April 1997 Draft
Explanation of Potential Human Resource
A critical ingredient for the success of a Performance-Based Organization (PBO) will be
the capacity to design personnel systems that clearly support the agency's mission and
are compatible with its culture. This will require making optimal use of existing administrative
flexibilities, taking advantage of the statutory flexibilities in the model legislative language in
Appendix A, and/or making effective use of the demonstration project authority in chapter 47 of
title 5, United States Code.
At the same time, the personnel systems of any PBO must be grounded in some
fundamental principles of effective personnel management for the Federal Government. No set
of flexibilities, moreover, will substitute for effective leadership, supervision, and
communication; for fair and reasonable personnel practices; and for providing timely and
efficient basic personnel services to managers and employees.
This appendix has four parts:
- Part I describes specific Governmentwide interests which would be retained. These
interests are important to achieving employee acceptance of the PBO initiatives and to
maintaining the essential elements of the Government as a "single employer."
- Part II presents existing personnel flexibilities. It is important that agencies make
appropriate use of these flexibilities so that initiatives can begin quickly; in some cases
the PBO framework may be based entirely on existing authorities.
- Part III describes new legislative authorities PBOs may want to have to better meet their
mission goals. These possible statutory changes, including streamlined demonstration
authority, are based on the various proposals for civil service reform that have been
extensively reviewed and discussed within the Administration and with key stakeholders
over the past few years. This is expanded upon in Appendix A.
- Part IV describes how the existing demonstration project authority (5 U.S.C. 4703) or the
streamlined demo authority in the model legislative language in Appendix A can be used
as the vehicle by which PBOs will obtain authority to make personnel system changes
that require waiving existing laws and regulations. Included in this part are descriptions
of some major personnel system changes requiring demonstration authority that appear to
be particularly appropriate.
PART I -- GOVERNMENTWIDE INTERESTS
For certain aspects of personnel management, conceiving of the Government as a "single
employer" remains sound public policy. Consequently, it is important to retain Government-wide approaches, authorities, entitlements, and requirements in several areas, including:
- Accountability for adherence to merit system principles;
- Employee protection from prohibited personnel practices;
- Veterans preference in employment and retention;
- A Governmentwide benefits system for retirement, insurance, and leave;
- A Governmentwide system for determining annual adjustments to the pay
structures for General Schedule, Prevailing Rate System, and other employees;
- A statutory collective bargaining framework for labor management relations;
- A system of due process protections for employees related to adverse actions;
- A Governmentwide system for collecting and publishing workforce information;
- Executive management by members of the Senior Executive Service and
Senior Foreign Service;(1) and
- Oversight by the Office of Personnel Management.
In addition, certain principles that promote the public interest must guide PBO's as they make
use of this appendix's flexibilities. Such principles include:
- Making organizational improvements in partnership with employees and their
representatives and in accordance with whatever bargaining and consultation
rights are invoked by employee representatives;
- Maintaining budget discipline as personnel systems and authorities are changed;
- Insuring interagency mobility (i.e., policies should not inhibit or discourage
movement in or out of a PBO); and
- Achieving reasonable Governmentwide internal equity (e.g., by precluding unfair
compensation competition among agencies in limited labor markets).
Within these broad parameters, PBOs are free to:
- Make immediate use of the existing personnel flexibilities listed in Part II of this
- Pursue demonstration projects as described in Part III.
PART II -- EXISTING PERSONNEL FLEXIBILITIES
A. STAFFING--Federal agencies have extensive flexibilities and authorities related to staffing
[For general questions, contact the Employment Service--202-606-0800]
- Recruiting and Examining [Contact: Pat Paige--202-606-0830]
- Authority to conduct competitive examining for all positions (except administrative law
judges). Requires delegation agreement between OPM and the agency.
[Pub. L. 104-52; 5 U.S.C. 1104(a)(2) ]
- Use of commercial recruiting firms and nonprofit employment services to recruit for
vacancies. [5 CFR part 300, subpart D]
- Discretion to hire from a wide array of sources.
