Personnel changes

Members of the House Government Reform Committee may vote next week on legislation that has far-reaching effects for personnel management in the federal government.

"The Civil Service and National Security Personnel Improvement Act"(H.R.1836) introduced Tuesday by Rep. Tom Davis, R-Va., chairman of the committee, includes sweeping changes to personnel policies at the Defense Department and NASA. Those changes include expanding a variety of pilot and demonstration projects that have experimented with pay banding, performance bonuses and other changes to the traditional General Schedule pay scale. The bill also would create a $500 million pay-for-performance fund all federal agencies could use to hike the salaries of high performers. The Bush administration pitched the latter measure, along with a plan to offer a 2 percent across-the-board raise next year, in its fiscal 2004 budget proposal.

Civil service reform advocates insist the changes proposed by the bill are needed because the current federal pay system is antiquated, does not adequately reward top performers, and hinders recruitment and retention efforts. Office of Personnel Management officials say the federal government has outgrown the one-size-fits-all civil service system and the time has come to shift to agency-specific personnel plans.

NASA Administrator Sean O'Keefe, who served as deputy director of the Office of Management and Budget before taking the helm of the space agency in January 2002, spent most of last year lobbying legislators for changes to that agency's personnel system. O'Keefe argued that NASA needed personnel flexibilities to compete with the private sector in attracting employees, diversifying the agency's workforce, restructuring the current workforce and steering more students into science and technology.

"We cannot resolve these new and emerging problems with past solutions, nor are current personnel flexibilities adequate," O'Keefe told the House Science Subcommittee on Space and Aeronautics in July 2002.

Most lawmakers admit that the current pay system does not work well, but some are hesitant to extend the broad personnel authorities included in the bill to NASA and the Defense Department because they fear it would give agency officials too much authority over personnel issues.

"You're asking Congress to give the department the ability to waive the law," Rep. Jo Ann Davis, R-Va., said Tuesday during a House Government Reform Subcommittee on the Civil Service and Agency Organization hearing on the Defense proposal. Davis is chairwoman of the subcommittee. "I want the 700,000 people in the Defense Department to have the protection of the law just like everyone else."

According to David Chu, Defense undersecretary for personnel and readiness, the real issue is trust.

"Change is hard, I know," he said after the hearing Tuesday. "This is new, this is different. It's a matter of trust; can they trust the administration to take these flexibilities and use them well? We think there is a track record of our using it well on the military side."

Lawmakers have also questioned the viability of the governmentwide performance fund given the federal government's poor performance appraisal system.

"Pay-for-performance will not work without a strong personnel management system, one that is understood and accepted by employees and their supervisors," Chairwoman Davis said Tuesday.

Rep. Danny Davis, D-Ill., plans to introduce legislation that would put in place safeguards and other checks and balances to ensure that managers did not misuse pay-for-performance systems.

Costs of Spending

National Treasury Employees Union officials are raising questions about a deal the Office of Personnel Management brokered with the contractor hired to oversee the new flexible spending accounts set to roll out in July.

This new federal benefit lets federal employees put aside up to $3,000 pre-tax dollars to pay for medical costs not covered by traditional healthcare plans. As much as $5,000 pre-tax dollars can be socked away to pay for dependent care costs. Under FSAs, employees pay for services up front and are reimbursed by their employers from the accounts. Federal employees will be able to sign up for the accounts during the Federal Employees Health Benefits Program open enrollment period which beings on May 19.

SHPS Inc., the benefits administration company hired by OPM to manage the program, will charge employees $4 a month to cover administration costs. According to Jerry Oehm, director of business development for SHPS, federal agencies are unable to offset those costs as some private sector companies are able to do.

In an April 30 letter to OPM Director Kay Coles James, NTEU President Colleen Kelley took issue with that fee, as well as a plan to assess 1.5 percent of the amount deposited into dependent care accounts. Kelley questioned charging federal employees, when SHPS would be earning interest on the money held in FSAs. She also said the agency was "shirking its responsibility by failing to undertake the necessary educational campaign to ensure the success of the program."

"If this is the kind of 'negotiation' that characterizes OPM's annual secret negotiations with health carriers for the Federal Employees Health Benefits Program (FEHBP), it is easy to see why OPM has come under such criticism for its role in that annual event," Kelley said in a statement.

On Wednesday an OPM official said that the early enrollment period is for people already knowledgeable about the accounts, which are widely used in the private sector. Early enrollment information will explain the use-it-or-lose-it element of the plans, the official said, and a more expansive education campaign will come later.

"There is some risk. There is the risk of not incurring the expenses that you depend on and then having money left in your account and losing it at the end of the year," the official said. "We really do want to do a good education campaign, so the early enrollment is for people already familiar with FSAs."

He also said that the interest earned on money in the accounts would not go to SHPS, but rather OPM would work with the company to use that and any forfeited money to reduce future fees.

"Really, if we had our druthers, the agencies would have the ability to make these payments on behalf of their employees," the official said.