July 14, 1998
Congress creates performance-based
By Brian Friel
After two years of failed attempts to transform
several federal agencies into
performance-based organizations, Congress
has approved a plan to turn the Education
Department's student financial aid office into a
On Thursday the Senate passed the Higher
Education Amendments of 1998, which includes
the PBO provision. The House passed the bill
Under the legislation, in return for a shot at
substantial bonuses, senior executives in
charge of student aid would commit to annual
performance goals. The executives would also
be given wide-ranging management
flexibilities. The top executive--the chief
operating officer--would be eligible for bonuses
of up to 50 percent of annual salary.
"This performance-based organization will, I
believe, ensure the Secretary of Education can
recruit the best people for this job and retain
them based on their performance," said Sen.
Christopher Dodd, D-Conn.
In a June 5 letter to Senate Minority Leader
Tom Daschle, D-S.D., Education Secretary
Richard Riley said the administration supports
the PBO proposal.
Under the measure, the chief operating officer
would have to show "demonstrated ability in
management and experience in information
technology or financial services." The COO
would enter into an annual performance
agreement with the Education Secretary. The
COO would be paid on the Senior Executive
Service pay schedule, but with bonuses could
make up to the president's annual salary of
"For the first time, the day-to-day management
of the student aid programs will be in the
hands of someone with real-world experience
in financial services," said Rep. Howard
McKeon, R-Calif., head of the House
subcommittee on postsecondary education.
Other senior managers would also have to
agree to annual performance plans. Their
salary and bonuses would be limited to 125
percent of the maximum Senior Executive
Service pay rate.
The bill bestows personnel and procurement
flexibilities on the student aid office, allowing
executives to experiment with new
Vice President Gore originally touted
performance-based organizations in a March
1996 speech. The idea of the PBOs, based on a
British government model, is to separate
policy-making functions from program
operations. PBO candidates typically deliver a
tangible service or product to the public, which
makes setting performance goals easier than
for agencies with regulatory or policy functions.
The Clinton Administration has formally
proposed four PBO candidates: The Patent and
Trademark Office, Defense Commissary Agency,
St. Lawrence Seaway Development Corp. and
air traffic services at the Federal Aviation
Administration. Congress has yet to approve
any of the administration's proposals.
House staffers proposed creating the PBO at
Education. Administration officials originally
approached the idea with hesitation.
The bill now goes to conference so that House
and Senate negotiators can reconcile
differences in their versions.
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