- Short-Term Staffing Needs [Contact: Pat Paige--202-606-0830]
- Use of commercial temporary help services obtained by contract to meet brief or
intermittent personnel needs. [5 CFR part 300, subpart E]
- Use of temporary, part-time, job sharing, seasonal, and intermittent employment to meet
temporary, fluctuating, and less than full-time workforce needs, and use of the
streamlined student employment program for meeting future workforce needs.
[5 CFR part 316, subpart D, part 340, and §213.3202]
- Use of term appointments for more than 1 year up to 4 years when the need for the
employee's services is not permanent including, but not limited to, project work,
extraordinary workload, scheduled abolishment, reorganization, or contracting out of the
function, uncertainty of future funding, or the need to maintain permanent positions for
placement of employees who would otherwise be displaced from other parts of the
organization. [5 CFR part 316, subpart C]
- Employment of experts or consultants for temporary or intermittent employment.
[5 U.S.C. 3109; 5 CFR part 304; agency's own legislation]
- Lateral and Upward Movement [Contact: Pat Paige--202-606-0830]
- Authority to determine the knowledge, skills, and abilities, and to define the specialized
experience required to perform each job. Use of training agreements under which
employees can be given accelerated training or on-the-job experience to gain new skills
[OPM Operating Manual: "Qualification Standards for General Schedule Positions"]
- Authority to design their own merit promotion plans. [5 CFR part 335]
- Authority to establish career ladders that allow noncompetitive promotion based on
performance and acquisition of appropriate knowledge and skills. [5 CFR part 335]
- Probationary Period [Contact: Pat Paige--202-606-0830]
- Discretion to remove, with few procedural requirements, new appointees, supervisors,
and managers during their probationary period. [5 CFR part 315, subparts H and I]
B. CLASSIFICATION--Although there is a single statutory classification system for General
Schedule (as well as for Prevailing Rate System employees), various administrative
flexibilities increase the system's utility.
[For general questions, contact the Office of Classification--202-606-2950]
- Generic or Job Family Standards [Contact: Winford Hooker--202-606-2950]
- This broader approach to job evaluation provides flexibility to organize work along
mission-critical lines and to make better use of interdisciplinary procedures in staffing
positions. It also allows more use of shortened position descriptions. [5 U.S.C. 5105]
- Automated Procedures [Contact: Helene Rosenheim -- 202-606-2950]
- Use of automated procedures has streamlined the development of position descriptions
and the evaluation of positions.
- Delayering Support [Contact: Delmar White -- 202-606-2950]
- The revised General Schedule Supervisory Guide deleted numbers of people supervised
as a factor in setting grade levels. In collaboration with agencies, OPM is developing
guidelines for Team Leader positions that replaced supervisory jobs.
[General Schedule Supervisory Guide, TS 123, April 1993]
C. COMPENSATION--Agencies have considerable discretionary authority to provide
additional direct compensation in certain circumstances to support their recruitment,
relocation, and retention efforts. Under 5 U.S.C. 5307, most payments are subject to the
limitation that total aggregate pay may not exceed the rate for Executive Level I (currently
[For general questions, contact the Office of Compensation Policy--202-606-2880]
- Agency-Based Discretionary Authorities [Contact: Bryce Baker--202-606-2858]
- Authority to pay relocation expenses for new employees or pay travel expenses for pre-employment interviews. [5 CFR part 572]
- Authority to make a lump-sum payment of up to 25 percent of basic pay based upon a
determination that difficulty would otherwise be encountered in filling the position
[5 U.S.C. 5753; 5 CFR part 575, subparts A and B]
- Authority to make continuing payments of up to 25 percent of basic pay based upon a
determination by the agency that (1) the unusually high or unique qualifications of the
employee or a special need of the agency for the employee's services makes it essential to
retain the employee, and (2) the employee would be likely to leave or retire in the absence
of a retention allowance. [5 U.S.C. 5754; 5 CFR part 575, subpart C]
- Authority to make an initial appointment at a rate higher than the minimum rate for any
General Schedule grade because of the superior qualifications of a candidate or a special
need of the agency for the candidate's services. [5 U.S.C. 5333; 5 CFR 531.203(b)]
- Authority to set the rate of basic pay of an employee upon reemployment, transfer,
reassignment, promotion, demotion, or change in type of appointment, by taking into
account (1) the actual rate of basic pay for the highest grade and step previously held by
an individual while employed in a General Schedule position; or (2) the highest actual
