He indicates that it is a gargantuan job.

“This is a multidimensional, multifaceted, multilayered process,” explained Speigel, who retired Jan. 1. In a real sense, he went on, the task is about as tough and complex as designing and developing a new fighter aircraft.

In the 2004 defense authorization act, Congress gave the Pentagon wide-ranging authority to discard its decades-old system for managing civilian workers and create a new and modern human resources management system. This so-called National Security Personnel System (NSPS), now taking shape, will modify rules governing employee rights and labor relations.

As a result, all of the Defense Department’s nearly 700,000 civilian employees will, by 2009, see sweeping changes in aspects of their jobs. The change will range from how they interact with their bosses to the size of their paychecks.

The existing system and rules have long been criticized for making it hard to reward top employees, fire bad ones, and attract qualified workers from the private sector to work for the Defense Department. Pentagon leaders successfully lobbied lawmakers to make the change, arguing that such alterations were vital to military transformation goals. DOD claimed that the prosecution of the Global War on Terror demanded a more-agile workforce.

Moreover, employees of the baby-boom generation may retire en masse over the next decade, meaning that the Pentagon faces the need to hire thousands of replacement workers.

Back to the Force

Secretary of Defense Donald H. Rumsfeld said managers frequently assign uniformed military personnel to civilian-type jobs because, under today’s rules, it takes too much time to move civilians into those positions.

Rumsfeld said at a press conference in November, “Tens of thousands of office jobs currently held by uniformed military are being considered for conversion to civilian positions, returning those needed military billets to the warfighting force.”

Initially, Pentagon officials wanted to roll out the new system by the end of 2004, but that did not happen. DOD quickly designed a system; however, after that, the drive was slowed by federal employee unions, the Office of Personnel Management, and lawmakers who claimed they had been shut out of the negotiations.

John Gage, president of the American Federation of Government Employees (AFGE), asked Congress to stop the “destruction of the civil service system.” Sen. Carl Levin (D-Mich.), a key member of the Senate Armed Services Committee, claimed Pentagon officials had ignored the wishes of labor unions on the matter.

The Pentagon relented and scrapped plans for activating the system in 2004. Rumsfeld made Navy Secretary Gordon R. England the DOD point man in a new and more open attempt to overhaul the personnel system. England immediately slowed down the process, scheduled town-hall style meetings and focus groups with defense employees, and established working groups from each service and defense agency.

“When we are ready, we will do it, and not before,” England told an audience of Pentagon workers last July. He said rollout of NSPS will be “event-driven, not time-driven.”

Under the new approach, some DOD civilians will transition to the new system in three large chunks, known as spirals, beginning in summer 2005. In July, 60,000 workers will begin the transition, and another 240,000 will be added over the next 18 months to complete the first spiral.

Once those employees are moved into the new system, the Pentagon will assess the system, make necessary changes, and move toward adding remaining employees under spiral two. The Pentagon must get OPM approval to move its remaining civilian workers to NSPS. Assuming that OPM gives its assent, the conversion will be completed by January 2008.

Mary Lacey, the Defense Department’s program executive officer for NSPS, said in a prepared statement to spiral one workers that “we will gain experience with the procedures we put in place, and I am counting on you to provide feedback in identifying any improvements as we implement the system to the entire workforce.” A list of those employees and organizations in spiral one is available at http://www.cpms.osd.mil/nsps/SpiralOneActivities.html.

Eventually, the Pentagon will add a third spiral that will put tens of thousands of workers at defense research labs under the new system. Congress has currently prohibited those workers from participating in NSPS, although many already are governed by special pay and personnel rules.

Speigel said the step-by-step implementation of NSPS is modeled on the “spiral development” method used to develop complex weapon systems. Under that approach, systems are fielded incrementally and are upgraded as new capabilities come on line. Speigel expects NSPS to change as pilot programs play out and more workers are affected.

Specifics Yet To Come

The Pentagon has yet to release specifics of how the new system will be constructed. In the fall, the Pentagon did publish the “Requirements Document for National Security Personnel System,” which lays out guiding principles and parameters.

“The overarching mission objective of NSPS is to place the right civilian employee in the right job with the right skills at the right time and at the right cost,” stated the requirements document. “The NSPS system must allow rapid adaptation of the civilian workforce composition to meet changes in mission requirements.”

The document laid out six key performance parameters:

•High performing workers and managers should be compensated and retained, based on performance and contribution to the mission.

•The workforce should be agile and responsive to handle changing missions.

