Tilting at Windmills

George Nesterczuk exits the Office of Personnel Management, his efforts to reshape the Defense and Homeland Security bureaucracies far from complete.

George Nesterczuk is a warrior, which may seem peculiar because of his soft face, round physique and easy laugh. The Ukrainian-American archconservative doesn't engage in red vs. blue political battles. Instead, he has spent his career as a strategist in a decidedly less glamorous campaign, struggling to reshape the civil service.

He is at the center of the Bush administration's personnel reforms, funneling years of observation and philosophy into a blueprint for new pay and management systems at the Defense and Homeland Security departments.

Nesterczuk's decision to leave the Office of Personnel Management in July and head to the Ukraine to reform its bureaucracy means "we've lost one of the true warriors in civil service reform," says Ronald Sanders, the top personnel adviser to Director of National Intelligence John Negroponte. "He's been at this a long time," Sanders says. "He's sort of a Russian Don Quixote. He's been tilting at windmill since I first met him in the late '80s."

Before becoming DNI chief human capital officer, Sanders worked side by side with Nesterczuk at OPM, advising the Defense Department on how to make sweeping changes to the way it pays, hires, fires and bargains with 700,000 civilian workers. His allusion to the fabled 17th century chivalrous Spanish warrior and his uphill fight for a grandiose notion of right and wrong seems apt in Nesterczuk's case.

But in some circles, Nesterczuk is more likely to be compared to another literary figure: Harry Potter's nemesis, Lord Voldemort. When asked if he is federal workers' own Dark Lord, Nesterczuk laughs gently and simply says, no.

But many federal labor union officials see Nesterczuk as an ideologue who helped hatch an evil plan at a conservative Washington think thank, The Heritage Foundation, and then returned to government to impose it. The nefarious plan? Rid the country of an oversized bureaucracy and its pesky unions. Unions so far have sued both the Defense and Homeland Security departments successfully to halt twin labor relations systems that would have crippled their ability to bargain.

Last spring, in an update to members, the United Department of Defense Workers Coalition outed Nesterczuk as a key engineer of the personnel reform programs they oppose. The coalition, a group of 36 Defense labor unions that coalesced when the Pentagon began work on its new National Security Personnel System, pointed out a January 2001 Heritage report that Nesterczuk co-authored with his self-declared mentor, Donald Devine. As Ronald Reagan's OPM chief, Devine won attention and enmity for his efforts to downsize government. In the report, the pair, along with Heritage fellow Robert E. Moffit, wrote, "Unions are, at best, responsible to their members. At worst, they represent the permanent government acting on its own self-interest rather than on the desires of the electorate."

In a July 2002 Heritage paper, Nesterczuk argued on his own for "a streamlined [Homeland Security Department] dispute resolution system, providing for internal agency appeals and reviews and ending with the secretary as final arbiter." Just such a system took shape at DHS and at the Pentagon; both were ruled illegal this year.

Ideologue and Architect

A former astrophysics doctoral candidate, Nesterczuk began a 25-year effort to remake civil service rules with posts in President Reagan's OPM, continued with a chief of staff job on the House Civil Service Committee in the 1990s, and culminated ushering in the Pentagon's new system.

Ron Ault, president of the Metal Trades Department, AFL-CIO, says when he saw Nesterczuk on the NSPS team he was immediately concerned that the program was an ideological one with no room to negotiate. "Nesterczuk, Devine and Moffit, those are the guys that came out with 'let's go back to the old spoils system,' " Ault says. "They didn't use the word 'spoils system,' but they went back to the patronage system where people were totally loyal to the president."

Terry Rosen, a labor relations specialist for the American Federation of Government Employees, says the philosophies of Nesterczuk and other Heritage thinkers have been behind the reforms from the start. "The architects of the system are people pushing an ideology that government should do the least possible, have the smallest role possible," Rosen says. "[And] civil service employees are an impediment to getting a particular political agenda in place, that federal unions are an impediment."

Nesterczuk doesn't apologize for his work at Heritage or his reputation as an ideologue. "It was in that context that [former OPM director] Kay James hired me," Nesterczuk says. "She sought me out. It was because I had a reputation of having strongly held views on, how should we call them, controversial issues."

