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The panel assigned to review the Pentagon's National Security Personnel System recommended major changes to the pay-for-performance program, as well as reforms to the General Schedule in its final report released on Tuesday.

But the report sparked criticism from federal employee groups with its recommendation to keep in place a modified version of NSPS, even as the Defense Department has vowed not to add any more employees to the system until the changes are implemented.

"NSPS at its inception was an ambitious and complex initiative," wrote Rudy deLeon, Michael Bayer and Robert Tobias, the three members of the review board, in the report. "The men and women of the Department of Defense workforce deserve a performance management system that is built upon a deliberative approach that clearly articulates the expected level of performance, identifies how their performance will be measured, and ensures that the impact of their work is clearly understood and evaluated and fairly rewarded."

The report expanded on the preliminary findings the panel released in July. The board criticized the pay pool system used to allocate ratings as confusing and not sufficiently transparent. The report also recommended that the Pentagon develop a program to foster working partnerships between management and employees who represent the department's civilian employees and cited the Air Force as a successful model for such relationships.

But the panel's broader recommendations were less specific. The report called for a "reconstruction" of NSPS, and said such an effort should begin by setting new key performance parameters, criteria Defense is supposed to use to evaluate the success of the program.

"To date, this has not been effectively done, leaving questions as to whether NSPS, or other alternative personnel systems, have actually improved organizational performance," panel members noted.

Despite that critique, the board said it would not call for an end to NSPS because "the performance management system that has been created is achieving alignment of employee goals with organizational goals."

Federal employee unions said while they were not surprised by the final report's recommendations after the preliminary findings, they thought the call to "reconstruct" NSPS was not feasible. William Dougan, national president of the National Federation of Federal Employees, said Defense already had been given six years to create a workable pay-for-performance system under the auspices of NSPS, and it was not clear that another effort would be more successful.

John Gage, president of the American Federation of Government Employees, wrote in an Aug. 13 letter to the panel that, "The [panel] found the system was so flawed that it can't be fixed and has to be reconstituted from scratch. We wonder why DoD isn't holding those responsible for NSPS accountable and terminating them for this colossal failure."

The report acknowledged that while it might not be possible to extend even a reformed NSPS system to cover employees who are members of bargaining units represented by unions, the Pentagon might consider creating another alternate personnel system to cover those employees. Panel members criticized the General Schedule system, saying it "falls short" in comparison to NSPS on issues such as linking individual and agency goals and differentiating between good and poor performance.

Gage dismissed the panel's recommendations on broader pay reform, saying the issue went beyond the review's mandated scope. But NFFE's Dougan said any other potential pay system for Defense employees should be included in Office of Personnel Management Director John Berry's governmentwide hiring reform efforts, and it should work for the majority of employees.

Max Stier, president of the nonprofit Partnership for Public Service, said he thought it was important that the report acknowledged some of the strengths of NSPS, and took a broader perspective on federal personnel systems.

"I think that one of the elements that is frequently missing in the debate is a recognition that the status quo isn't good enough," he said.

Deputy Defense Secretary William Lynn and Berry said in a joint statement that they looked forward to reviewing the report's contents as they worked to reach a final decision about whether NSPS will continue. They did not comment, however, on the panel's recommendations.

Lynn said Defense employees who already have been converted to NSPS will continue to be covered by it, but the moratorium on adding new groups of workers to the system, which began when the review was announced in March, would continue.

Federal Managers Association President Darryl Perkinson praised the decision to maintain the moratorium on conversions, but said managers might have to deal with the consequences of having employees in different pay systems.

"If the NSPS payout turns out to be a little better on average than what the GS pay raise was, than the GS people are going to be asking questions like, 'Why I can't be in NSPS?' " he said. "And if it's less, the NSPS people will be saying, 'Why can't we go back?' "

Ben Toyama, Western vice president for the International Federation of Professional Technical Engineers, said the final report would reinvigorate his union's efforts to lobby lawmakers to pass amendments that would repeal NSPS.

Both the House (H.R. 2647), and Senate (S. 1390) versions of the 2010 Defense authorization bill contain similar, though not exact, language that would eliminate the NSPS within one year. Both versions of the legislation allow the Defense secretary to defend the system before Congress, if he decides it is necessary to retain.

The House and Senate passed the fiscal 2010 Defense authorization bill earlier this summer. A conference committee is expected to iron out the differences and create a final version after Congress returns in September from recess.

Also on Tuesday, Defense Secretary Robert Gates announced that Brad Bunn, who is currently the program executive officer for NSPS, will be transferred to run the human resources division at the Defense Logistics Agency.

"Even under the extreme ideologically driven constraints placed on him by the political appointees of the past administration, Brad has been a true professional and has worked in a respectful way with labor," said Matt Biggs, IFPTE's legislative director.