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7 October 2008. Add correction.
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[Federal Register: October 7, 2008 (Volume 73, Number 195)]
[Rules and Regulations]
[Page 58435]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc08-2]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 9901
RIN 3206-AL62
National Security Personnel System; Correction
AGENCY: Department of Defense; Office of Personnel Management.
ACTION: Final rule; correction.
-----------------------------------------------------------------------
SUMMARY: The Department of Defense (DoD) and the Office of Personnel
Management (OPM) published in the Federal Register of September 26,
2008 (73 FR 56344) a final rule governing the operation of the National
Security Personnel System (NSPS), a human resources management system
for DoD, as originally authorized by the National Defense Authorization
Act for Fiscal Year 2004 and amended by the National Defense
Authorization Act for Fiscal Year 2008. This correction document
clarifies the effective date of the final rule.
DATES: Effective October 7, 2008.
FOR FURTHER INFORMATION CONTACT: At DoD, Bradley B. Bunn, (703) 696-
5303; for OPM, Charles D. Grimes III, (202) 418-3163.
SUPPLEMENTARY INFORMATION: In FR Doc. E8-22483, appearing on page 56344
in the Federal Register of Friday, September 26, 2008, the DATES
section should read, ``Effective November 25, 2008.''
Office of Personnel Management.
Charles D. Grimes III,
Deputy Associate Director, Center for Performance and Pay Systems,
Department of Defense.
Bradley B. Bunn,
Program Executive Officer, National Security Personnel System.
[FR Doc. E8-23727 Filed 10-6-08; 8:45 am]
BILLING CODE 6325-39-P
[Federal Register: September 26, 2008 (Volume 73, Number 188)]
[Rules and Regulations]
[Page 56343-56420]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26se08-17]
[[Page 56343]]
-----------------------------------------------------------------------
Part IV
Department of Defense
Office of Personnel Management
-----------------------------------------------------------------------
5 CFR Part 9901
National Security Personnel System; Final Rule
[[Page 56344]]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 9901
RIN 3206-AL62
National Security Personnel System
AGENCY: Department of Defense; Office of Personnel Management.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Defense (DoD) and the Office of Personnel
Management are issuing final regulations governing the operation of the
National Security Personnel System (NSPS), a human resources management
system for DoD, as originally authorized by the National Defense
Authorization Act for Fiscal Year 2004 and amended by the National
Defense Authorization Act for Fiscal Year 2008. This final regulation
governs compensation, classification and performance management under
NSPS. NSPS aligns DoD's human resources management system with the
Department's critical mission requirements and protects the civil
service rights of its employees.
DATES: November 25, 2008.
FOR FURTHER INFORMATION CONTACT: At DoD, Bradley B. Bunn, (703) 696-
5303; for OPM, Charles D. Grimes III, (202) 418-3163.
SUPPLEMENTARY INFORMATION:
Table of Contents
This SUPPLEMENTARY INFORMATION section is organized as follows:
I. The Case for Action
II. The Need for Change
III. Significant Changes to the Original Law
IV. Two Years of Operational Experience Under NSPS
A. Classification
B. Compensation
C. Pay Administration
D. Performance and Pay Pool Management
E. Other Changes
V. Response to Public Comments
A. Major Issues
1. Specificity of the Regulation
2. Collective Bargaining and Labor Relations
3. Performance and Pay Pool Management
4. Influence of Performance Versus Market Factors on Pay
5. Control Points
B. General Issues
C. Issues by Subpart
1. Subpart A--General Provisions
2. Subpart B--Classification
3. Subpart C--Pay and Pay Administration
4. Subpart D--Performance Management
VI. Next Steps
I. The Case for Action
The United States needs a future force that is defined less by size
and more by mobility and swiftness, one that is easier to deploy and
sustain, one that relies more heavily on stealth, precision weaponry,
and information technologies.
With this philosophy established in 2001, DoD set the direction for
the transformation of defense strategy and defense management--the way
DoD achieves its mission. To accomplish this, DoD transformed the way
it leads and manages the people who develop, acquire, and maintain our
Nation's defense capability. Those responsible for defense
transformation--including DoD civilian employees--anticipate the future
and, where possible, help create it. The Department continues to
implement new capabilities to meet tomorrow's threats as well as those
of today.
The National Security Personnel System (NSPS) is a key pillar in
the Department of Defense's transformation. NSPS was established to
provide a flexible and contemporary civilian personnel system that is
essential to the Department's efforts to create and maintain an
environment in which the DoD Total Force thinks and operates as one
cohesive unit.
DoD civilians are unique in Government. They are an integral part
of an organization that has a military function. DoD civilians
complement and support the military around the world in every time
zone, every day. Just as new threats, new missions, new technologies,
and new tactics are changing the work of the military, they are
changing the work of our entire civilian workforce as well. To continue
to support the interests of the United States in the current national
security environment--where unpredictability is the norm and greater
agility the imperative--civilians must be an integrated, flexible, and
responsive part of the Total Force team.
The Federal personnel system in use by much of the Department and
the Federal Government is based on 20th century assumptions about the
nature of public service and cannot adequately address public service
requirements in the 21st century national security environment.
Although this personnel system is based on important core principles,
the principles are manifested in an inflexible, one-size-fits-all
system of defining work, hiring staff, managing people, assessing and
rewarding performance, and advancing personnel. The inherent weaknesses
of this system make support of DoD's mission complex, costly, and
ultimately risky. The pay and movement of personnel is linked to
outdated, narrowly defined work definitions with inadequate means of
making distinctions in pay between high and low performers.
Recognizing this, NSPS is designed to provide a more flexible,
mission-driven system of human resources management that retains core
principles while providing a more cohesive Total Force. Additionally,
the Department's 28 years of experience with transformational personnel
demonstration projects, covering approximately 30,000 DoD employees,
has demonstrated that fundamental change in personnel management
results in individual career growth and opportunities, workforce
responsiveness, and innovation. All of these things multiply mission
effectiveness.
The immense challenges facing DoD today support the continuation of
this civilian workforce transformation. Civilian employees are being
asked to assume new and different responsibilities, take more risk, and
be more innovative, agile, and accountable than ever before. It is
critical that DoD supports the entire civilian workforce with modern
systems--particularly a human resources management system that supports
and protects their critical role in DoD's Total Force effectiveness.
The enabling legislation provides the Department with the authority to
meet this transformation challenge.
More specifically, the law provides the Department and OPM
authority to establish a flexible and contemporary civilian human
resources management system for DoD civilians. The attacks of September
11 and the continuing war on terrorism make clear that flexibility is
not a policy preference. It is nothing less than an absolute
requirement, and it must be the foundation of civilian human resources
management.
NSPS promotes a performance culture in which the performance and
contributions of the DoD civilian workforce are more fully recognized
and rewarded. The system provides the civilian workforce a contemporary
pay-banding construct which includes performance-based pay. This allows
for the establishment of more competitive salaries and the ability to
adjust salaries based on various factors, to include labor market
conditions, performance, as well as changes in employee duties.
In other words, NSPS provides a more flexible HR management system
to attract skilled, talented, and motivated people, while also
retaining and improving the skills of the existing workforce. The
system retains the core values of the civil service while
[[Page 56345]]
allowing employees to be paid and rewarded based on performance,
innovation, and results. It also provides employees with greater
opportunities for career growth and mobility within the Department. DoD
leadership will ensure that supervisors and employees understand NSPS
and can function effectively within it.
The NSPS pay and classification system provides a more flexible
support structure that helps attract skilled and talented workers,
retain and appropriately reward current employees, and create
opportunities for civilians to participate more fully in the total
integrated workforce. A pay-banding structure replaced the artificial
limitations created by the previous pay and classification systems.
With broad pay bands, the Department is able to move employees more
freely across a range of work opportunities without being bound by
narrowly described work definitions. The pay structure is more
responsive to market conditions. The Department is able to adjust rate
ranges and local market supplements based on variations relating to
specific occupations, rather than using a one-size-fits-all approach.
Labor market conditions also are considered when making pay-setting
decisions. As prescribed in the enabling legislation, NSPS better links
individual pay to performance using performance rather than time on the
job to determine pay increases.
Despite the professionalism and dedication of DoD civilian
employees, the limitations imposed by the Governmentwide Federal
personnel system often prevent managers from using civilian employees
effectively. This causes the Department to sometimes use military
personnel or contractors when civilian employees are the best choice to
accomplish the task. The Federal personnel system limits opportunities
for civilians at a time when the role of DoD's civilian workforce
includes more significant participation in Total Force effectiveness.
NSPS generates more opportunities for DoD civilians by providing an
incentive for managers to turn to them first when certain vital tasks
need doing. This frees uniformed men and women to focus on matters
unique to the military.
A key to the continued success of NSPS is ensuring that the system
is perceived as being fair, i.e., establishing a trust between
employees and supervisors. The Department's mission cannot be
accomplished without the civilian workforce. NSPS recognizes that
employees more readily exercise personal responsibility and sustain a
high level of individual performance and teamwork when they perceive
that the system and their supervisors are fair. The Department and the
Office of Personnel Management have addressed fairness in NSPS in
several dimensions: system design; the right to seek review of
important categories of management decisions; workforce access to
information about system provisions, processes, and decisions criteria;
and accountability mechanisms.
NSPS regulations and implementing issuances include safeguards
against arbitrary actions. Examples include written performance
expectations, multi-level reviews of performance plans expectations and
performance rating and payout decisions, and mandatory within-grade
increase buy-in for all employees who are moved to NSPS via management-
directed actions. In addition, NSPS continues employees' and labor
organizations' rights to challenge or seek review of key decisions. For
example, non-bargaining unit employees will be able to request
reconsideration of their job objective rating or their rating of record
through an administrative grievance procedure. Bargaining unit
employees use a negotiated grievance procedure to challenge matters
related to their rating of record. Employees must be notified in
advance of a proposed adverse action, be given time and opportunity for
reply, and be given a decision notice that includes the reasons for the
decision in accordance with Governmentwide adverse action and employee
appeal rules. Labor organization officials may file unfair labor
practices claims or grievances. Labor organizations may seek collective
bargaining on NSPS implementation under Governmentwide labor relations
rules.
The Department and Components make information about NSPS rules,
policies, and practices readily available to the workforce in the form
of published regulations, published implementing issuances, local level
instructions, training, and other sources.
The last dimension of accountability for fair decisions and
practices under NSPS builds on human capital management mechanisms
beyond NSPS, and on internal NSPS provisions. First, there are human
resources management accountability reviews within the Department that
identify and address issues regarding the observance of merit system
principles and regulatory and policy requirements, including those
established under NSPS. In addition, the Department monitors the
outcomes of administrative and negotiated grievances, performance
rating reconsiderations, equal employment opportunity complaints, and
whistleblower complaints to correct chronic problems and particular
failings.
Second, NSPS program evaluation findings enable the Secretary and
the OPM Director to determine whether the design of NSPS and the
pattern of its results meet statutory requirements like fairness and
equity and the specific performance expectations for a credible and
trusted system. Section 9901.107 of this rule identifies the
requirement for an NSPS program evaluation. A robust and long-term NSPS
program evaluation plan of studies and reviews, transactional data
analyses opinion surveys, and other evaluative methods has been
fielded.
Fairness in NSPS is not a specific thing, but rather an intrinsic
quality built into the design of a flexible human resources management
system--one to be accounted for during reviews and evaluations of NSPS
operations and decisions.