rate of basic pay received by an individual while employed in any Federal position or the
DC government (with certain exceptions). [5 U.S.C. 5334(a); 5 CFR 531.203(c)]
- Authorities Available with OPM and/or OMB Approval
- Higher special rates of pay may be established by OPM, upon request by department
headquarters and after coordination with other relevant Federal agencies, for an
occupation or group of occupations nationwide or in a local area based on a finding
that the Government's recruitment or retention efforts are, or would likely become,
significantly handicapped without those higher rates. The minimum rate of a special
rate range may exceed the maximum rate of the corresponding grade by as much as
30 percent. However, no special rate may exceed the rate for Executive Level V
(currently $108,200). [5 U.S.C. 5305; 5 CFR part 530, subpart C]
[Contact: Bryce Baker--202-606-2858]
- OMB, in consultation with OPM, may use a critical pay authority to increase the rate of
basic pay up to the rate for Executive Level I (currently $148,400) for a position that
requires expertise of an extremely high level in a scientific, technical, professional, or
administrative field or one that is critical to the agency's successful accomplishment of an
important mission. [5 U.S.C. 5377; OMB Bulletin No. 91-09]
[Contact: Ellen Kill Kelley--202-606-2246]
- Upon the request of an agency, OPM is authorized to waive the requirement for a
reduction in the retired or retainer pay of a military retiree or the civilian pay of a civilian
retiree upon reemployment in a civilian position. Total pay and retirement benefits not
subject to Executive Level I aggregate limitation on pay. OPM may approve waivers to
meet temporary emergency hiring needs or when the agency has encountered exceptional
difficulty in recruiting or retaining a qualified candidate for a particular position, and may
specify a time limit for reemployment without penalty.
[5 U.S.C. 5532(g), 8344(i), and 8468(f); 5 CFR part 553, subpart B]
[Contact: Larry Lorenz--202-606-0830]
D. PERFORMANCE MANAGEMENT(2)--OPM has substantially deregulated performance
appraisal and awards policies within the limits of existing statute and with the express intent
of promoting decentralized systems and programs that conform to specific agency mission
and culture. In addition, recent changes to the Government Employees Training Act added
considerable flexibility for the training that employees may receive.
[For general questions, contact the Office of Employee Relations and Workforce
- Performance Planning and Appraisal [Contact: Peggy Higgins--202-606-2720]
- Authority to establish a flexible agency performance appraisal system and to decentralize
the design and operation of specific appraisal programs, including:
- Using as few as two and as many as five summary levels in official ratings of record;
- Appraising employee performance using at least one critical element that addresses
- Flexibility to incorporate performance goals and objectives measured at team and
organizational levels into performance planning; and
- Flexibility to take group and organizational performance into account when assigning
ratings above "Unacceptable." [5 CFR part 430, subpart B]
- Incentive Awards and Recognition [Contact: Peggy Higgins--202-606-2720]
- Authority to grant a cash award to an employee, individually or as a member of a group,
up to $10,000 without external approval, up to $25,000 with OPM approval, and in
excess of $25,000 with Presidential approval. Awards based on ratings of record may not
exceed 20 percent of the employee's rate of basic pay excluding locality adjustments.
Cash award payments are subject to the aggregate limitation on total pay equal to the rate
of pay for Executive Level I. [5 U.S.C. 45; 5 CFR part 451]
- Awards may be based on individual and group contributions, performance ratings of
record of at least "Fully Successful," and other special acts or services.
[5 U.S.C. 45; 5 CFR part 451]
- Authority to grant time off from duty without charge to leave or loss of pay as an award
and to grant honorary, nonmonetary awards. [5 U.S.C. 4502; 5 CFR part 451]
- Authority to reward exceptional individual performance with faster than normal
advancement in the pay range by granting "quality step increases" in a General Schedule
employee's rate of basic pay. [5 U.S.C. 5336; 5 CFR part 531, subpart E]
- Performance Development and Training [Contact: John Zottoli--202-606-2721]
- Authority to provide any training that will assist in achieving the agency's mission and
performance goals, with no requirement that training be directly related to "official
duties." [5 U.S.C. 4103]
- Authority to take full advantage of available training sources with no distinction made
between Government and non-Government sources. [5 U.S.C. 4105]
- Authority to determine when a "continued service agreement" with an employee is
appropriate and apply it to any training to protect the Government's investment.