And he contends his views are grounded in philosophy, not simply in opposition to organized labor. "I respect what the unions do," Nesterczuk continues. "I respect the individuals. They have some very competent people representing them. . . . They're statutorily empowered; they have a legitimate role to play. I just take issue with the perception that all unions are all things to all people in every agency. Hell no."

In fact, he sees himself as standing up for voiceless high-performing government executives and managers who want flexibility to hire and fire, to dole out or restrict pay raises, and who aren't represented by unions. His wife, Oksana, a supervisor at the Defense Department, is one of them.

Goal-Line Fumble

When a three-judge panel, including two Republican appointees, froze the Homeland Security Department's labor relations system in late June because it "effectively eliminate[s] all meaningful bargaining over fundamental working conditions," many observers said the government had engineered its own loss. The ruling followed a lower court decision against DHS. A similar lower court decision against the Pentagon now is winding its way up to the same appellate court.

Joseph Swerdzewski, former general counsel at the Federal Labor Relations Authority under President Clinton, likens the situation to a football game. Team DHS is on the one-yard line with less than a minute to go in the fourth quarter. If they kick a field goal, they'll win the game. Team DHS already has changed the rules, so that even if they miss the field goal they will win the game. But they decide they never want the Union Team to come back again, so they run the ball. "As they were running the ball, guess what happened?" Swerdzewski says. "They fumbled. And the ball was recovered by the [other] team. They had the opportunity to change the system, but they tried to go further than the courts are saying they had the right to go."

Some of the overreaching, according to the judges, included regulations allowing the secretaries of both agencies to override collective bargaining agreements at any time and the ability to severely limit the scope of what unions can bargain over.

As a result, instead of the hundreds of thousands of employees originally planned, DHS has only 4,900 nonbargaining unit employees, many of them at headquarters, working under the new performance management system and scheduled to receive their first performance-based paychecks in January 2007. At the Defense Department, fewer than 80,000 nonbargaining employees will work under the system by January. Original plans called for 300,000 to be in the system by that time.

Setbacks don't shake Nesterczuk's belief in the systems he helped create. When asked whether the departments overreached, he says, "No. Flat out no." He calls all three of the court decisions enjoining the two systems incompetent and says all the labor changes are necessary to get the pay changes into place.

Competency aside, the court rulings mean the performance-based pay systems for all bargaining unit employees are stopped, too. The departments would have to bargain with hundreds of individual unions to get them into place, a process that could take years.

Nesterczuk says there's another reason the Defense Department included such broad changes over the objections of unions during the meet-and-confer process preceding announcement of the new system. Union representatives told agency officials, "We don't care what you pass as a regulation, we're going to sue you," Nesterczuk says. "That's what they told us. We knew they were going to sue us. Under those circumstances, why would you issue a regulation that didn't reflect everything you want? You're going to get sued one way or another. You do what you got to do."

Union representatives deny they planned to sue no matter what. "No, that's not true," says Matt Biggs, spokesman for the Defense coalition. "During the meet-and-confers, when they were slowly but surely giving us bits and pieces of their NSPS, we had the authorizing law in front of us and we reminded them time and time again: This is illegal, this is illegal. They didn't listen to us.

"I think they figured they would roll the dice and try to win in court," Biggs says.

No Dice

Court-imposed delays could have lasting consequences. Both agencies' laws have a five-year sunset clause for labor relations changes. At DHS, that means the department's ability to modify the bargaining system ends in January 2009. At Defense, after five years the whole labor system expires, sending employees back to the current rules unless Congress reauthorizes the system.

DHS has given up its option to ask for a rehearing from the full appeals court. It has until late September to ask for Supreme Court review. At press time, the Defense Department was waiting for the appeals court to set a date for oral arguments.

If appeals fail and the court decisions force the departments to rewrite regulations, they would have to re-enter the meet-and-confer process, according to the National Treasury Employees Union's president, Colleen Kelley. Just how long that process would last is uncertain; at DHS, it lasted a couple of months. And then, unions could sue over the new system again, potentially running out the clock for both departments.

If DHS and Defense fail to get proven, working systems into place before the sunsets, it is unclear whether the political climate, with Sept. 11 fading in the rearview mirror, will give Congress the chutzpah to reauthorize.