II. The Need for Change
The Department's experience operating under the current NSPS
regulations as well as the 28 years of experience with transformational
personnel demonstration projects, covering nearly 30,000 DoD employees,
has shown that fundamental change in personnel management has a
positive impact on individual career growth and opportunities,
workforce responsiveness, and innovation; all these things enhance
mission effectiveness.
Public Law 108-136 amended title 5, United States Code, to provide
the Department with the authority to meet this transformation challenge
through development and deployment of NSPS. Public Law 110-181, while
amending Public Law 108-136, continues to promote a performance culture
in which the performance and contributions of the DoD civilian
workforce are linked to strategic mission objectives and are more fully
recognized and rewarded. It also retains flexibilities to streamline
the method for classifying positions and to provide a more flexible
support structure for both pay and classification in order to help
attract skilled and talented workers; retain and appropriately reward
current employees; respond to DoD mission requirements; and create
opportunities for employees to participate more fully in the total
integrated workforce. The System offers the more than 181,000 currently
covered employees a contemporary pay banding construct, which includes
performance-based pay. NSPS allows the Department to be more
[[Page 56346]]
competitive in setting salaries and to adjust salaries based on factors
such as labor market conditions, performance, and changes in duties.
The updated HR management system rules more specifically govern how
retained classification, compensation, and performance management
flexibilities will be implemented. The greater level of detail reflects
a continued commitment to greater transparency regarding provisions of
Pub. L. 110-181 and system improvements in light of operational
experience with NSPS. The System retains the core values of the civil
service, including merit system principles and veterans' preference,
and allows employees to be paid and rewarded based on performance,
innovation, and results.
III. Significant Changes to the Original Law
The original NSPS statute was enacted on November 24, 2003, and
provided the Secretary of Defense, in regulations jointly prescribed
with the Director of OPM, the authority to establish a flexible and
contemporary civilian personnel system called the National Security
Personnel System. This new civilian personnel system was intended to
cover most of the approximately 700,000 DoD civilian employees,
including blue-collar employees.
Among its features, it provided authority to establish a pay-for-
performance system that recognizes and rewards employees based on
performance and contribution to the mission; a new pay-banding system
to replace the General Schedule (GS); a simplified job classification
process and flexible processes to assign new or different work;
streamlined hiring processes and the ability to offer more competitive,
market-sensitive compensation; improved workforce shaping procedures
that reduce disruption with greater emphasis on performance as a factor
in retention; expedited disciplinary and employee appeals processes for
faster resolution of workplace issues, while preserving due process
rights of employees; and a labor-management relations system that
recognized DoD's critical national security mission and the need to act
swiftly to execute that mission, while preserving collective bargaining
rights of employees. The changes to labor relations included the
ability to negotiate at the national level instead of negotiating with
more than 1,500 local bargaining units, and the ability to establish a
new independent third party to resolve labor relations disputes in DoD.
The National Defense Authorization Act of 2008 (Pub. L. 110-181,
January 28, 2008) amended 5 U.S.C. 9902, retaining authority for
performance-based pay and classification and compensation
flexibilities, but substantially modifying other NSPS authorities. The
law, among other things--
Brings NSPS under Governmentwide labor-management
relations rules.
Excludes Federal Wage System (blue collar) employees from
coverage under NSPS.
Requires DoD to collectively bargain procedures and
appropriate arrangements for bringing DoD bargaining unit employees
under NSPS prior to conversion of these employees.
Brings NSPS under Governmentwide rules for disciplinary
actions and employee appeals of adverse actions.
Brings NSPS under Governmentwide rules for workforce
shaping (reduction in force, furlough, and transfer of function).
Requires that this regulation be considered a major rule
for the purposes of section 801 of title 5, United States Code, with
advance Congressional reporting for OPM/DoD jointly-prescribed NSPS
regulations.
Gives these regulations the status of Governmentwide rules
for the purpose of collective bargaining under chapter 71 when these
rules are uniformly applicable to all organizational or functional
units included in NSPS.
Mandates that all employees with a performance rating
above ``unacceptable'' or who do not have current performance ratings
receive no less than sixty percent of the annual Governmentwide General
Schedule pay increase (with the balance allocated to pay pool funding
for the purpose of increasing rates of pay on the basis of employee
performance).
Limits NSPS conversions to no more than 100,000 employees
per year and eliminates the requirement for the Secretary of Defense to
determine if the performance management system meets key parameters
before increasing NSPS coverage to more than 300,000 employees.
Based on the changes Public Law 110-181 made to section 9902 of
title 5, the revised rule deletes subparts E, F, G, H, and I (dealing
with staffing, workforce shaping, adverse actions, appeals, and labor
relations, respectively) of the current NSPS regulations.
Public Law 110-181 also amended section 9902 by modifying the
authority to conduct national-level bargaining and retains the rights
of employees to organize, bargain collectively and participate through
labor organizations of their own choosing in decisions that affect
them, subject to any exclusion from coverage or limitation on
negotiability established pursuant to law. It extends and expands
exclusions from NSPS coverage for certain DoD laboratories through
October 1, 2011. Some of these laboratories operate under demonstration
project authorities which provide their own pay-for-performance
systems.
In establishing the revised System, only certain provisions of
title 5, United States Code, may be waived or modified by DoD and OPM:
Chapter 43 (dealing with performance management);
Chapter 51 (dealing with General Schedule job
classification);
Chapter 53 (dealing with pay for General Schedule
employees and pay for certain other employees), except for certain
sections for which waiver or modification is barred by law; and
Subchapter V of chapter 55 (dealing with premium pay),
except sections 5544 (dealing with prevailing rate employees) and 5545b
(dealing with firefighter pay).
Finally, Public Law 110-181 has a significant effect on the content
of the current regulations governing NSPS. Previous legislation
authorizing NSPS permitted the promulgation of regulations outlining a
framework for NSPS. Implementing issuances provided the detail lacking
in the regulatory framework. Taken together, the regulations and the
implementing issuances formed the structure of NSPS. However, Public
Law 110-181 eliminated the previous legislation's exclusive statutory
collaboration process for employee representatives to participate in
design and implementation of NSPS. Public Law 110-181 mandated the
Governmentwide labor relations system in title 5, chapter 71, for NSPS
and conferred the status of Governmentwide rule on regulations
governing NSPS. Given these new provisions, much of the structure of
NSPS must be established in regulation, rather than through the
collective bargaining process, for purposes of uniformity and
consistency of the operation of NSPS, much like the Governmentwide
regulations that establish the structure of the General Schedule.
IV. Two Years of Operational Experience Under NSPS
In order to provide consistency and uniformity of application
throughout the Department, certain NSPS features
[[Page 56347]]
previously described in DoD implementing issuances have been
incorporated into this regulation. DoD now has more than 2 years of
experience with these features and has determined that they effectively
support key performance parameters of NSPS. In addition, the regulation
includes modifications made to NSPS as a result of operational lessons
learned over the last two years.
A. Classification
Effective Date of Classification of Position
The regulation now provides specific details for entitlement to
retroactive effective date of a classification decision. While the
prior regulation provided for both a classification reconsideration
process and a retroactive effective date, more detail has been added to
provide for a uniform and consistent application.
B. Compensation
The regulation modifies rules governing the current compensation
structure by removing the link between increases in the minimum rate of
the rate range and across-the-board increases. This change enables more
flexibility in responding to labor market changes that may impact the
lower end of a pay range for an occupation, but not the middle or upper
ranges. Also, discretionary authority is now provided to give targeted
general salary increases to designated occupational series within a pay
band. This flexibility enables management to adjust pay to recognize
market forces when the pay band itself is market competitive but, due
to rapidly changing markets, the current salaries paid to employees in
certain occupations are not.
C. Pay Administration
Several changes have been made in the area of pay administration.
Pay-setting flexibilities have been expanded to permit discretionary
within-grade increase buy-ins when employees from outside of NSPS move
to an NSPS position. Safeguards have been incorporated for employees
who are moved to NSPS via management-directed actions. In these cases,
the regulation now specifies a required within-grade increase buy-in. A
significant level of detail has been added to describe how pay is
administered upon promotion, reassignment, reduction in band and
appointment to the Federal service. Most of this detail reflects the
pay-setting rules that have proven effective during the past 2 years in
the operation of NSPS.
The regulation retains management's flexibility to set pay within a
given range, but provides safeguards by placing limitations on the
factors management may use in exercising its discretion as well as
establishing pay increase limits that cannot be exceeded without
higher-level review. There have also been some modifications to pay-
setting practices based on DoD's experience with the System. Most
significantly, pay-setting rules for employees moving into NSPS from
other systems or moving from NSPS positions covered by targeted local
market supplements have been revised. Pay for these employees was
previously set using ``base salary.'' Pay will now be set using
``adjusted salary'' (includes base salary plus any applicable locality
pay, special rate supplement, or other equivalent supplement) and any
physicians' comparability allowance payable for the position held prior
to the reassignment. In these cases, when the new position is in a
different location, a geographic pay conversion will be processed.
These rules allow management to set pay more competitively and
equitably compensate employees by permitting pay to be set in a manner
that prevents a loss in adjusted salary in certain circumstances.
Further changes in NSPS pay-setting rules include the discretion to
adjust the rate of pay of a teacher moving into NSPS up to 20 percent
to take into account the shorter work year incorporated in the annual
rate of a teacher paid under 20 U.S.C. 901.
Pay Retention
Pay retention rules have been modified to provide a ``grandfather''
clause for employees who are covered by General Schedule grade and pay
retention rules at the time they are converted into NSPS. These
employees will not be subject to the 104-week limit on pay retention.
They will be entitled to pay retention indefinitely, subject to
specifically identified pay retention termination events. Much detail
has been added in the area of pay retention to identify circumstances
for which pay retention is mandatory, eligibility requirements for
optional pay retention, and events leading to termination of pay
retention. These rules reflect current practices under NSPS.
Accelerated Compensation for Developmental Positions (ACDP)
``Treatment of Developmental Positions'' (Sec. 9901.345) has been
modified to specify criteria for Accelerated Compensation for
Developmental Positions (ACDP) increases, identify the range of pay
increases that are permitted under this discretionary authority, and to
expand the discretionary use of ACDP to employees in developmental or
trainee level positions assigned to the lowest pay band of a
nonsupervisory pay schedule and trainee level positions or positions
assigned to the Student Career Experience Program. To date, this
authority has been available only to employees in developmental or
trainee level positions in professional and analytical occupations. The
change provides additional flexibility in recognition of pay
progression patterns in other occupations.
Premium Pay
A critical feature of NSPS compensation is the ability to modify
premium pay in response to current and future needs. This flexibility
facilitates the Department's ability to accomplish its diverse mission.
The revised regulation incorporates rules governing NSPS premium pay.
Premium pay includes pay such as overtime pay, compensatory time off,
holiday, Sunday, and standby pay. Among the premium pay features unique
to NSPS are on-call premium pay for health care personnel in specified
circumstances, pay for weekend duty for health care personnel, and
foreign language proficiency pay. For the most part, the regulations
reflect current premium pay policies under NSPS, which include certain
modifications to the standard title 5 premium pay laws and regulations
to address unique DoD mission requirements and differences in the NSPS
classification and pay structure.
Conversion/Movement Out of NSPS
Regulations have been added to provide a process for converting
employees out of NSPS when their position is removed from coverage
under the System and to provide a ``virtual GS grade'' to employees who
leave their NSPS position to accept employment in a General Schedule
position. These rules promote more equitable pay setting upon moves to
the General Schedule pay system.
