Administration declines request to suspend pay-for-performance governmentwide

The Obama administration will not block the expansion of pay-for-performance systems governmentwide, but is considering a broad review of existing and proposed systems to determine whether they are fair and effective, the head of the Office of Management and Budget said in response to a request from Democratic lawmakers.

"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," OMB Director Peter R. Orszag wrote in a May 21 letter to House Oversight and Government Reform Committee Chairman Rep. Edolphus Towns, D-N.Y.

Towns and seven of his colleagues wrote to Orszag on April 3, seeking a governmentwide suspension of pay-for-performance systems. Such arrangements must be studied to determine if they discriminate against certain groups of federal employees, the lawmakers said. Their request came after the administration decided in March to stop the conversion of employees to the Pentagon's National Security Personnel System and to appoint a three-person panel to study the program's impact on employees and Defense Department performance.

Orszag's efforts to distinguish NSPS from other pay-for-performance systems came as the Defense Department released its first major internal evaluation of the personnel system. The report, performed by contractor SRA International, acknowledged substantial difficulties in winning workforce confidence in NSPS, but suggested such doubts were "typical of major programs involving significant systemic change."

A survey of civilian workers conducted in 2006, 2007 and 2008 found "no strong indication that NSPS has improved communications between supervisors and employees," the report said. The study also concluded employees believed the pay pools in NSPS did not produce fair ratings and raises, and were increasingly unwilling to take on supervisory positions because NSPS would limit them to 5 percent raises and they would be taking on a significantly more complicated workload.

"Even with massive training and communication efforts, the workforce has unanswered questions," the report stated.

Orszag said he would not support systems that proved to be discriminatory, or held down federal wages. But he said was working with Office of Personnel Management Director John Berry, who also received a copy of the letter, to consider ways to conduct a governmentwide review of pay-for-performance systems and see what lessons could be learned from them.

"Although the General Schedule contains mechanisms for rewarding performance, alternative pay systems may have the potential to improve individual and agency effectiveness by tying objective staff performance ratings and pay more directly to agency goals and achievements," Orszag wrote.

Those sentiments are in keeping with the administration's goal of achieving significant reform of the federal pay system. Berry has said President Obama asked him to design a strong performance management system and a training program for managers to support it.

Berry said in Washington on Tuesday that his goal was to get a pay reform bill passed by Congress and signed by President Obama before the 2010 midterm elections.