Realizing Reform

n 1993, Vice President Al Gore's National Performance Review called for reform of the civil service laws to give agency heads more discretion to hire, fire, pay and evaluate employees. But in the seven years since, there has been no agreement on the scope or the substance of comprehensive civil service reform. The year 2000, though, may bring an alignment of the sun, moon and stars-Congress, a new presidential administration and other stakeholders-to forge a civil service reform package on which all can agree.

There are several reasons why the long-dormant idea of civil service reform may be flickering back to life: the assurance of a new presidential administration after the fall's elections, rampant dissatisfaction with the government's current pay comparability system, and agencies' inability to hire desired employees in a tight labor market. But can the parties satisfactorily resolve the conflicts that have derailed all efforts at reform since the landmark Civil Service Reform Act of 1978?

The problems with the civil service system start with the hiring and compensation processes. Agency heads are complaining, as they did before the 1990 Federal Employee Pay Comparability Act (FEPCA) was enacted, that the government no longer can attract employees with specialized skills. Employees in the information technology, research, science and engineering fields are difficult, if not impossible, to hire and retain.

Six years of downsizing have masked the growing disparity between the pay of entry-level jobs in the private sector and those in the federal government. Reentering the marketplace, federal agencies are finding it extremely difficult to recruit the kind of high-caliber new employees who once sought federal jobs. Now that agencies finally have the funds to hire replacements, they find that good applicants are scarce and difficult to hire.

When agencies do find good candidates, they complain about how long the hiring process takes. They want more flexibility in the personnel system to compete in a shrinking applicant market. But whether they'll get it depends on several key factors.

A New Climate

A new administration will almost certainly have to reexamine the federal pay-setting process. Unless the next President lets Congress set federal employee pay, as it has for the past two years, he will be required to declare an "economic emergency" to avoid granting the pay increase required by FEPCA-currently calculated at 13 percent for Jan. 1, 2001. No new administration will want to be in the position of trying to declare an "economic emergency" if projected budget surpluses continue to grow, or to rely on Congress to get it off this embarrassing hook. And no new administration will want to grant federal employees a 13 percent pay increase.

If the process of setting annual pay rates is opened for discussion, the question of giving agency heads more discretion to set pay and create their own personnel systems will come into play. Several agencies, including the IRS and the Federal Aviation Administration, have already won such authority. Others are actively seeking it. Last year, for example, Congress passed legislation that would overhaul the Patent and Trademark Office and give its top officials much more latitude in setting compensation.

The political climate for civil service reform may be changing. Al Gore, Bill Bradley and George W. Bush are all campaigning on promises to make government work better, not abolish its functions. As columnist E. J. Dionne recently noted in The Washington Post, "The new competition is over who will use government more effectively to solve problems." It appears that all of the top presidential candidates will seek new alternatives to better deliver government services to the public. That may well cause them to embrace reform proposals that would make the federal government's personnel system more responsive to the needs of agencies.

Even if that happens, however, it won't be easy for interested parties to agree on exactly what a reform package should include. The Clinton administration, agency heads, employee unions, managers associations and members of Congress all have their own ideas on how to define "reform" when it comes to managing the bureaucracy. Any one of the parties can potentially block civil service reform
legislation.

Over the past seven years, agencies and unions have had some success engaging in labor-management partnerships to resolve problems in the civil service system. Such partnerships may provide the basis for a new collaborative process to reach agreement on a civil service reform package. But partnerships are no guarantee of success.

For example, a signed partnership agreement between the American Federation of Government Employees and the General Services Administration failed to prevent a major dispute when GSA decided earlier this year to close eight Federal Supply Service warehouses. The move could have thrown some 2,000 employees out of their jobs. After an independent arbitrator ruled that GSA must reverse its decision and negotiate with the union over the warehouses' fate, GSA chief David Barram agreed to get input from AFGE. But as of mid-November, he continued to insist that the final decision would be his.

A collaborative approach to reaching consensus on reform can create a synergy among the parties that yields a solution no one has considered before. But divisions between the groups are large, and trust is in short supply.

View From the Top

Since long before the National Performance Review, politically appointed federal officials have complained about the "one size fits all" federal personnel system. They argue that they need more discretion to hire the right people at the right time if they are to fulfill their agency missions. Civil service reform was born in large part from the cacophony of their complaints.

Historically, Office of Personnel Management officials, who oversee the personnel system, responded to complaints about the system by simply throwing up their hands and saying, "We're just administering the laws Congress passed." But OPM responded aggressively to the NPR initiative by eliminating vast portions of the Federal Personnel Manual and turning responsibility for many personnel actions over to managers. Agencies were allowed to create their own promotion processes, develop pass/fail performance evaluation systems, and grant employees bonuses of up to $10,000. In addition, agencies were delegated authority to offer 25 percent pay differentials to individuals and 10 percent differentials to uniquely qualified groups of employees who would be likely to leave the federal government.

Such administrative fixes, however, did not streamline the hiring process, allow agencies to create tailored classification systems or set pay based on broad-based agency needs. Such changes require legislation, and it is here that the effort has foundered for a variety of reasons.

