Bill ties higher SES pay to lower performance ratings

Federal agencies could pay their best senior executives more each year-if the agencies give lower performance ratings for their executives overall-under a provision included in the homeland security legislation approved by Congress Tuesday.

Agencies have been under the gun from the Bush administration to stop giving outstanding ratings to almost all of their executives. Nearly 84 percent of federal executives received their agency's highest performance rating in 2001. Office of Personnel Management Director Kay Coles James has urged agency leaders to make more "meaningful distinctions between those with a record of truly outstanding performance and those who did what was expected."

The carrot-and-stick approach included in the legislation would further push agencies to award lower ratings. The legislation would increase the total annual compensation limit on senior executives from the pay rate for Cabinet secretaries ($166,700 this year) to the pay rate for the Vice President ($192,600 this year). The higher limit would let executives collect larger bonuses in any given year. Presidential Rank Awards, for example, come with bonuses amounting to 35 percent of salary. The current pay cap forces many executives to have their bonuses paid over two years.

But under the legislation, agencies could not use the higher limit unless OPM and the Office of Management and Budget certify that their executive performance rating systems make "meaningful distinctions based on relative performance."

"There was definitely an interest in putting some accountability in the rating system, to make sure it didn't become just a sham," said Scott Milburn, a spokesman for Sen. George Voinovich, R-Ohio. "We wanted it to be real."

Voinovich sponsored the compensation limit increase in the version of homeland security legislation approved by the Senate Governmental Affairs Committee this summer. The performance rating caveat was added to the final version of the bill passed by the House last week and the Senate on Tuesday.

Carol Bonosaro, president of the Senior Executives Association, said agencies might respond to the provision by living with the current limit on total compensation, since they would have to jump through too many hoops to make sure their performance appraisal systems win certification from OPM and OMB.

"The certification would likely be withdrawn if OPM or OMB, in their collective wisdom, decided an agency had given too many outstanding ratings or too few unsatisfactory ratings," Bonosaro said. "I just find it astonishing that what would be put into this bill is an opportunity to micromanage agencies. You have to wonder, doesn't OMB have enough to do?"

Under the legislation (H.R. 5005), OMB and OPM will develop criteria for the certification of executive performance appraisal systems. OPM and OMB will certify agencies' systems for two years at a time. But the systems can be decertified any time that OPM and OMB decide that the agencies aren't making enough distinctions among executives' ratings.

The legislation eliminates an existing certification process that is largely considered a waste of time. Created in 1989, the current process certifies individual executives every three years as members of the Senior Executive Service, based on their performance ratings over the three years. Only a handful of executives have been decertified over the past 12 years.

"Recertification was a paper exercise," Bonosaro said. "This new provision is 'son of recertification.' Some things you just don't legislate.

"This one is a really dangerous hoop because it could certainly lead to an effort to force a distribution of ratings," she added. "No matter if every executive in an agency was doing more than satisfactory work, some few would have to be sacrificed on the altar of the certification process."