, I see a fairly quick phase-down, phase-out," he said. "If I had a crystal ball, I would envision that this would become primarily an in-house operation."

National Treasury Employees Union President Colleen M. Kelley said Homeland Security is not living up to congressional mandates.John Gage, president of the American Federation of Government Employees, called the contract troubling.