[5 U.S.C. 4108]
- Authority to retrain employees for placement in another agency when such training is in
the interest of the Government. [5 U.S.C. 4103]
- Poor Performance [Contact: Ken Bates--202-606-2920]
- Authority exists to take performance-based removal or demotion actions under 5 U.S.C.
chapter 43, Performance Appraisal. Additionally, agencies have the authority to take
performance-based removal, demotion, or suspension actions under 5 U.S.C. chapter 75,
Adverse Actions. Each method has specific procedural and evidentiary requirements that
must be met. [5 U.S.C. 4303 and 7513; 5 CFR parts 432 and 752]
- Once an agency has issued a decision to remove an employee based solely on
unacceptable performance, the employee may file a request for discontinued service
retirement if the age and years-of-service requirements are met. However, an employee
is not eligible for discontinued service retirement if the underlying reason for the removal
is misconduct or delinquency, including willful refusal to perform.
[5 U.S.C. 8336 and 8414]
- When an employee is determined to be unable to perform his or her duties (including
situations where the agency has issued a decision to remove the employee for poor
performance) and there is a medical condition that is causing the performance deficiency,
the employee may seek OPM approval of disability retirement. [5 U.S.C. 8337 and 8451]
E. DISPUTE RESOLUTION [Contact: Marjorie Marks--202-606-2920]
- OPM has abolished the regulations prescribing features of an agency's Administrative
Grievance System (AGS). This allows agencies greater flexibility in designing an AGS.
(The AGS is used to resolve disputes with non-bargaining unit employees that do not
require use of a statutory grievance, complaint, or appeal process--e.g., grievances about
merit promotion or performance appraisals.) [5 CFR part 771; §771.101]
- The Negotiated Grievance Procedure (NGP), used by bargaining unit employees, may be
structured through collective bargaining to meet agency and employee interests.
[5 U.S.C. 7121]
- In both the NGP and the AGS, agencies may use a variety of dispute resolution
techniques to resolve employee disputes at the lowest possible level, thereby preventing
costly and time-consuming formal processes and litigation.
PART III -- POTENTIAL NEW PERSONNEL FLEXIBILITIES AND
Appendix A contains model legislative language and a section-by-section analysis of the
language PBO candidates may select from if they need legislative changes to their existing
personnel authorities to implement their PBO. This model language includes:
- No ceiling on the number or grade of personnel
- Flexibilities that do not require prior OPM approval, such as:
- performance management programs.
- performance incentive flexibilities.
- poor performance flexibilities.
- Broadbanding authority subject to OPM criteria.
- "Stepless" General Schedule with performance increases and exceptional performance
increases subject to OPM criteria.
- Noncompetitive conversion of certain term appointees.
- Alternative ranking procedures.
- Exemption from time limit on details.
- Extended probationary period.
- Flexibilities that will require prior OPM approval:
- Alternative job evaluation system.
- Grade and pay retention flexibilities if broadbanded or under an alternative job evaluation
- recruitment/relocation bonus and retention allowance flexibilities.
- Streamlined demonstration authority for flexibilities not included in the above lists.
In general, as noted in Part I of this appendix, these flexibilities continue OPM oversight of
merit system principles, whistleblower protection, veterans preference, governmentwide
retirement and benefit provisions, aggregate compensation limits, and labor-management
requirements in existing law.
However, agencies will not be able to implement any flexibility provided in the personnel
section of the bill unless they have a written agreement that provides for the use of that flexibility
with the labor organization that represents the affected employees. Labor and management must
enter voluntarily into the implementation of a flexibility or the flexibility, even if granted in law,
cannot be used. Since these are voluntary agreements, a disagreement cannot be taken to the
Impasses Panel for a resolution.