•Workers and managers should understand and have access to the system to ensure credibility and trust.

•The system must be fiscally sound, so managers can make salary decisions and set personnel budgets.

•Training programs and information technology systems must be established for managers and workers.

•The system must be operational and stable by no later than November 2009.

The most significant change will be the elimination of the General Schedule for classifying and paying employees. The GS pay table, long a staple of federal employment, places workers in one of 15 pay grades, depending on their job responsibilities. Within those grades, employees move up 10 salary “steps,” based on how long they’ve been in the job.

For example, an Air Force white-collar supervisor might be rated in a GS-11 position, which paid in Fiscal 2004 $44,621 to $56,707 a year, with the exact amount depending upon how long the employee has been in that position. Employee raises are tied to the annual pay increase authorized by Congress and regional cost of living pay adjustments made by the Office of Personnel Management. Pay scales are standard across the federal government.

In other words, said Speigel, “The outstanding employee is paid the same as the average employee.”

Under NSPS however, DOD will abolish the General Schedule’s narrow pay grades and steps and place employees into one of a handful (three to five) of broad pay categories. The so-called “pay bands” would group employees by job occupation and allow the Defense Department to offer a wide range of salaries without regard for longevity.

The Pentagon believes a more flexible system will make it far easier to award top performers and offer higher pay to those coming in from outside government.

Return to the example of the Air Force GS-11 supervisor. Under a system of pay banding, he or she might be eligible for a salary ranging from $40,000 to $75,000, depending on skills and job performance. The employee’s pay raise would be determined after an annual performance review and not by a rigid increase for all federal workers.

Managers Must Manage

Sharon Seymour, associate director for NSPS, said supervisors will be asked to manage a pool of personnel dollars. “Typically, supervisors have not had to deal with civilian pay,” she said, adding that a big challenge will be teaching supervisors how to negotiate salaries, develop personnel budgets, and evaluate employees.

Spiegel said, “Managers are going to have to manage employees.”

Employees will no longer be evaluated on a pass-fail basis. Managers will judge an employee’s strengths and weaknesses and how close he or she has come to meeting specific goals in annual performance reviews. Workers will receive pay raises beyond annual governmentwide adjustments, based on whether they meet those goals.

“If pay remains stationary,” added Speigel, “then [an employee] is not performing well.”

Seymour said employees will be more fairly rewarded under the new system. Moreover, they will also find it easier to win a promotion.

In the traditional system, promotions between grades take months because of paperwork and job-posting requirements. By broadening career fields, managers will be able to more easily move employees to new jobs without extensive personnel actions.

The NSPS Web site (http://www.cpms.osd.mil/nsps) cites pay banding as a way to give government workers salaries that are more competitive with the private sector.

The OPM Web site notes several pilot programs, known as personnel demonstration projects, which link pay to performance that could serve as models for NSPS. These include:

•The Navy demonstration project at China Lake Naval Air Warfare Center. There, employees meet with supervisors twice a year to set performance goals and then receive or fail to receive predetermined pay increases. Started in 1980, Congress made it permanent in 1994.

•The Defense Department’s acquisition workforce program. Employees in various acquisition organizations are rated as “appropriately compensated,” “overcompensated,” or “under compensated” by supervisors, following preset goals. Implementation began in October 1999 for this “contribution-based compensation system.”

•The Air Force Research Laboratory demonstration project. Scientific and technical employees work under a system in which pay is linked to accomplishment of the agency’s mission. The demo started in 1997. According to an AFRL assessment, about 96 percent of the employees in the program were adequately compensated in 2003.

In a January 2004 report, the Government Accountability Office reviewed several pay banding projects and said pay banding should be expanded throughout the federal government. “How it is done, when it is done, and the basis on which it is done can make all the difference,” GAO found.

No Panacea

Diane M. Disney, Pentagon civilian personnel chief in the Clinton Administration, warns against viewing pay-for-performance as a “panacea.” She said managers must have the “backbone” to give honest performance evaluations; otherwise they risk raising personnel costs by giving all employees raises for meeting basic goals.

“There has to be a big emphasis on the evaluation system,” she warned. “Without that, pay banding won’t reach its potential.”

Labor unions, meanwhile, have criticized the pay-for-performance initiative discussed for NSPS.

Brian DeWyngaert, executive assistant to the AFGE president, said at OPM’s 2004 Federal Workforce Conference in Baltimore that pay-for-performance systems are “anti-employee” and warned they would create turmoil in the workforce. He said DOD civilians trust the current system and wondered whether they would ever get raises under the new system.