D. Performance and Pay Pool Management
Higher Level Review
The revised regulation more specifically outlines safeguards to
ensure the NSPS performance and pay pool management system is fair and
equitable based on employee performance. For example, under subpart D,
the revised regulation now
[[Page 56348]]
provides for a higher level review of performance expectations and
recommendations for ratings of record, share assignment, and payout
distribution. This review helps ensure that assigned employee
objectives are reviewed for appropriateness and consistency within and
across the organization and/or pay pool as well as employee ratings,
share assignments, and payout distribution. These safeguards help
ensure equity in performance payouts.
Calculating Annual Payout
Rating levels, share assignment ranges, and rounding rules for
conversion of raw performance scores are also specified in the revised
regulation, as well as formulas for share values and calculation of
performance payouts. The language also clarifies the intended
application of a common share value (expressed as a percent of pay)
throughout an entire pay pool, to include all sub pay pools. This
further preserves equity across a pay pool.
Flexibility in Extending Performance Appraisal Periods
The authority to extend individual performance appraisal periods to
enable employees to complete minimum periods is specified as well as
limitations on this authority. By specifically providing for extension
of individual rating cycles, valued performers and higher-performing
employees moving to NSPS positions can more quickly benefit from the
NSPS performance-based pay features.
Pay Pools
The pay pool concept has also been further defined in this
regulation by providing parameters for pay pool composition and
specifying the roles of pay pool officials within the pay pool process.
Much thought was given to achieving the ``right'' balance between
safeguards and management flexibility. For example, although pay pool
share ranges have been specified for each rating level, management
still has the flexibility to determine assignment of shares within that
range. System safeguards were added to ensure fairness, equity, and a
performance focus by expressly stating and limiting the factors which
may be used in the determination of share assignment. Similarly,
management still retains the flexibility and authority to determine the
distribution of a performance payout between base salary increase and
bonus or a combination thereof. However, to ensure safeguards within
the system, the factors management may use in exercising this authority
have also been expressly defined and limited to ensure fairness,
equity, and a performance focus. While pay pool funding is still
determined by management, higher-level reviews have been required to
provide internal controls. Additional safeguards added include a
uniform approach to handling performance payouts for employees who
leave a pay pool after the end of the performance period, but before
the date of the payout. Finally, to promote transparency of the pay
pool process, a requirement has been added for organizations to share
with employees the average rating, ratings distribution, share value
(or average share value), and average payout (expressed as a percentage
of base salary) at the completion of the performance payout process.
Reconsideration Process
Employee performance reconsideration opportunities have been
expanded to permit reconsideration of individual performance objective
ratings in addition to the overall rating of record. This change
recognizes that many pay pools use raw performance scores as a guide in
determining how many shares to assign to employees. Since raw
performance scores may be impacted by individual performance objective
ratings, the ability to request review of individual performance
objectives enables employees to seek redress on all performance rating
decisions affecting their pay.
E. Other Changes
Other changes reflected in this regulation include language
providing salary increases for employees who did not meet the minimum
period of performance due to an approved paid leave status or
performance of labor activities on ``official time.'' These pay
adjustments will be based on the modal rating of a pay pool. Likewise,
provisions have been made to adjust the pay of employees returning from
temporary assignments outside of NSPS or returning from long-term
training for which no NSPS performance plan was assigned. These changes
ensure that employee pay is not harmed by the inability to meet a
minimum performance period or inability to rate performance while
employees either exercise statutory leave entitlements or fulfill other
roles important to the organization.
Finally, the regulations in subpart D (dealing with performance
management) permit limited coverage under NSPS pay-setting and
classification flexibilities for employees who are appointed for less
than 90 days. Providing access to NSPS pay-setting flexibilities for
these positions enhances DoD's competitive position in the labor market
when hiring temporary employees for 90 days or less.
V. Response to Public Comments
A. Major Issues
The proposed rule was published in the Federal Register on May 22,
2008. The public comment period concluded June 23, 2008. In response to
the proposed rule, the Department received 526 comment submissions
during the 30-day public comment period. In reviewing the comment
submissions, we discerned several recurring themes that spanned
multiple sections of the proposed regulation. Major issues identified
included: (1) Specificity of the regulation; (2) collective bargaining
and labor relations; (3) performance and pay pool management; (4) the
influence of performance versus market factors on pay; and (5) control
points. Because these issues are critical to understanding the
objectives of NSPS, as well as its implementation, we have given them
particular attention in the following sections of this Supplementary
Information.
1. Specificity of the Regulation
A significant issue raised in the public comments concerned the
level of specificity in the proposed regulation. Some commenters,
pointing to a lack of detail regarding specific issues, such as
performance management, sought more specificity in the proposed
regulation itself as opposed to the Department providing future
direction in implementing issuances, which are not open to public
comment. However, many of the commenters who weighed in on this issue
argued that the proposed regulation is too specific. Commenters
suggested that the increased level of detail was written into the
proposed regulation not to improve the clarity of the regulation, but
to preclude negotiation with labor organizations. Labor organization
representatives argued that because DoD, under the National Defense
Authorization Act for Fiscal Year 2008 (NDAA 2008), no longer has
authority to establish a labor relations system under its control, the
Department is attempting to write regulations as narrowly as possible
to avoid the collective bargaining process.
Interestingly, during the public comment period for the 2005
regulation, a large number of commenters recommended that the
regulation include far greater specificity, with
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numerous commenters stating that they were unable to provide
substantive comments without more information. Some additional
specificity was written into the final 2005 regulation in response to
these comments, but it retained its original goal of establishing a
general policy framework to be supplemented by detailed implementing
issuances.
This regulation of necessity includes more specificity than the
2005 regulation in order to preserve uniformity and consistency of
application of NSPS in the changed statutory environment created by
Public Law 110-181. The uniform and consistent application of NSPS is
important to ensure equitable treatment of all employees, whether
bargaining unit or non-bargaining unit; for ease of movement of
employees across components and organizations; and to achieve
efficiencies in support systems such as automated performance
management tools and training. Public Law 110-181 restored the
Governmentwide labor relations coverage of title 5, chapter 71, to NSPS
employees and conferred the status of Governmentwide rule upon this
NSPS regulation. It also removed the statutory collaboration process
which ensured uniformity and consistency and was the exclusive process
for employee representative involvement in the design and
implementation of NSPS. Given those provisions, OPM and DoD concluded
the 2005 regulatory framework and detailed implementing issuance
construct created unwarranted risk to the goal of uniform and
consistent application of NSPS to both bargaining unit and non-
bargaining unit employees. With much of the operational core of NSPS in
its implementing issuances subject to collective bargaining, we
concluded the likely outcome of bargaining over the various components
of NSPS would be multiple versions of NSPS for bargaining unit
employees (there are more than 1,500 local bargaining units in DoD) and
one NSPS for non-bargaining unit employees. Therefore, OPM and DoD
chose to incorporate sufficient detail in this regulation, under the
legislative grant of Governmentwide regulation status, to preserve the
uniformity and consistency of a single NSPS. The regulation provides a
standardized, yet flexible, DoD NSPS environment that promotes the
growth of all employees and improves management's ability to manage the
workforce. Labor organizations still retain collective bargaining
rights regarding NSPS under title 5, chapter 71. In fact, labor
organizations may seek to collectively bargain implementation of NSPS
prior to implementation for bargaining unit employees to the same
extent bargaining occurs on implementation of other Governmentwide
regulations across the Federal Government.
2. Collective Bargaining and Labor Relations
In addition to their concerns on how the specificity of the
regulations affects the collective bargaining rights, labor
organizations made numerous comments in each subpart that various
matters should be subject to collective bargaining under 5 U.S.C.
chapter 71. In some cases these matters are not subject to collective
bargaining today for bargaining unit employees outside NSPS as such
matters are covered by law. In other cases, these matters are limited
in collective bargaining because they are covered by Governmentwide
regulations encompassing these employees. There were also various
suggestions to include language throughout the regulations that
collective bargaining rights exist on certain specified matters, even
where the scope of collective bargaining rights is actually more
limited than what is suggested by the labor organizations.
DoD is committed to fulfilling its obligation to bargain in good
faith consistent with Governmentwide labor relations rules under 5
U.S.C. chapter 71 and the requirements of 5 U.S.C. 9902 and section
1106(b) of Public Law 110-181. However, it is appropriate that the
Department seek uniformity and consistency in its NSPS employment
practices through issuance of regulations. We do not believe it is
necessary to repeat throughout the regulations a statement regarding
any statutory collective bargaining rights and have not adopted the
suggestion. This does not occur today in other Governmentwide
regulations or agency policies. However, we have added a clarifying
general statement in subpart A regarding collective bargaining
obligations prior to converting bargaining unit employees to NSPS.
3. Performance and Pay Pool Management
Background
The Department designed NSPS to be a robust performance management
system in recognition of the increased importance of performance in
making pay and retention decisions. NSPS uses a multi-level appraisal
system that makes distinctions in levels of employee performance and
links employee achievements, contributions, knowledge, and skills to
organization results. NSPS also allows the Department to better
recognize and support team contributions and accomplishments. The
System ensures that performance expectations are clearly communicated
to employees and are linked to the organization's strategic goals and
objectives. This provides the ability to recognize valid distinctions
in performance and reward employees based on those distinctions, which
will foster a high-performance culture within the Department.
NSPS modifies the way DoD employees are paid. NSPS bases individual
pay increases on performance instead of primarily on tenure and time-
in-grade, i.e., the emphasis is on quality of results achieved as
opposed to length of experience. In addition, this system is far more
market-sensitive. Both of these goals are met through the changes in
the classification, pay, and performance management systems.
We believe the Department's pay-for-performance system is essential
to DoD's ability to attract skilled and talented workers; retain and
appropriately reward current employees; respond to DoD mission
requirements; and create opportunities for employees to participate
more fully in the total integrated workforce.
Performance and pay pool management inspired a large number of
comments during the public comment period. In fact, many commenters
raised issues that related to both subparts C and D, since pay
administration and performance management are so closely aligned. In
reviewing the comments that addressed aspects of performance management
under the proposed regulation, we identified seven recurring issues.
These issues are addressed in the following paragraphs.
Fairness
Many commenters expressed concerns about fairness in operation of
the NSPS performance management system. Whether they characterized
their concern as ``favoritism,'' ``cronyism,'' ``nepotism,'' or the
euphemism ``good ol' boy'' system, commenters expressed concerns that
NSPS could or would present opportunities for unfairness within the
performance appraisal and overall performance management system. These
commenters feared supervisors and Pay Pool Managers would assign
ratings based on personal preferences and relationships unrelated to
performance.
From the beginning, NSPS was designed to be consistent with
specific
[[Page 56350]]
guiding principles. Among the principles emphasized in the performance
management process are fairness, credibility, and transparency, as well
as adherence to merit system principles. The regulation establishes
many safeguards--or checks and balances--specifically designed to guard
against favoritism, cronyism, and unfair practices.
First and foremost, the performance management system design
features uniform performance criteria across NSPS (see SC 1940 of NSPS
implementing issuances). By using uniform criteria, NSPS ensures
employees performing similar categories of work are evaluated using the
same tools of measurement. To ensure that the measurement tools are
interpreted consistently across the organization and in a manner free
from favoritism, cronyism, or other inappropriate consideration, NSPS
provides multiple-level reviews of recommended ratings, share
assignments, and payout distribution determinations. Not only does the
supervisor/rating official offer a recommended rating of record based
on an overall assessment of the employee's accomplishments (Sec.