In a roundtable on February 11, 1997, union leaders agreed with this approach and said that
the flexibilities in the model legislation "are worth talking about; nothing [in it] is automatically
off the table." They said PBOs provide a vehicle for bringing change into the workplace and they
will embrace change if their are given a chance to help shape these changes. As one leader
noted, "This provides a tremendous opportunity if we do it right." However, they strongly
cautioned that managers need to involve their employees and unions in crafting such changes.
PART IV -- POTENTIAL SYSTEM CHANGES BASED ON THE
DEMONSTRATION PROJECT AUTHORITY
The demonstration project authority (5 U.S.C. 4703, 5 CFR part 470), or the streamlined
authority in the PBO model legislation in Appendix A, can be used by PBOs to obtain the
authority to make personnel system changes that require waiving title 5 laws and regulations.
Demonstration projects are jointly developed by the agency and OPM, require a results-oriented
evaluation, are subject to Congressional review, require bargaining with affected bargaining unit
employees, and require OPM approval. The authority does not permit waiver with respect to the
leave and benefits systems, nondiscrimination laws, merit system principles, prohibited personnel
practices, and Hatch Act provisions.
Role of Labor-Management Partnerships--Labor organizations must be involved in the process
of developing a demonstration project (5 U.S.C. 4703(f)). It is also the policy of this
Administration to encourage employee involvement through labor-management partnerships.
Consequently, demonstration projects should be arrived at in partnership with constituent labor
organizations, consistent with the directives in Executive Order 12871, "Labor-Management
Partnerships." Demonstration projects provide labor and management an opportunity to "jointly"
determine appropriate personnel management system flexibilities through waivers of title 5 law
The remainder of this part describes major system changes that might be especially useful to
PBO's that require demonstration authority. Other flexibilities would also be fully considered
for inclusion in a demonstration project.
[For general questions, contact the Office of Merit Systems Effectiveness--202-606-2820]
- Competitive Examining--Permit using a category rating system instead of numerical scores
to rank applicants.
- Qualified applicants are divided into two or more quality categories based on the relative
level of their knowledge, skills, and abilities needed for successful performance in the job
to be filled.
- Veteran preference eligibles who have a compensable service-connected disability of
10 percent or more and meet minimum qualification standards are listed in the highest
quality category (not applicable to scientific and professional positions at and above
GS-9, or equivalent).
- Within each quality category, preference eligibles are listed ahead of all nonpreference
- A manager may select any candidate in the highest quality category, except that a
nonpreference eligible may not be selected if a preference eligible is available in the
- If fewer than three candidates are in the highest quality category, selection may be made
from a merged category consisting of the highest and second highest categories.
- Short-Term Staffing--Make nonpermanent appointments of up to 4 years when the
agency's need for an employee's services has a foreseeable end.
- Appointment made through the competitive examining process, including veterans
preference. Public notice includes potential for permanent employment.
- Appointment may be extended beyond 4 years only by the head of the agency to complete
work essential to agency's mission.
- For performance or conduct adverse actions, employee covered by negotiated grievance
process or internal agency appeal process (but not title 5, U.S.C.) after 1 year of service in
same or similar positions. No further review after internal agency appeal.
- Employee not subject to Governmentwide reduction in force rules.
- May be selected under merit promotion procedures for permanent appointment after
employee has 2 years of current continuous nonpermanent service with acceptable
performance. Use limited to position in same line of work and only when consistent with
programs for surplus and displaced employees.
- Probationary Periods--Permit periods longer than 1 year, up to 3 years.
- Permitted only for positions where the nature of the work is such that 1 year is
insufficient to demonstrate complete proficiency in the position.
- Applies to initial appointments in the competitive and excepted service.
- During the period of longer probation, an employee would have very limited rights.
- Broadbanding--In job evaluation and classification of General Schedule positions, permit
broad-banded systems in accordance with demonstration project criteria related to:
- The minimum and maximum number of grades that may be combined into pay bands.
- Requirements for adjusting pay within a band.
- Requirements for setting the pay of supervisory employees in pay bands.
- Requirements and methods for setting pay upon conversion to a banded system, initial
appointment, change of position or type of appointment, and movement between systems.
- Means and methods for controlling costs.
