Defense lags in SES pay-for-performance certification

The Defense Department is one of the last agencies without certification from the Office of Personnel Management to implement a pay-for-performance system for its employees in the Senior Executive Service.

Speaking on Wednesday at a conference organized by the Senior Executives Association-a nonprofit organization that advocates for career federal executives-OPM Director Linda Springer confirmed the audience's assertion that the Defense Department does not have a performance appraisal system that is up to snuff with OPM and Office of Management and Budget standards.

OPM and OMB are required to certify that agencies have the ability to properly assess SES employees before they can give pay raises based on achievement, and before they can have access to a higher pay cap for executives. Springer said that about 5,000 members of the SES are in agencies that are certified to implement the new system, and about 2,000 remain in uncertified agencies.

The certification requirement -- and the SES performance pay system as a whole -- comes in response to November 2003 legislation that eliminated regular cost-of-living adjustments and locality pay for senior executives, instead tying raises to performance evaluations.

As of Sept. 1, the Defense and State Departments are the only two Cabinet-level agencies that are not certified to implement the system, according to OPM's count. The remaining 12 Cabinet-level agencies have provisional certification, which Springer called "a good start." Only two independent agencies, the General Services Administration and the Pension Benefit Guarantee Corporation, have obtained full certification to appraise their SES employees.

Agencies that can demonstrate that their current systems meet the standards set by OPM can apply for a two-year full certification, while agencies that have developed systems but haven't yet implemented them can apply for one-year provisional certifications. They can later apply for full certification.

The Defense Department's failure to develop a satisfactory performance appraisal system for their executives comes at a time when the department is close to unveiling a pay-for-performance system for all of its civilian employees. Final regulations for Defense's National Security Personnel System are set to be published in the Federal Register some time this fall, according to NSPS officials. The draft regulations include tying parts of employee raises to performance, much like the SES system.

Springer called the SES system a "good training ground" for programs like NSPS, the Homeland Security Department's similar proposed system and draft legislation from the Bush administration dubbed the Working for America Act, which would apply pay for performance, among other personnel reforms, to the domestic agencies.

For one, Springer said the government is learning that the cost of implementing performance appraisal systems is not prohibitive.

"The cost to put these systems in place, certainly at SES, is not that high," Springer said. "We're not talking about…buckets of money. It isn't a budget issue; it's more of a training and performance issue."

Springer also noted the importance of managers, like those in the SES, being the first to undergo a pay-for-performance system.

"If we can't do this ourselves," Springer said, "it becomes challenging to say" to the employees that executives manage that they must accept the new system.

Even once the final regulations for NSPS are announced, managers will have to train for the new system, and employees may not see their first performance-based pay raise for months, or years.