9901.412(b)), but these recommended ratings receive a higher-level
review--a requirement identified and added to the revised regulation in
Sec. 9901.412(c) and made effective via implementing issuances.
Following the higher-level review, a panel of senior leaders (i.e., the
Pay Pool Panel) reviews and reconciles ratings within a pay pool (Sec.
9901.412(f)). In reconciling ratings, share assignments and payout
distribution recommendations, the panel compares the employee's
accomplishments (via supervisory assessments and optional employee self
assessments) to job objectives and standard rating criteria to ensure
that the same understanding of performance criteria has been applied to
employees across a pay pool. The Pay Pool Panel considerations do not
include a pre-established distribution of ratings as a factor in
determining the rating of record. This is because NSPS regulations also
prohibit forced distribution of ratings (Sec. 9901.412(a)). As opposed
to a forced alignment of employee ratings against a particular
distribution pattern, employee performance reflects a measurement of
``what'' an employee accomplished (and ``how'') against standardized
performance measurements. The employee also has a voice in how his or
her work is viewed via the opportunity to write a self-assessment of
what was accomplished by the employee and in what manner objectives
were achieved during the performance cycle. Such assessments become
part of the record that is forwarded to the higher-level reviewer and
Pay Pool Panel. Checks and balances such as those described above form
the safeguards for fairness and equity built into the regulation and
the performance management system.
As with the multi-level review for employee ratings of record, NSPS
also provides for reviewing performance plans at multiple levels.
First, supervisors are responsible for making sure that performance
objectives accurately reflect an employee's work and for engaging
employees in that determination (Sec. 9901.406). Employees participate
in the development of performance expectations via conversations and
written communication with their supervisors (Sec. 9901.406(g)).
Second, there is a review of performance expectations at a higher level
to ensure that assigned employee objectives are consistent and
equitable with similar positions within and across the organization
(Sec. 9901.406(h)).
In addition to the checks and balances outlined in the preceding
paragraphs, NSPS contains four other important features intended to
contribute to the sustainment of a fair, credible, and transparent
system. First, supervisors and managers will be held accountable in a
specific job objective for effectively managing the performance of
employees under their supervision and will be assessed and measured on
their performance against this objective (Sec. 9901.406(d)). There is
a connection between administration of the performance management
system and supervisory performance ratings and, consequently, a
supervisor's pay. Second, DoD is committed to extensive training, both
initial and ongoing, for supervisors, managers, and employees so that
they understand the requirements of the performance management system.
For supervisors and managers, in particular, training is focused on how
to establish and communicate performance expectations, how to assess
employee performance, and how to appropriately translate that
assessment into pay adjustments. Third, there are various review and
evaluation processes designed to monitor the implementation of NSPS and
identify inconsistent, unfair treatment of employees so that these
situations, if they occur, can be remedied in a timely manner. As a
final check and balance, employees may also request reconsideration of
ratings of record as well as ratings for individual job objectives
under Sec. 9901.413.
To ensure that employees are treated fairly, there are rules to
guard against arbitrary actions, enable employees to challenge or seek
review of key decisions, and for setting up accountability mechanisms.
All of these safeguards and checks and balances are monitored during
regular and recurring reviews and evaluations of NSPS at multiple
levels within the Department.
Uniformity and Consistency
Some commenters questioned whether performance would be measured
uniformly and consistently among pay bands, occupational areas, and
Components. While there is opportunity for some aspects of
implementation of NSPS performance management to be handled flexibly to
accommodate different circumstances, NSPS is designed to ensure
uniformity and consistency in the most important core features of
performance management. For example, the regulation mandates a uniform
summary rating level pattern (Sec. 9901.405(b)(5)) and share
assignment range for each rating level (Sec. 9901.342(f)), and it
provides common formulas for determining the share factor value and
payout within each pay pool (Sec. 9901.342(g)).
The NSPS implementing issuances and NSPS performance tools further
institutionalize uniformity and consistency via the establishment of
standardized NSPS performance measures applied across NSPS. For
example, NSPS uses standardized performance criteria, which evaluate
``what'' was accomplished (also known as performance indicators), as
well as standardized contributing factors and benchmark descriptors,
which serve to measure ``how'' an objective was accomplished (SC 1940).
The use of standardized criteria and rules helps to ensure consistency
across NSPS.
Transparency
Several commenters expressed concern that ratings and performance
payout determinations are made ``behind closed doors,'' and commenters
questioned whether the NSPS system meets its stated goal of
transparency. While it is true that Pay Pool Panels deliberate in
private, this is necessary to protect the privacy of employees as
individuals as well as to provide an atmosphere for robust performance
management discussion. Nevertheless, there are a number of requirements
in the system that helps preserve transparency outside of the pay pool
deliberation. The regulation adds language to specify requirements for
sharing of pay pool information to NSPS
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employees (Sec. 9901.342(g)(10)). In addition, through implementing
issuances (SC 1940), NSPS requires notice to employees of additional
pay pool related information. This information may include the
membership and composition of the pay pool to which the employee
belongs; projected pay pool funding amounts; rules for making share
assignment and payout distribution determinations; percentage of pay
pool funding to be applied to bonuses versus increases to base salary;
criteria for Organizational Achievement Recognition (OAR) awards;
identity of Pay Pool Manager, Pay Pool Panel members, and Performance
Review Authority; and performance indicators and contributing factors.
The regulation also specifies that performance expectations (e.g., job
objectives) must be communicated to employees in writing (Sec.
9901.406(b)). Performance measurement criteria are available to all
employees through Web sites (e.g., http://www.cpms.osd.mil/nsps) and
agency implementing issuances. The regulation adds greater detail to
performance and pay pool management (such as specifying number of
rating levels (Sec. 9901.405(b)(5)), rounding rules for raw
performance scores (Sec. 9901.405(b)(6)), share ranges (Sec.
9901.342(f)), factors that may be considered in making a share
assignment or payout distribution determination (Sec. 9901.342(g)),
share value and payout formulas (Sec. 9901.342(g)), minimum criteria
for eligibility for a performance payout (Sec. 9901.342), as well as
identification of and procedures for performance payouts for specially
situated employees not previously covered in the regulation (Sec.
9901.342(i)-(l)).
Premium on Good Appraisal Writing Skills
A few commenters expressed concern that the NSPS system rewards
those who can write well, not necessarily those who perform best.
Commenters believe that employees who have difficulty communicating
their accomplishments in a self-assessment will be at a disadvantage in
comparison to good writers, even if their performance level actually
exceeds that of the good writers. Another commenter expressed concern
that employees are required to write their own appraisals. The written
employee self-assessment is optional and is just one of many components
of the NSPS performance management system. Another component of the
performance management system is that each rating official also
prepares a written assessment of employee performance. One of the
system safeguards that helps ensure employees are not adversely
affected by the ``written word'' is the requirement that Pay Pool
Panels afford a rating official the opportunity to provide further
justification before the panel changes a recommended rating of record
(Sec. 9901.412(f)). This requirement provides an opportunity for
further explanation as well as that presented in writing. Additionally,
to assist both employees and rating officials in the development of
written assessments, DoD has developed and made available both
classroom and Web-based writing classes (see ``iSuccess'' training at
http://www.cpms.osd.mil/nsps/training.html). Also, DoD has made
available guidance in the form of writing tips and ``lessons learned''
by other organizations that have implemented NSPS to help employees and
rating officials write effective self-assessments, performance plans,
and performance assessments.
Finally, mock pay pool exercises offer both employees and rating
officials the opportunity to practice their writing skills. A mock pay
pool exercise is a way for organizations to understand the pay pool
process. During the exercise, employees may submit written self-
assessments and rating officials may submit supervisory assessments for
consideration by the pay pool panel. Pay pool panels can communicate
back to both rating officials and employees the value of those
assessments to the appraisal process and make suggestions on how to
write such assessments more effectively. Also through mock pay pools,
organizations identify ways to improve their process to achieve greater
consistency and ensure fairness in ratings and payouts. Past experience
has shown that these exercises improve not only participants'
familiarity with the process, their understanding of the various
aspects of the pay-for-performance system, and the quality of their
decisions, but also their writing skills in the context of the
performance management system.
Differences Between Grade-Based Systems and NSPS in Rewarding
Performance
Commenters noted that the proposed regulation allows organizations
with wage grade workers and NSPS employees to reward performance
differently, which could result in inequities. We assert differences do
not necessarily result in inequities. Without doubt, there are
differences between the design of the NSPS personnel and performance
award system and the Federal Wage System (FWS) personnel and
performance management systems. These differences with the FWS existed
even when NSPS positions were still covered by the General Schedule
(GS). They are a result of overall differences in the compensation
systems. For example, GS grades have 10 steps, with waiting periods
from one to three years between steps. Each step represents
approximately a 3 percent increase in base pay awarded primarily based
on seniority. The FWS has only five steps, but much shorter waiting
periods (six months to two years) and larger increases (approximately 4
percent increase in base pay). Like the GS, the FWS also awards steps
primarily based on seniority. The basis for pay progression under both
GS and FWS systems is primarily a combination of seniority-based pay
progression in the form of step increases, promotions, and cost of
labor (e.g., locality pay). Performance pay, when awarded, is typically
paid out via bonuses. In contrast, the design of the NSPS compensation
and classification architecture has no step increases and fewer
promotions. The express purpose of this design decision is to redirect
pay, formerly paid out based, in part, on seniority, toward rewarding
and encouraging performance (i.e., performance-based pay). Therefore,
under NSPS, pay progression primarily occurs via performance-based
increases. In the absence of step increases and promotions to grades
that no longer exist, NSPS applies civilian pay increase dollars that
would have been expended on those pay progression methods to
performance-based increases and Accelerated Compensation for
Developmental Positions (ACDP). In redirecting the seniority-based and
promotion-based pay increases under the General Schedule to performance
pay, it is appropriate that performance awards under NSPS be greater
than performance awards under systems that do not redirect step
increases and promotions associated with more defined levels of work to
performance. The differences between NSPS and grade-structured systems
are simply differences rather than inequities. Therefore, we made no
attempt to align NSPS performance rewards to those of other personnel
systems. In so doing, we reiterate the belief that Congress and the
American people expect their public employees to be paid according to
how well they perform, rather than how long they have been on the job.
Another commenter expressed an equity concern that NSPS employees
may be disadvantaged over General Schedule employees where there is
internal competition for reassignment
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and promotion to other positions. In particular, the commenter
expressed a belief that the NSPS performance appraisal system creates
an impression that an employee with a ``3'' as his or her last rating
of record is inferior to a GS employee with all Level 9's. Despite
inconsistencies in rating scales across the government (to include
pass/fail, NSPS, and 3 and 4 level rating systems, etc.), the
employee's record of accomplishment along with appropriate employment
references and a copy of the aggregate NSPS rating distribution
(available via NSPS web site) should serve to inform prospective
employers of the value of a NSPS Level 3 rating of record.
Communication of Performance Expectations
Commenters also noted that the proposed regulation does not place
enough accountability on supervisors to communicate performance
expectations. One commenter noted that the proposed regulation does not
explicitly require the supervisor to notify the employee of performance
expectations. Yet Sec. 9901.406 of the proposed regulation very
explicitly states the requirement to communicate performance
expectations to employees prior to holding the employee accountable for
them (``Performance expectations will be communicated to the employee
in writing, prior to holding the employee accountable for them.'').