- Provisions to ensure the Government's continued ability to compare the rates of pay of
employees covered by a broad-banded system with non-Federal rates of pay in each pay
- Classification Review--Require that when an employee requests a review of the
classification of his or her position, the determination must first be reviewed by the agency
before the employee may request OPM review.
- General Schedule Pay Administration--Simplify the pay structure and reorient the method
for advancing in a General Schedule pay range to emphasize performance rather than time.
- Eliminate the fixed 10-step framework for General Schedule positions to create a more
rational and flexible pay system that resolves certain anomalies caused by the fixed step
- Redesignate "periodic step increases" (i.e., within-grade increases) as "performance
increases" to emphasize their being contingent upon performance--i.e., meeting the
retention standard, and establish their value as equal to one-ninth of the difference
between the minimum and maximum rates of the pay range.
- Eligibility for Pay Increases--Broaden eligibility criteria.
- Authorize performance increases for nonpermanent employees in General Schedule
D. PERFORMANCE MANAGEMENT
- Performance Planning and Assessment--Emphasize the objective of performance
management and assessment as strengthening the effectiveness and accountability of
individuals, groups, and organizations.
- Establish individual accountability by communicating to each employee at least one
retention standard for individual performance and determining whether such standards
have been met; that determination to serve as the basis for:
- possible performance-based adverse action (removal, demotion); and
- eligibility for performance-based personnel actions (pay increases, promotion,
additional retention credit in a reduction in force).
- Broaden performance planning and assessment to support the integration of employee
performance management with other performance-based management processes being
implemented under the Government Performance and Results Act and the National
Performance Review by permitting:
- use of group and organizational goals and objectives; and
- limitations on the distribution of assessments of employees who meet their
- Incentive Awards--Reorient awards and recognition programs to support improving
individual, group, and organizational performance.
- An individual award in excess of $10,000, but not more than 25 percent of the rate for
Executive Level V (currently $27,050), may be granted without external review and approval.
- Productivity gainsharing programs may be established.
- Redesignate "additional step increases" (quality step increases) as "exceptional
performance increases," and authorize them in amounts less than a full performance
- Poor Performance--Improve procedures and reduce disincentives for dealing with poor
- Specify that adverse actions based on failure to meet a retention standard may be taken
under chapter 75.
- Reduce the formal period of advance notice of a proposed removal or demotion from
30 days to 15 days.
- Eliminate an employee's right to appeal to the Merit Systems Protection Board the denial
of a performance increase on the basis of poor performance.
PBOs are urged to begin discussing any demonstration project proposals with OPM as soon as
- Carol J. Okin
- Associate Director
- for Merit Systems Oversight
- and Effectiveness
- U.S. Office of Personnel Management
- 1900 E Street, NW. Room 7470
- Washington, DC 20415-0001
- Telephone: (202) 606-1575
- Fax: (202) 606-1798
OPM SERVICES AVAILABLE TO SUPPORT PBOs
OPM provides a full range of technical assistance and a wide variety of personnel services,
some through reimbursable agreements. OPM can support PBOs in all aspects of personnel
Developing competitive examinations;
Conducting competitive examinations and rating applications
for merit promotion, using state-of-the-art automated
Developing job evaluation systems, qualification requirements,
and classification standards;
Classifying positions and automating position classification
Designing broadbanding systems and pay administration
Designing performance management programs, including
methods for planning and assessing performance and
approaches to awards and recognition;
Designing pay-for-performance programs;
Designing training and development systems, including the
creation and implementation of training, distance learning,
and certification programs;
Designing alternative dispute resolution procedures;
Designing systems for assuring accountability for merit system
principles and prohibited personnel practices;
Providing other services such as survey processing
and organizational needs assessment; and
Evaluating the effectiveness of personnel systems.
1. OPM's Office of Executive Resources (OER) has developed a template of SES
personnel flexibilities. Contact OER at 202-606-2246 to obtain a copy.
2. "Performance management" in the context of personnel authorities relates to the
management of employee performance (i.e., planning, developing, appraising, and rewarding
employee contributions), rather than performance-based or performance-oriented approaches to
managing, measuring, and accounting for agency program performance. The two concepts can
and should be linked and integrated, but they remain distinct in some respects, particularly
regarding establishing individual accountability and dealing with poor performers.
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