“Why do we want to go to a pay system where everything is secretive?” DeWyngaert asked.

The International Federation of Professional and Technical Engineers union sent brochures to Congress last fall warning about implementing a pay-for-performance system. They included written accounts from defense workers who have participated in pilot personnel demonstration programs.

Gary E. Phetteplace, a scientist at the Army Corps of Engineers Cold Regions Research and Engineering Lab in New Hampshire, wrote: “The pay-for-performance plan we participated in for four years did nothing to force federal employees to prove their worth due to the fact that it had no performance metrics. The appraisals by the supervisors were entirely subjective, and the employee is left with no specifics upon which to appeal and the taxpayers are left with no assurances of performance.”

Already, DOD has begun using some new hiring flexibility and workforce-shaping authorities it was granted under the reform package in 2004.

The Pentagon now can hire retired civilians for hard-to-fill jobs without those workers losing federal pensions. Retirees have been reluctant to take defense jobs because their salaries had to be offset by the income they received from federal pensions. Now, they can receive a full salary and full retirement benefits.

DOD also now can hire up to 2,500 “highly qualifed experts” for up to five years (with a possible one-year extension) for full-time, part-time, or intermittent work outside normal pay and personnel rules. Salaries could range from $125,000 to $136,900, depending on issues ranging from labor market conditions to the candidate’s experience. The move is meant to make it easier for the Department of Defense to hire top private-sector workers, who would otherwise have to take a big pay cut to work for the government.

Aside from streamlining hiring, the legislation enables DOD to eliminate workers it no longer needs. Congress made permanent the Pentagon’s authority to offer annual buyouts of up to $25,000 to as many as 25,000 defense workers and make unlimited use of early retirement. The Pentagon will use the new provision to cut unneeded jobs and add new positions without swelling the ranks of the civilian workforce.

Labor Union Issue

The most contentious issues concern not pay but the role labor unions will have in representing defense workers and employee rights in appealing management action. Congress has given the Pentagon wide latitude in redefining how it works with labor unions and streamlining the employee appeals processes.

The Pentagon has proposed several options for overhauling labor management relations and employee appeals, including:

•Limiting what can be bargained over by unions and putting time limits on negotiations between the Defense Department and unions, to avoid delays in carrying out national security missions.

•Requiring the Defense Department to bargain only with national unions, rather than hundreds of local unions when proposing changes that impact all defense civilians.

•Changing how labor disputes are resolved by either creating a new organization to resolve them or requiring existing agencies, like the Federal Labor Relations Board, to make quicker decisions and consider DOD’s national security mission.

•Changing how employee appeals of management actions are decided, by either streamlining current systems, such as the governmentwide Merit Systems Protection Board, or building a new one for DOD cases.

Speigel said that bargaining with a single national union rather than hundreds of smaller unions saves time. The Defense Department has about 40 national unions with about 1,150 local branches at military bases around the globe. He noted that, when the Pentagon began issuing purchase cards, they were instantly issued to the military, but distributing them to civilians took far longer because rules for their use had to be negotiated with each local union.

Speigel emphasized that local unions will not be completely left out of bargaining sessions. He said that, on issues that have an impact on specific bases, they’ll still have a say.

Federal unions, however, have attacked those proposals, claiming the Defense Department wants to minimize the role of unions and eliminate the right of an employee to challenge managers. A coalition of more than 30 unions with defense workers has formed the United DOD Workers Coalition and is urging members to go to town hall meetings and question the changes.

AFGE has run radio advertisements on stations near military bases. Don Hale, a civilian worker at West Point, N.Y., says in one radio spot, “DOD is driving a plan to break our union, gut our pay, and replace our dedicated workers with unreliable private contractors and political patronage hires. Without question, the critical support for our military will be weakened.”

DOD has countered those charges, noting that it has held nearly monthly meetings with union leaders to discuss proposed changes. As of mid-October, defense officials said they had held more than 100 focus group meetings with more than 1,000 defense civilians at installations around the globe, as well.

Disney gives DOD a mixed review for handling issues concerning labor relations and the appeals process. She said there is no question that the Pentagon should streamline and simplify the appeals processes and suggested that mediation be an option. On bargaining issues, Disney warned against locking out smaller unions.

For his part, England strove to avoid politics at a town hall meeting this summer at the Pentagon. He said the NSPS long-term goal is more straightforward: “We want everybody to go home every night and brag about the great job they accomplished that day. That is what we are trying to accomplish.”