That section further states: ``Performance expectations that comprise a
performance plan are considered to be approved when the supervisor has
communicated the performance plan to the employee in writing.'' In
addition to the employee requirements stated in Sec. 9901.406(c),
Sec. 9901.406(d) states that performance expectations of supervisors
and managers additionally will include assessment and measurement of
how well supervisors and managers plan, monitor, develop, correct, and
assess subordinate employees' performance. Inasmuch as the ``planning''
phase of performance management is considered to incorporate
development and implementation of subordinate employees' performance
plans and those plans, per the regulation, are only considered approved
once communicated to the employee in writing, the regulation does in
fact hold supervisors and managers accountable for communicating
performance expectations.
Perceived Administrative Burden
Some commenters objected to the amount of time and resources needed
to administer NSPS, particularly the performance management component.
Commenters cited the amount of paperwork required under NSPS and the
limitations of the NSPS Performance Appraisal Application (PAA) tool.
We agree that the design of NSPS and the safeguards built into the
system result in increased time demands, especially during the start-up
years. However, DoD's experience with Personnel Demonstration Projects
indicates that the amount of time required for the same tasks levels
off and even decreases as the organization gains experience with the
pay pool process. Additionally, as experience and efficiency increase,
organizations tend to parlay the process of reviewing individual
performance into an examination and driver of overall organizational
performance, thus increasing the return on their investment of time.
Consequently, we have not altered the requirements, believing that the
end result is fairness and consistency--key objectives of NSPS--and the
ability to further individual as well as organizational performance.
Another commenter indicated that there are an insufficient number of
characters available in the PAA to adequately provide self assessment
information. We continuously evaluate the PAA tool to improve it to
better meet user needs. We have addressed many of the initial
limitations of the system and are currently reviewing changes to other
features such as the limitation on the number of characters that users
can enter into various fields.
4. Performance Versus the Influence of Market Factors on Pay
While a number of commenters supported the idea of a performance-
based pay system, some commenters were less supportive of the
consideration of non-performance-related factors when setting pay.
These commenters objected to the weight given to factors other than
performance. For example, one commenter stated: ``The factors used in
determining if [employees] get a raise or a bonus are * * * complicated
and * * * have nothing to do with performance. Employees have no
control over many of these factors, which include attrition rates,
shortages of skills, and labor market. Obviously, this really isn't a
true pay-for-performance system.'' In response to this comment--and the
many commenters who expressed similar concerns about the use of factors
other than ``performance'' in setting pay--we acknowledge that it is a
misperception that compensation under NSPS is based solely on
performance. From its inception, NSPS was designed to emphasize both
performance pay and compensating employees based on market factors. In
the Supplementary Information for the 2005 regulation we said the
following about the new system: ``The pay structure will be much more
responsive to market conditions'' and ``Labor market conditions will
also be considered when making pay-setting decisions. As prescribed in
the enabling legislation, the new compensation system will better link
individual pay to performance * * * ''. We also said: ``As the
Department moves away from the General Schedule system, it will become
more competitive in setting salaries and it will be able to adjust
salaries based on various factors, including labor market conditions,
performance, and changes in duties.''
The NSPS compensation system, first described in the 2005 NSPS
regulation, is designed to fundamentally change the way employees in
the Department are paid. First, it allows DoD, after coordination with
OPM, to define occupational career groups and levels of work within
each career group that are tailored to the Department's missions and
components. Second, it gives DoD considerable discretion, after
coordination with OPM, to set and adjust the minimum and maximum rates
of pay for each of the pay schedules and pay bands within those career
groups based on national and local labor market factors and other
conditions. Instead of ``one size fits all'' pay rates and adjustments,
NSPS allows DoD to customize those adjustments and optimize valuable
but limited resources. This kind of flexibility, which is lacking under
the GS and FWS pay systems, enables DoD to allocate payroll dollars to
the occupations and locations where they are most needed to carry out
the Department's mission. At the same time, NSPS is a system that
balances linking individual pay to performance and aligning positions
both internally based on position classification and externally based
on labor market.
The NSPS classification, compensation, and performance management
structures are designed to act in tandem to achieve two significant
objectives: Reward performance and pay employees consistent with
current national and local market conditions. As a result, beyond
providing a system for rewarding performance, NSPS is structured to be
far more responsive to applicable labor markets than grade-based
systems and provides the flexibility needed to quickly adjust to a
constantly changing labor market. Some of the mechanisms by which NSPS
responds to applicable markets are
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decisions involving setting the pay of employees initially hired into
NSPS positions, payout distributions between base salary and bonus,
establishment of control points, establishment of targeted local market
supplements, targeted general salary increases, and the adjustment of
pay band minimums and maximums. By utilizing contemporary pay practices
to establish a market-sensitive system, DoD is better able to establish
itself as an attractive employer in a competitive environment.
Under NSPS, DoD has created a system that allows the flexibility
necessary to consider both market factors and performance in making
compensation decisions. As a result, DoD is in a better position to
attract, retain, and reward a workforce that is able to meet the high
expectations set for it by the Department's senior leaders for the
purpose of accomplishing the Department's mission--the defense of our
nation.
5. Control Points
A number of commenters expressed concerns about control points.
Many perceived them as inappropriately limiting employees' potential
for salary growth in a pay-banded system where pay is expected to be
based on performance. They felt the full pay band salary range should
be accessible to every employee in a band and advanced the argument
that control points effectively cap a top performer at the control
point, subverting the goal of a pay-for-performance system. Others
opined that by establishing control points, the merit system principle
of equal pay for equal work has been thwarted. The concept of control
points is not inconsistent with the goals of a pay-for-performance
system which, from the initial design phase of NSPS, envisioned a
greater link between pay decisions and an individual's performance.
While a statutory requirement exists for NSPS to better link
individual pay to performance, the NSPS performance-based features are
not intended to result in ``performance'' trumping all other factors
that may be considered in setting pay and pay progression. Unlike the
GS and FWS pay systems, which compensate employees primarily on a
seniority basis, NSPS requires that many factors be considered in
setting pay. For example, the statutory requirements for NSPS specify
that the system shall ``not waive, modify, or otherwise affect the
public employment principles of merit and fitness'' set forth in 5
U.S.C. 2301, ``* * * including the principles of * * * equal pay for
equal work.'' Inasmuch as the merit system principle of ``equal pay for
equal work'' further requires that equal pay should be provided for
work of equal value, ``with appropriate consideration of both national
and local rates paid by employers in the private sector and appropriate
incentives and recognition * * * provided for excellence in performance
[italics added] * * *'', managing pay using either or both market and/
or performance-based control points makes sound business management
sense and is consistent with statutory requirements.
Another key requirement of NSPS is that it be ``flexible and
contemporary.'' While compensation structures prior to the 1980's were
primarily aligned to highly structured classification systems, the need
to compete for talented employees who possess the knowledge, skills,
abilities and/or competencies associated with 21st century technologies
and industries essential to the DoD national security mission requires
a shift in emphasis to a market-sensitive compensation strategy in
order to respond to quickly changing labor markets. Therefore, NSPS
regulations governing control points allow management to consider and
balance a variety of factors, in addition to performance, in
determining rates of pay and salary progression through a pay band.
Control points represent one tool that can be used to manage
employees' progression through the bands and can help ensure that only
the highest performers move to the upper range of a pay band. Control
points also allow management to account for variances in position
responsibilities within a pay band. This allows the Department to set
pay more consistently with the labor market and to be more effective in
attracting and retaining top performers. In fact, several of the DoD
demonstration projects have successfully used control points in their
pay-for-performance systems.
Sometimes, higher parts of a pay band are reserved for the highest
of performers; at other times, parts of the pay band are reserved for
work or skill combinations not easily acquired for which the labor
market pays a higher rate of pay and which management has identified as
being important to organizational performance. Therefore, for pay
progression to occur beyond an established control point, the employee
must meet certain criteria, such as specific work assignments,
acquisition of particular competencies, and/or a rating of record at a
particular level. With one exception, the restriction on receiving pay
increases once a control point is reached is no different from the
restriction on increases in basic pay a General Schedule employee
experiences once he or she reaches the maximum step of his or her
grade. The one exception to this analogy is that the General Schedule
employee must be promoted in order to pass the step 10 or maximum rate
of the pay range for the grade. In contrast, an NSPS employee may move
past a control point subject to meeting the criteria associated with
passing that control point.
Control points also provide management with the latitude needed to
positively impact a variety of pay decisions, such as starting rates,
rate ranges, and the size and mix of performance payouts. Control
points manage pay progression to reflect duties and responsibilities,
labor markets, and/or performance. DoD requires that control points be
applied consistently to similar positions in the same pay band and
career group within a pay pool.
A commenter noted that ``pay bands with control points are the GS
scale by another name.'' Some control points may indeed be similar to
the GS grade structure. This may merely reflect a common labor market
between the positions assigned those control points and the General
Schedule system. As stated earlier, however, there is considerably more
room for pay progression within a band than within a GS grade. NSPS
employees may move more easily from control point to control point
within their assigned band, or other comparable bands. Additionally,
unlike the General Schedule employee who reaches the step 10 of his or
her GS grade, an employee with a Level 3 or higher rating of record is
guaranteed a share of the pay pool and any amount in excess of the
control point (or the top of the pay band, if applicable) is paid out
as a bonus.
Another individual noted that control points can be a factor in
determining whether a performance payout is awarded as a bonus or a
base salary increase, which could have the effect of reducing
retirement benefits, since bonuses are not counted toward retirement in
retirement calculations. As under the General Schedule, performance
bonuses under NSPS do not count toward retirement. However, they are a
means of recognizing and paying for performance when an employee is not
eligible for further increases in pay.
One labor organization representative suggested that control points
may delay advancement for employees in one band compared to employees
in another band even though both employees perform at the same level.
This is true. Under
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NSPS, employees performing similar levels of work may be compensated
quite differently based on type of work, competencies required, or
level of performance. This was also true under the General Schedule.
For example, GS-13 pilots at one time received a special rate of pay
that was approximately 30 percent higher than the rate GS-13 employees
in other occupations received. This difference in rates reflected
differences in staffing difficulties and labor markets between
different occupations.
Another labor organization representative noted that we state that
the Secretary will determine control points when previously this
function was delegated to Components. They believe this is an attempt
to limit their ability to bargain and take away a flexibility
previously delegated by DoD to its own managers. We note that the
Secretary is ultimately responsible for decisions involving NSPS, and
authority is provided to the Secretary throughout the regulation to
make these decisions. However, the day-to-day operation of many
features may be delegated to the Components, including determining
control points. These delegations will be provided in implementing
issuances. Concerns about collective bargaining rights have been
addressed under ``Collective Bargaining and Labor Relations'' located
under ``Major Issues''.
Other commenters suggested that if control points must exist,
language should be inserted in the rules to the effect that control
points will increase at the same time that rate ranges are adjusted and
by an equivalent percentage. However, the basis for decisions driving
the establishment of control points may not always mirror adjustments
in rate ranges. No change has been made to the regulation in response
to these comments. Nevertheless, it should be noted that whether or not
control points are adjusted consistent with rate ranges, control points
do not bar increases to base salary due to across-the-board NSPS
general salary increases under Sec. 9901.323(a)(1).
Another commenter suggested that, because control points are a
somewhat foreign concept to most employees and will likely be viewed as
incompatible with the pay band concept, additional information about
the reasons for and need for control points might be helpful, either in
the Supplementary Information for this regulation or the implementing
issuances. Consequently, we have taken care to elaborate on responses
addressing comments concerning control points and will continue to
examine other means of providing a greater understanding concerning the
use of control points.