"Well, look at the impetus" for the laws, Nesterczuk says. "It took 9/11, right-the recognition that we needed to reorganize a whole bunch of government agencies, do it in such a way that DHS has more flexibility to get its job done. It's in that environment that you got civil service reform.

"That was the only set of circumstances in which some members of Congress would take on the union interests," Nesterczuk says.

Unions agree about the influence of Sept. 11. "Within the first sentence if not the first paragraph of every conversation with them is 'in the aftermath of Sept. 11.' Or the answer is 'we have to do this for national security,' " says Kelley. "So it is an excuse that is overused. There is no doubt in my mind there are times that is the appropriate answer, the appropriate framing, but it is the exception rather than the rule."

One barometer of continued congressional support for the reforms is Sen. George Voinovich, R-Ohio. As chairman of the Senate Homeland Security and Governmental Affairs subcommittee overseeing the federal workforce, Voinovich is a leading voice on personnel reform, and is respected by both sides.

After the last DHS ruling, he issued a statement asking the department to resume discussions with employees. Like a marriage counselor, Voinovich endlessly has encouraged the two sides to work it out, but in the absence of mutual agreement, he sticks by his support for reforms.

According to a Senate aide, unions unofficially asked Congress to essentially rewrite the laws, but were told that wouldn't happen. The administration has not, however, asked Congress to legislatively intervene in the court decisions.

Another measure of support is recent movement by some lawmakers to strip funding from the Defense system. In June, the House voted to block funding for the labor relations system at NSPS and no member rose to oppose the amendment.

The effort was less successful in the Senate. Both Sens. John Warner, R-Va., who chairs the Armed Services Committee, and Susan Collins, R-Maine, who heads the Homeland Security and Governmental Affairs Committee, opposed an amendment to defund the system and blocked it from being considered as part of the 2007 Defense spending bill, according to the union coalition's Biggs.

As for DHS, both the House and the Senate made reductions of several million dollars each to the administration's 2007 funding request for the management systems; the House cut more drastically than the Senate. Funding for both systems will be worked out in House-Senate conferences.

Pay on the Table

The DHS and Defense experience is telling for prospects for wider reform.

"What we're seeing now is kind of a balkanized, backdoor approach to civil service reform," says Donald Rider, a lawyer and a professor of human resources management and labor relations at the University of Maryland's University College. "Various agencies are dissatisfied or uncomfortable with the kinds of discretion that the agency enjoys, and since comprehensive civil service reform is not something on anybody's front burner, you've got individual agencies coming forward seeking what they view as relief from the strictures of civil service."

But when agencies individually step from behind the shield of governmentwide rules, they often wind up bargaining over pay-something proscribed by the civil service rules they escaped. The biggest example is the Federal Aviation Administration, which left the General Schedule for a more flexible system in the 1980s and began bargaining over pay.

If DHS and Defense leave the General Schedule in favor of broad paybands and performance-based raises without a new labor relations system that precludes pay bargaining, they could be in dangerous territory. Unions are excited about the possibility of gaining a voice in salary-setting, but OPM officials say that even the regulations on pay prevent it.

"FAA is penny ante compared to DoD," Nesterczuk says. "I mean, [in] FAA you're talking about 40,000 employees. DoD has 20 times that. So a billion-dollar payroll problem for the FAA becomes a $20 billion problem for the government when you're looking at DoD. That's a huge deal."

"We'd love to negotiate pay," says Biggs. "We think that's a possibility. What they've done is they may have enabled the unions . . . to negotiate pay. That's not a problem for us."

AFGE's Rosen, who also thinks pay may well become negotiable at DHS and Defense without the shield of the General Schedule, sees the process as deterring an opposite intention. "We fear that [the new] system is as much about enabling the agencies to lower payroll over time because they won't have to budget what Congress mandates for other agencies," Rosen says.

"I think there are pluses to it and there surely are-there will wind up being-funding issues as there always are," says Kelley. "But we have always been more than willing to move into the arena of bargaining for pay."

Meanwhile, Nesterczuk leaves OPM with uncertainty clouding his career-long campaign. "NSPS-am I happy with it?" he says. "No, I'm not happy with where it's at now. I wish we could have prevailed in court. But I accept the fact that it's a continuing battle."