Administration outlines steps to governmentwide personnel overhaul

The Bush administration on Monday released a rough plan for implementing the broad changes that would be required if Congress passes yet-to-be-introduced personnel reform legislation.

The move marks the latest step in the administration's quest for a governmentwide overhaul of pay systems.

Dubbed the Working for America Act, the draft legislation was written by the Office of Personnel Management and the Office of Management and Budget. It would replace the General Schedule with performance and market-based pay, requiring reforms similar to those in progress at the Homeland Security and Defense departments.

Although the bill has not been introduced in Congress and officials have said it is still a work in progress, OMB and OPM outlined the implementation plan in response to queries from Sens. Susan Collins, R-Maine, and George Voinovich, R-Ohio.

The plan would grant OPM significant influence over the system, especially at the outset. The personnel agency would classify jobs and conduct research in order to set market-sensitive locality pay. It would also establish a governmentwide performance appraisal system, upon which raises would be based.

OPM would consult with OMB and the Federal Pay Council to determine the minimum and maximum salary for each payband as well as the local market pay that would supplant locality pay.

OPM also would determine how other agencies could divide up performance-based raises for the first five years. After that, agencies would manage their own pay-based systems within the boundaries of OPM regulations.

According to the plan, OPM would consult the Chief Human Capital Officers Council as well as "appropriate stakeholders" to design performance appraisal systems. This could result in fixed regulations or guidance, the plan stated.

In addition to the implementation plans, Collins and Voinovich asked OMB and OPM to expound upon the existing alternative personnel systems they looked to in writing the legislation.

"Twenty-five years of experience with 90,000 federal employees on alternative pay systems tells us pay for performance is better than the current system," said OMB Deputy Director for Management Clay Johnson. "Governmentwide pay reform can improve program results and employees' satisfaction."

In its response to Collins and Voinovich, the administration reported that employee turnover in four demonstration projects dropped significantly after implementation of new systems.

As an example, OMB and OPM held up the Army Medical Research and Materiel Command, whose turnover rate fell from 75 percent to 37 percent from 1996-2000 for employees rated "outstanding." The demonstration project started in 1998.

The administration also noted that agencies funded their new systems from their existing budgets. There were some start-up costs, however, for automated classification systems and conversion of employees to new payroll systems.

After a transition period, agencies spent the same amount on performance-based raises as they previously did on within-grade, quality-step and career ladder pay hikes, the administration reported.

The report found that agencies maintained control of costs in six areas:

• Method of converting pay rates for individual employees to their rates in paybands.
• Policy on starting salaries.
• Type of pay progression and system of performance management.
• Size and mix of salary and bonus budgets.
• Choice of full-performance level pay rates.
• Overall number and distribution of positions established across bands and work levels.