Finally, another commenter noted that ``budget'' should be added to
the list of factors to consider when establishing a control point and
noted that adding this factor is consistent with information provided
in the Table of Changes for Sec. 9901.321(c) for the proposed
regulation, which listed budget as a factor. In fact, we have
determined that a budget or cost factors should absolutely not
influence the setting of control points. We have not adopted this
suggestion.
B. General Issues
We received some comments which were not aimed directly at the
substance of the proposed regulation but which we felt should be
addressed.
One commenter noted that in the SUPPLEMENTARY INFORMATION of the
proposed regulations (73 FR 29898) we certify, in accordance with the
Paperwork Reduction Act of 1995, that this proposed regulatory action
will not impose any additional reporting or recordkeeping requirements
under the Act. The commenter asserted that this is an improper
statement since it means that the new NSPS pay pool decisions and with
it the monies that the pay pool will be ``playing with'' and dividing
among employees will have no records concerning how the decisions were
made. The commenter stated that this is especially worthy of
recordkeeping if the Pay Pool Panel makes pay and award decisions that
are different from those of the rating official and higher-level
reviewer. The commenter said that these records seem extremely
necessary since the pay pool is distributing taxpayers' money and
because they ensure the application of equal treatment of pay for job
performance. Actually, the Paperwork Reduction Act applies to the
burden placed on the public by Government agencies in gathering
information related to the agencies' missions. It does not pertain to
the generation of records within the agency. Rating officials and Pay
Pool Panels will, in fact, generate records associated with the rating
and pay pool processes.
Another commenter requested that we allow noncompetitive temporary
promotions for 180 days instead of 120 days. This comment relates to
NSPS staffing provisions which we did not address in the proposed
regulation. The original NSPS statute, Public Law 108-136, permitted
the Department and OPM to modify certain OPM staffing regulations,
including the 120-day limit on temporary promotions, but the currently
governing statute does not.
One commenter expressed concern that the proposed regulation does
not include references to applicable 5 CFR regulations, thus requiring
users to review and study both the Federal Register rules and the 5 CFR
regulations to determine which apply to a particular situation. This
individual stated that it would be better if the NSPS regulations had
the applicable sections from 5 CFR included so that there is a single
reference source. In response, we note that the NSPS regulations
published in the Federal Register are ultimately incorporated into 5
CFR and the section(s) referenced in the Federal Register become the 5
CFR reference(s) (e.g., Sec. 9901.101 in the Federal Register becomes
5 CFR 9901.101). To the extent that the comment was intended to
recommend inclusion of 5 CFR language in lieu of a cross reference when
one has been provided, we note that references allow for application of
revisions to those sections without change to this regulation in the
event the language in the referenced section is modified. Therefore,
cross references to 5 CFR sections covering the General Schedule
continue to be incorporated in the final rule.
A labor organization representative articulated apprehension with
the fact that an employee's performance payout can be provided as a
salary increase, a bonus, or a combination of the two, potentially
resulting in each person's pay being different and, thereby, greatly
multiplying the workload of administrative staffs and the Defense
Finance and Accounting Service. The representative stated that
previously there were standard pay increments, but now each employee's
pay is different, requiring more time to process actions, raising the
possibility of more errors, and requiring increased staff to correct
the errors, all of which conflicts with DoD's recent staff
consolidations and downsizing initiatives to reduce overhead costs. It
is true that employees will no longer be paid at fixed step rates but,
rather, may have their pay set at numerous points within their pay band
rate range as a result of many different decisions based on various
factors. To the extent possible, pay actions will be programmed to
occur through an automated process. For example, general salary
increases and most performance payouts will occur through an automated
process. Many other pay decisions, however, will require manual
intervention because it is not possible to program the many potential
pay-setting variations. With the flexibility of pay banding come the
challenge and the
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responsibility for setting pay correctly and minimizing errors.
However, both sufficient training for all personnel involved in NSPS
pay setting and the establishment of adequate review processes prior to
finalizing pay actions will create the expertise associated with pay-
setting decisions as well as mitigate error rates.
Several comments were received related to various issues involving
reassignments and promotions. Several commenters observed that, since
many movements that were formerly promotions under the GS system are
now processed as reassignments in the NSPS pay banding environment, the
financial enticement for taking on a new assignment is not as great as
in the past. Another commenter stated that in addition to the higher
salary received upon promotion, the promotion itself is a prestigious
event, insinuating that the lack of promotion opportunities in a pay-
banded system is detrimental to employee self-esteem. One commenter
declared that being reassigned instead of promoted is ``unfair'' and
``cheats'' those who qualify for higher-level positions. This commenter
further believes that this practice discourages employees from
accepting an NSPS position and will force young, energetic employees to
leave DoD for agencies operating under the old system. Others commented
that reassignments and promotions can occur noncompetitively without
other employees even being made aware of vacant positions. Some of
these commenters asserted that employees would be placed in high-level
positions without required knowledge, skills, and abilities simply
because they are someone's close friend. Another employee asked that we
change the proposed rules to permit a fair process for notifying
employees of promotion opportunities because a model employee might not
have a chance to compete because they do not belong to an association,
do not participate in community work, or fish with the boss. Still
another commenter alleged that the system will effectively eliminate
certain groups of employees from obtaining promotions based on the
supervisor's personal feelings toward those people.
By law, and by design, NSPS does not waive, modify, or otherwise
affect the public employment principles of merit and fitness set forth
in section 2301 of title 5 (merit system principles) or any provision
of section 2302 of title 5, relating to prohibited personnel practices.
At the same time, NSPS is designed to be a modern, contemporary,
flexible, and agile human resources management system to help DoD meet
the national security challenges of the 21st century. The NSPS
classification system recognizes ranges of difficulty in various
organizational and work situations, allowing for natural progression
from entry/developmental to journey and expert levels of work, and
provides broad-banded pay that offers employees greater advancement
opportunities. NSPS pay bands combine a range of work into one discrete
pay band level--each individual or single pay band level normally
encompasses work formerly performed at one or more GS grade levels.
This structure permits employees to move more easily, i.e., be
reassigned, between different positions or assignments within their
assigned pay band or to positions in comparable pay bands. It also
results in fewer ``promotions'' than under the GS system.
NSPS is a performance-based pay system; the primary method of pay
progression with a pay band is the performance payout. Under NSPS,
employees have the opportunity, based on performance, to move more
rapidly through a salary range than they may have had under a previous
system. In many cases, they may have additional earning potential.
Additionally, NSPS provides other pay incentives. For example,
employees in pay band 1 of the nonsupervisory pay schedules may receive
an Accelerated Compensation for Developmental Positions payment as
described in Sec. 9901.345. In addition to regular performance
payouts, high-performing employees may receive additional performance
increases that reward extraordinary individual performance,
organizational or team achievement, or for other special circumstances.
Employees are also eligible to receive chapter 45 incentive awards.
Unlike the GS system, NSPS employees may also receive reassignment base
salary increases of up to 5 percent in accordance with the rules at
Sec. 9901.353. When employees are promoted to a higher-level pay band,
they are entitled to a more significant base salary increase of at
least 6 percent and may receive an increase of up to 12 percent, or
more, in accordance with the rules at Sec. 9901.354. While many
studies have indicated that employees are motivated by more than money
to accept challenging work, we think the potential to progress
financially in a pay-banded system, without being constrained by a
``one-size fits all'' design, will be accepted and welcomed by high-
performing employees. We acknowledge, however, that this may take some
time.
With respect to the comments regarding competitive versus
noncompetitive movement, as with the GS system, many NSPS positions to
which employees are reassigned are advertised; however, some are not.
As under the GS system, some reassignments are done competitively if
the position the employee will be reassigned to ultimately leads to a
position in a higher full performance pay band (i.e., a higher-level of
work under the NSPS classification architecture). Whether a position is
advertised or not, employees who are reassigned to another position
must be qualified for the position, unless they are reassigned as a
result of reduction in force procedures and qualification requirements
are waived.
C. Issues by Subpart
1. Subpart A--General Provisions
Subpart A defines the roles and general characteristics of the
National Security Personnel System (NSPS). This subpart describes who
is eligible for coverage under NSPS, identifies the authorities and
responsibilities of OPM and DoD for administering and implementing the
system, and defines key terms used through the regulation.
Section 9901.101--Purpose
Section 9901.101 explains the overall purpose of the regulation in
5 CFR part 9901, which is to implement a human resources management
system as authorized by section 9902 of the National Defense
Authorization Act for Fiscal Year 2008 (NDAA 2008). Section 9901.101
states various guiding principles and key operational characteristics
and requirements. It also describes who is eligible for coverage under
NSPS, identifies the authorities and responsibilities of OPM and DoD
for administering and implementing the system, and defines key terms
used throughout the regulation.
Labor organization representatives stated that the process of
issuing a regulation prior to any bargaining does not meet the intent
of Congress. The law requires DoD to honor collective bargaining
obligations prior to any decision to implement NSPS for bargaining unit
employees. The law also requires the Department honor national
consultation rights under 5 U.S.C. chapter 71 for any proposed rule
before it becomes final. Collective bargaining does not occur prior to
national consultation and only occurs after the proposed rule becomes
final and if a decision is made to implement for bargaining unit
employees. DoD and OPM have met the requirements of law and the intent
of Congress in issuing these regulations.
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Labor organization representatives expressed concern that the
requirement in Sec. 9901.101(a) to establish implementing issuances to
supplement any matter in the regulation excludes input from the Office
of Personnel Management (OPM) and prevents collective bargaining. They
also stated that the Department has published these proposed changes
without employee involvement or collective bargaining, contrary to the
requirement at 9901.101(b) that the system be more ``credible and
trusted.'' We received many comments regarding issues surrounding
collective bargaining; we have addressed them more in depth under the
``Major Issues'' section. DoD is committed to fulfilling its obligation
to bargain in good faith on this regulation consistent with
Governmentwide labor relations rules under 5 U.S.C. chapter 71 and the
requirements of 5 U.S.C. 9902 as amended by NDAA 2008 and section
1106(b) of NDAA 2008. The scope of collective bargaining for this
regulation, however, was determined by the statute.
Labor organization representatives expressed concern that the new
regulation incorporates content from implementing issuances developed
under the 2005 regulations. These commenters felt that incorporation of
material from existing issuances into the revised regulation somehow
conflicted with Public Law 110-181 (NDAA 2008). Some commenters
indicated they believed the implementing issuances themselves were no
longer valid due to the passage of that law. While portions of the
implementing issuances became invalid due to the passage of Public Law
110-181, the implementing issuances were left largely intact and valid.
To the extent the implementing issuances are inconsistent with the
requirements of Public Law 110-181, we have not incorporated that
material into the revised regulation. Revised implementing issuances
were published on June 10, 2008 to implement policy changes and
technical corrections, as well as make revisions based on requirements
of Public Law 110-181. The authority for these issuances extends from
the 2005 regulations, currently still effective where consistent with
Public Law 110-181 (see section 1106(b)(3) of Public Law 110-181).
Since certain modifications in these issuances impact equity with
respect to the treatment of the Department's employees, we considered
the release of the revised issuances crucial. We anticipate that these
issuances will need additional revisions once this regulation is
finalized and published.
Section 9901.102--Eligibility and Coverage
Section 9901.102 sets forth general rules regarding employee
eligibility and coverage under the various subparts of part 9901.
Categories of eligible employees become covered only when the Secretary
affirmatively approves coverage. Under this section, the Secretary has
the explicit discretion to extend or rescind coverage to the
Department's civilian employees.