Rules Rule

Congress has historically viewed the federal government as a single employer, enacting merit principles in law that apply to all of its employees: fair and open competition for federal jobs; equitable treatment in all aspects of personnel management; equal pay for equal work; retention of employees based on their performance; effective training for employees; and protection for civil servants from partisan political activity, arbitrary actions and reprisal for lawful disclosure of information. Congress also enacted governmentwide legislation on pay, benefits and personnel policies to ensure that the merit principles were applied uniformly.

In the interest of fairness, the rules-based civil service system does not allow for variances from agency to agency. Allowing agencies more authority to hire, fire, promote, pay and manage employees would require legislation. In such legislation, Congress would have to change its evaluation of agencies' performance from whether they followed the merit principles as defined by OPM to whether they created and applied a merit-based system that helped achieve agency goals. Agencies, rather than OPM, would be the interpreter and applier of the merit principles.

Many stakeholders in the civil service system have opposed changes in the laws, rules and regulations created to implement the merit principles because they fear that allowing agency leaders a broader range of judgment will inevitably lead to at least some arbitrary or impartial decisions.

Unions, for example, have resisted supporting a civil service reform package in recent years. The harsh attacks on federal employees after the GOP won control of Congress in 1994 forced unions into a protective mode. Union officials decided that staying out of the line of fire in the legislative arena as much as possible was the best policy to avoid harm. Putting civil service reform in play meant risking unwanted changes in the collective bargaining statute, Merit Systems Protection Board protections, or levels of pay and benefits.

Unions were also afraid that any discretion given to agency heads would not be subject to collective bargaining, weakening unions' ability to represent members potentially harmed by the exercise of the discretion.

Some union leaders were excited by the idea of participating in implementing new personnel flexibilities and pay-setting authority, but no top union official was willing to run the risk that agency heads would unilaterally exercise the new discretion.

At the same time, federal managers and executives associations have focused on increasing pay, preserving benefits, making it easier to discharge poor performers and resisting any incursion by unions on the exercise of existing agency head discretion. Like the unions, they have focused primarily on preserving the status quo and avoiding congressional cuts in pay and benefits.

Finding Freedom

The Clinton administration, on the other hand, has been actively seeking to allow agencies wide discretion to create personnel systems through the creation of performance-based organizations (PBOs). Under the PBO concept, federal operations are given freedom from strict government personnel and procurement regulations in return for meeting tough performance standards.

The PBO concept raises several questions. The Clinton administration has been divided over how much discretion chief executives of PBOs should have to set salaries above General Schedule rates and to replace the current merit-based network of hiring, pay and personnel policies. Should unions be allowed to negotiate over the exercise of any additional agency head discretion? Is the PBO model appropriate for a vast number of federal agencies?

Agencies that believe they are underfunded fear that giving agency executives more discretion-not to mention higher compensation themselves-would put rich and poor agencies in competition with one another. Agencies that receive less funding fear they will not be able to compete for the best talent against their better-funded brethren elsewhere in the government.

Agencies that do receive higher funding levels and are in the congressional spotlight, such as the FAA and the IRS, want the widest possible discretion to attract the people they need to overhaul their operations.

Finally, agency heads are divided over whether it will be possible to fully utilize the flexibilities embodied in the PBO concept if their discretion is subject to negotiation with unions. Depending on where you sit, union involvement is either critical to agencies' ultimate success or a hindrance to effective management in the absence of centralized oversight.

On the Hill

Despite their differences, both unions and agency executives have shown an interest in working together on civil service reform. But they'll need help from Congress, and that will require clearing several jurisdictional and oversight hurdles.

Establishing the federal employee pay-setting process, defining benefits, reviewing issues of general management and ensuring adherence to the merit principles are the responsibility of the House Government Reform Committee and the Senate Governmental Affairs Committee. These two panels would have only supporting roles if each agency head were given broad authority to create pay and personnel systems. In such a situation, each agency's specific oversight committee would become responsible for determining if such discretion was exercised in a way that accomplished the agency goals more effectively. Like all committees in Congress, the Government Reform and Governmental Affairs panels have resisted giving up any jurisdiction.

In 1998, when the House Ways and Means Committee proposed paying up to 40 IRS managers salaries that could rise as high as that of the Vice President, the Government Reform Committee asserted its jurisdiction over the issue and requested the opportunity to hold hearings and manage that portion of the IRS reform legislation. Ways and Means, the IRS' authorizing committee, agreed to negotiate with representatives of Government Reform, but refused to cede any jurisdiction.

This fight made clear the tensions between committees like Ways and Means and the Senate Finance Committee, which have special expertise and an interest in solving individual agencies' problems, and the Government Reform and Governmental Affairs panels, which have general responsibility and want governmentwide rules, not individual agency aberrations.

The IRS experience shows that it's not just unions that have a vested interest in opposing broad-based civil service reform. At the same time, the conditions for collaboration among all interested parties to reach agreement on a reform package have rarely been better. The abolish-government mentality is fading, while at the same time agencies are under ever-increasing pressure to streamline operations and position themselves to compete for workers in the tightest job market in recent memory. Besides, what better time to take on the job of creating a new framework for the bureaucracy than at the dawn of a new millennium?

Robert M. Tobias is a distinguished practitioner in residence and director of the Institute for the Study of Policy Implementation at American University in Washington. He was president of the National Treasury Employees Union from 1983 to 1999.