Commenters objected to Sec. 9901.102(a), stating that there is no
statutory authority in Public Law 110-181 that allows DoD to apply NSPS
to employees covered by anything other than the waivable or modifiable
chapters of title 5, United States Code. We do not agree. The language
at Sec. 9901.102(a)--stating that employees are eligible for coverage
``except to the extent specifically prohibited by law''--does not
permit the Department to convert to NSPS any employees who cannot
legally be covered by NSPS. Section 9901.102(f) describes the special
circumstances under which it would be possible for the Secretary to
extend NSPS coverage to employees who are not in systems established
under the waivable or modifiable title 5 chapters. The Secretary may
extend coverage to eligible employees under subparts B through D to the
extent those provisions are not in conflict with other statutory
requirements. We made no change to the proposed regulations based on
these comments.
Several commenters expressed concern that the newly proposed NSPS
regulation did not adequately define eligible employee groups for
coverage under NSPS. Commenters described Sec. Sec. 9901.102(a) and
9901.102(f) as inappropriately allowing NSPS to be applied to employees
not specifically covered by title 5, including Domestic Dependent
Elementary and Secondary Schools (DDESS) personnel. Another commenter
stated that personnel not explicitly covered under title 5 had
protective rights entitling them to collectively bargain their pay
outside the scope of any NSPS statute. We have not modified the
proposed regulation because it does not permit the Secretary to convert
to NSPS any employee who cannot be legally covered by NSPS. Although
title 10 DDESS educators are authorized to negotiate rates of pay,
including any rates of pay linked to performance, to the same extent
that they could before the enactment of NDAA 2004 as noted in 5 U.S.C.
9902(e)(9) (2008), that does not preclude the Secretary from taking
action to convert them to coverage under NSPS if that is determined to
be appropriate.
Commenters requested we amend Sec. 9901.102(b) to conform to 5
U.S.C. chapter 71 requirements to provide advance notice to labor
organizations regarding the extension of NSPS coverage to specific
categories of employees. Although the proposed regulation was silent on
this matter, the Department is committed to meeting its statutory
obligations under 5 U.S.C. chapter 71 regarding advanced notice and
opportunity to bargain the implementation of any decision to extend
NSPS coverage to bargaining unit employees. The absence of a specific
reference to chapter 71 language does not relieve the Department of its
chapter 71 obligations. For clarification, we have added the following
to Sec. 9901.102(b): ``The Secretary will notify affected employees
and labor organizations in accordance with the requirements of 5 U.S.C.
chapter 71 regarding a decision to extend NSPS coverage to any
bargaining unit employees.'' Any such notices would be provided at the
appropriate level of recognition where the collective bargaining
relationship exists.
Another commenter remarked that Sec. 9901.102(b) was confusing and
that we should rewrite the section to indicate that any category
covered under this paragraph must be covered by all the subparts listed
to be eligible. Similarly, another commenter stated that we should
amend this section by deleting ``one or more subparts'' from Sec.
9901.102(c) and substituting ``subparts B-D''; changing the last
sentence of Sec. 9901.102(e) to state ``The Secretary will notify
affected employees and labor organizations in advance of a decision to
rescind the application to them of subparts B-D''; and deleting from
the first sentence of Sec. 9901.102(f)(1) the words ``one or more
subparts'' and substituting ``subparts B-D.'' The commenter reasoned
that the current proposed language allows employees to be covered by
(1) subparts B, C, and D; (2) subparts B and D; (3) subparts C and D;
or, (4) subpart D. The commenter asserted that, because no apparent
reason exists for this variety of options and the provisions of all of
these subparts are related, employees should be covered by all of them
or none of them. The law requires coverage by a performance management
system that links pay and performance (subpart D); however, the
Secretary has statutory discretion to apply the other subparts (B and
C) to employees once these employees are covered by the NSPS
performance management system. We do not agree and have not changed the
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proposed regulation in response to this comment.
Another commenter noted that Sec. 9901.102(e) does not clearly
state that the Department is under no obligation to notify a labor
organization if the organization is not affected by an NSPS rescission.
This section requires notification to labor organizations when an NSPS
rescission affects bargaining unit employees. While we agree with this
comment, no change to the proposed regulation is necessary.
Commenters stated that we should strike Sec. 9901.102(f),
pertaining to the Secretary's authority to make coverage decisions,
because the NSPS statute does not grant such authority to the
Secretary. This section does not permit the Secretary to convert to
NSPS any employees who cannot legally be covered by NSPS. The language
at Sec. 9901.102(f) is consistent with law and remains unchanged.
Finally, under Sec. 9901.102(b) we have added a requirement
imposed by NDAA 2008 to the end of the first sentence of this paragraph
specifying that no more than 100,000 employees per year may be moved
into NSPS. Also, in Sec. 9901.102(f)(3), we have added a reference to
Sec. 9901.231 and clarified the language found in the proposed
regulations.
Section 9901.103--Definitions
Section 9901.103 provides definitions of terms used in more than
one subpart.
Commenters differed with respect to the degree of specificity in
the definitions. Some commenters stated that some of the new or revised
definitions are too broad and fail to provide enough detail for
important terms. Others considered the definitions misleading because
they are too detailed. One commenter recommended reinserting removed
definitions, even though the terms and subparts to which these
definitions applied have been removed from this regulation. We have not
made changes in response to these comments.
A commenter requested that the definition for appraisal in Sec.
9901.404 be moved to this section and redefined to say, ``Appraisal
means a written assessment of an employee's accomplishment of job
objectives and contributions.'' We have not inserted the definition for
appraisal in this section because the term is not used outside of
subpart D. We have also not changed the definition of this term in
Sec. 9901.404 in response to this comment.
Commenters expressed concern over the lack of consideration for
earning potential in the definition of comparable pay band or
comparable level of work as it applies to classification. The
definition is consistent with the NSPS classification structure.
Comparable pay bands mean a comparable level of work without regard to
the earning potential of the bands because labor markets may drive
different salary ranges for different pay schedules due to differences
in types of work vs. level of work. We have not revised this definition
in response to these comments.
Similarly, one commenter objected to the terms higher level of work
and lower level of work as they relate to movement to an NSPS position
from a non-NSPS (e.g., GS) position. The commenter stated that it was
inappropriate to apply the broad classification criteria associated
with a pay banding system with more narrowly defined non-NSPS
classification criteria. The commenter pointed out that each NSPS
position does have a specific level of difficulty, complexity of
duties, and independence; therefore, it is more appropriate (albeit
impractical) to consider these factors in light of the GS
classification standards in order to determine whether they constitute
a higher or lower level of work. For example, since a GS-9 position is
not comparable in terms of job complexity or qualifications needed,
movement to a YA-2 position that was formerly classified to a GS-13
should be considered a higher level of work, and promotion rules should
apply. This view is completely contrary to the flexibility we have
designed into NSPS and would have the effect of continuing to bind us
to the GS or other more restrictive systems. Therefore, we have not
revised our definition of these terms. However, for clarity, we
modified the last sentence of the definition of these terms, as well as
the last sentence of the definition of comparable level of work, to
say, ``When moving from a non-NSPS position to NSPS, the band of the
NSPS position is determined to be at a [higher, lower, comparable]
level of work than the grade or level of the non-NSPS position based on
application of the NSPS classification structure as described in
implementing issuances.''
One commenter suggested that the word ``behaviors'' be deleted from
the definition of competencies because this term relates to skills, not
behaviors. Another commenter also asked us to revise this term stating
that ``competency'' means capability, not behavior. According to OPM's
Delegated Examining Operations Handbook, a competency is a ``measurable
pattern of knowledge, skill, abilities, behaviors, and other
characteristics that an individual needs to perform work roles or
occupational functions successfully.'' The definition in Sec. 9901.103
is an adaptation of OPM's definition; therefore, we have not revised
this definition in response to the comment.
Another commenter stated that the term contribution is vague and
unnecessary because it is duplicative of the concept of
``accomplishment of assigned work.'' The commenter also said that the
phrase ``or group of employees,'' which appears within the definition,
is improper because performance evaluation properly concerns only an
individual's performance, not a group's performance. An employee's
contribution may go well beyond accomplishing assigned work. The
employee may add value to the finished product by performing a task
exceptionally well or by moving beyond assigned work to produce more
than is required or expected. Similarly, we consider it appropriate to
take into account an employee's role in team contributions when
assessing an employee's overall contribution to the organization. As a
result, we have not removed the term or revised the definition.
Another commenter asked that we add information to the definition
of Pay Pool Manager (PPM) to indicate that the payout distribution
includes salary increases and bonuses, thereby establishing the
agency's approval authority for each type of payment. We agree and have
revised this definition accordingly.
Commenters expressed concern over the broad definition of the term
performance. These commenters stated that performance means ``effort to
accomplish assigned work,'' and they objected to the references to
``demeanor'' and ``attitude'' in the definition of performance, saying
that these requirements are inappropriate absent a genuine nexus
between demeanor and accomplishment of an assignment. These commenters
also stated that any ``behavior'' or lack of ``civility'' or ``respect
for others'' that has no nexus with accomplishment of work assignment,
but is so egregious as to be intolerable in any employee, is a conduct
issue, not a performance issue. We note that the attributes causing
concern are observable behaviors that affect the accomplishment of
assignments, responsibilities, and organizational goals. We believe
performance assessments would not be complete without considering
employees' behaviors in carrying out work assignments. For example,
because customer service is a paramount organizational objective, the
manner in which employees treat customers is an
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important aspect of overall performance. Employee behaviors can be
objectively observed and evaluated against established performance
expectations. Under NSPS, supervisors may consider how underlying
misconduct negatively impacts the execution of an employee's duties,
those of the team, and/or those of the organization to the same extent
such matters may be considered under other performance management
systems. We have not revised the definition for performance in response
to these comments.
Commenters also objected to the definition of unacceptable
performance as being over broad and stating that we should define it as
meaning ``failure to meet a performance expectation that may affect job
retention''--a long-understood meaning of this term. These commenters
recommended that, when defining the work assignment, managers should
state the extent to which work should be done by a particular method or
means, satisfy a particular qualitative or quantitative standard, or be
done with a particular demeanor. We have not revised the definition of
unacceptable performance in response to these comments.
Another commenter requested that the definition of Performance
Review Authority (PRA) be changed to refer to ``official(s)'' to better
indicate that a PRA can be more than one person. We agree and have
modified the definition of PRA to clarify that this entity may be more
than one person.
A commenter suggested the elimination of the mandatory use of
contributing factors in determining performance ratings. In addition,
the use of contributing factors was explained in response to a concern
regarding whether the NSPS system is meeting its stated goal of
transparency. These specific issues are discussed in the applicable
sections of this regulation. Because this term is found in more than
one subpart of the regulation, we moved the definition for contributing
factor from Sec. 9901.304 to Sec. 9901.103 and provided a link to
that section.
Other commenters recommended that the role of the Pay Pool Manager
in the pay pool panel process be clarified. We did so by amending the
definition of Pay Pool Panel to clarify the active membership of the
Pay Pool Manager on that panel.
A commenter suggested that the definition of rating of record in
the proposed regulation did not clearly define the term. We clarified
the definition of rating of record as meaning the final numerical
rating and narrative justification associated with a performance
appraisal. In addition, we revised item (2) under the definition of
this term to reflect that we are referring to an unacceptable rating
``of record.''
Section 9901.105--OPM Coordination and Approval
Section 9901.105 identifies those actions requiring DoD to
coordinate with or request approval from OPM prior to promulgating
certain implementing issuances and certain other actions related to the
ongoing operation of NSPS, where such actions could have a significant
impact on other Federal agencies and the Federal civil service as a
whole.
As described in this section, ``coordination'' entails (1)
providing OPM with an opportunity to review and comment on DoD
proposals and to officially concur or nonconcur with all or part of the
proposals, (2) taking OPM's views into account, and (3) advising OPM of
the final DoD decision, including reasonable advance notice of the
decision's effective date.
Many commenters requested we broaden Sec. 9901.105(c) to require
OPM approval for any action outlined in Sec. Sec. 9901.105(a) through
(e). By design, and in keeping with the statutory objective of
establishing a ``flexible'' system, these regulations give DoD
considerable authority within the regulatory framework. At the same
time, OPM continues to have a role in overseeing the civil service
system and in advising the President on civil service matters,
including matters covered by these regulations. We believe the
coordination and approval roles as defined in this section allow OPM
full latitude to fulfill its responsibilities. To require OPM approval
for every action would undermine the intent to create a flexible
system, especially when the action is in response to a time-sensitive
national security matter. As a result, we have not revised the language
in this section in response to these comments.
Finally, a modification to Sec. 9901.105(b)(9) changes ``general
salary increases'' to ``targeted general salary increases'' in
accordance with revised terminology at Sec. 9901.323(a)(2). This
change was made in response to a comment discussed under that section.
Section 9901.106--Relationship to Other Provisions
Section 9901.106 describes the relationship of the NSPS regulation
to other laws and regulations.
Several commenters expressed concern over the use of the term
``great deference'' in Sec. 9901.106(a)(2), with respect to the DoD
and OPM interpretation of this regulation. Commenters suggested that
this term has legal implications and that the degree of deference owed
to an agency is determined by a court applying judicial precedents, not
an agency's own declaration of the degree of deference that the agency
believes it is owed. Commenters also stated that the provisions of this
regulation will also be interpreted in light of their consistency with
5 U.S.C. chapter 71. The degree of deference courts afford an agency's
interpretation of a statute it administers is well-settled by judicial
precedent. Accordingly, we have removed the sentence addressing
deference from the proposed regulation.
Section 9901.107--Program Evaluation
Section 9901.107 prescribes the Secretary's responsibility for
evaluating the design and implementation of NSPS.
Many commenters questioned the deletion of the employee
representative reference. They expressed concern that not explicitly
including employees or employee representatives in the evaluation
process excludes those on the ground level from that process. Some
commenters expressed concern that, at the least, this omission was
symbolic of a decrease in the importance of employee representatives in
the evaluation process. One commenter suggested reinsertion of the
reference to employee representatives as an explicit recognition of the
importance of employee representatives to the evaluation process. The
removal of the reference to employee representatives does not diminish
their importance to program evaluation; rather, it clarifies that their
participation is not a requirement for evaluation of NSPS.
Commenters also declared that Public Law 110-181 requires reviews
by the Comptroller General under section 1106(c). We note that the
requirements of Sec. 9901.107 are not based on any statutory
requirements. This section places a self-evaluation requirement on DoD
and does not address third-party evaluations of NSPS, such as
evaluations by the Comptroller General. Any obligations that may exist
with regard to labor organizations will be honored consistent with 5
U.S.C. chapter 71, 5 U.S.C. 9902, and section 1106(b) of Public Law
110-181. We believe it is a matter of good management that any agency
implementing a new human resources management system has a
responsibility for evaluating that system so that any problems can be
corrected and improvements made. We have made no change to the proposed
regulation based on these comments.
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One commenter suggested that the evaluation process that has
occurred thus far in the life cycle of NSPS has been less than ideal
and that evaluation teams do not have the power or the authority to
follow up meaningfully on any specific evaluation. To address concern
that NSPS regulations can and will be ignored with respect to the
implementation of specific features, commenters asked that this section
clearly give the NSPS Program Executive Office the responsibility and
authority to investigate, analyze, and appropriately report on
implementation of NSPS and to follow up, as necessary, to address
issues and ensure compliance with the regulation. Another commenter
noted the importance of evaluation of compliance and that evaluation of
program outcomes cannot be a basis for deciding whether or not to
change the regulation unless a proper determination is made as to
whether the outcomes are the result of following or not following the
requirements of the regulation. The commenter suggested that we add the
following language to this section, ``Evaluation will seek to determine
compliance with and the consistency and fairness of the implementation
of the regulations, as well as the effectiveness and employee views of
classification, compensation, and performance management practices.''
The Department's established Human Capital Accountability System
includes compliance-oriented reviews at field activities to ensure that
personnel actions, decisions, and practices adhere to merit system
principles and pertinent regulations, and holds DoD managers and human
resource practitioners accountable for their human capital decisions
and actions. These reviews include decisions and actions under NSPS as
well as other personnel systems covering the non-NSPS workforce.
Sharing NSPS-related information gleaned during accountability system
reviews with the Program Executive Office makes a separate
accountability program or authority unnecessary. Therefore, we have
made no change to the proposed regulation in response to comments
recommending incorporation of compliance reviews.
2. Subpart B--Classification
General Comments
Subpart B covers classification under the NSPS system. This section
waives the current General Schedule classification system for those
eligible for NSPS and outlines the new system for classification. The
new classification system supports merit system principles and removes
constraints of the narrowly defined grades under the General Schedule
classification system.
Some commenters argued that the methodology and procedures for
classifying and establishing jobs under the current regulation are
ambiguous. Another commenter stated that NSPS lacks clear guidelines
and that, in contrast, the GS system had built-in parameters for
establishing pay grades using job factors. Some of these commenters
suggested that NSPS adhere to the broad parameters established for the
General Schedule classification criteria under 5 U.S.C. 5106. These
broad parameters applicable to the General Schedule included the
requirement that duties and responsibilities of the position, level of
difficulty, responsibility and qualification requirements serve as the
basis for determining the appropriate class and grade of a position. We
agree that the regulation would be the appropriate place to provide a
similar level of criteria for NSPS classification determinations. A new
paragraph Sec. 9901.201(b) has been added to address the basis for
determining appropriate classification under NSPS. The new language
reads as follows: ``The basis for determining the appropriate
classification under NSPS is the primary duties and responsibilities of
the position, level of difficulty, occupational qualifications,
competency requirements, mission of the organization, and relationship
of the position to other positions or organizational levels.''
Similar to General Schedule classification and qualification
standards, the specific criteria within the broad parameters for NSPS
position classification and qualification standards and functional
guides are described in an issuance system not incorporated in the Code
of Federal Regulations. While some commenters understood that the
classification criteria would be further defined and clarified in
implementing issuances, they objected to this approach because
issuances are not subject to public comment. These commenters suggested
that the NSPS classification program is less transparent and credible
as a result. The same commenters tended to uphold the General Schedule
classification system as a more transparent and credible system.
Nevertheless, the NSPS classification system is modeled in transparency
after the General Schedule. Neither the GS nor the NSPS classification
system publishes classification criteria through the Federal Register
process. As a result, agencies can respond more quickly to evolving
mission, technologies, and work methods applicable to Federal service
occupations. The Federal Register process, including the public comment
period, slows the ability of the agency to establish and implement
classification standards in a timely manner. For this reason, both DoD
and OPM opt to use other methods to engage stakeholders and solicit the
input of the agency and professional and employee organizations. Once
classification criteria are established, both the NSPS and GS systems
provide transparency by making criteria available to the DoD population
and the public sector at large via the Internet and the agency issuance
system. Those classification standards established for NSPS can be
found on the NSPS Web site at http://www.cpms.osd.mil/nsps as well as
at numerous other agency Web sites as well as through DoD civilian
personnel offices.
Many commenters expressed the desire to include OPM in every phase
of organization-wide classification changes. Their suggestions about
OPM's role varied considerably, however, from wanting OPM to approve or
disapprove any classification action taken by the Secretary to wanting
OPM to approve all establishments of and alterations to classification
standards. The regulation, which defines OPM's institutional role in
the process in Sec. Sec. 9901.105(b)(3) and (4), does provide for OPM
coordination on NSPS classification standards. This coordination role
enables OPM to meet its institutional role in the Federal Government at
large. Requiring OPM approval, however, would unnecessarily restrict
the ability of the Secretary to respond to unique national security
requirements. Therefore, no change has been made to the proposed
regulation in response to these comments.
Some commenters requested that the assignment of positions to
career groups, pay schedules, and pay bands be open to the collective
bargaining process as well as the classification appeals process.
Collective bargaining under NSPS is governed by 5 U.S.C. chapter 71, 5
U.S.C. 9902, and section 1106(b) of NDAA 2008. DoD is committed to
fulfilling any obligation to bargain in good faith on negotiable
conditions of employment related to these regulations, consistent with
those laws. We note that policies, practices, and matters involving
assignment of positions to career groups, pay schedules and pay bands
generally relate to classification of positions. To the extent that
proposals related to career groups, pay schedules and pay bands involve
negotiable conditions of
[[Page 56360]]
employment, the Department will satisfy its collective bargaining
obligations.
Comments on Specific Sections of Subpart B
Section 9901.201--Purpose
Section 9901.201 explains the purpose of subpart B, which
establishes a classification structure and rules for covered DoD
positions and employees.
One commenter suggested that a machinist on the east coast should
be paid the same as a machinist on the east [sic] coast and that we
should remove all local market supplements (LMS) and simply pay people
for the work they do. While machinists are excluded by this regulation,
the commenter appears to perceive that the LMS is in conflict with the
stated requirement to comply with merit principles in this section.
Specifically, this section requires that the NSPS classification
structure and rules in title 5, U.S. Code, are ``in accordance with the
merit principle that equal pay should be provided for work of equal
value, with appropriate consideration of both national and local rates
paid by employers in the private sector, and appropriate incentives and
recognition should be provided for excellence in performance.'' First,
we note that standard local market supplements under Sec. 9901.323 are
administered in the same manner and amount as locality pay for General
Schedule employees under 5 U.S.C. 5304. Whether the same or different,
however, local market supplements are in harmony rather than in
conflict with the merit principle of ``equal pay for equal work'' in
that they implement that part of the merit principle that states that
pay will be set in accordance with ``* * * appropriate consideration of
national and local rates paid by employers in the private sector, * *
*''. Therefore, no changes have been made to the proposed regulation in
response to this comment.
Section 9901.203--Waivers
Section 9901.203 of the regulations specifies the provisions of
title 5, U.S. Code, that are waived for employees covered by the NSPS
classification system established under subpart B. As specified in
Sec. 9901.203(a), the waivers apply when a category of DoD employees
is covered by a classification system established under this subpart,
except with respect to OPM's authority under 5 U.S.C. 5112(b) and
5346(c) to act on requests for review of classification decisions,
under Sec. 9901.106 and Sec. 9901.222(d).
Some commenters objected to the waiver of chapter 51 classification
provisions and the substitution of language that the commenters argued
is vague and does not contain clear standards. DoD is committed to
implementing an easily understood and applied NSPS classification
system across DoD. The waiver of chapter 51 was necessary to create a
performance-based pay system, and provide the framework for an agile
and responsive workforce. We do not believe that the waiver of chapter
51 provisions inhibits understanding or clarity of the NSPS
classification process. In fact, to the contrary, the waiver of chapter
51 permits simplification of the more complex classification
determination process designed under the General Schedule. While the
regulation itself does not prescribe the specific criteria to be used
in classifying NSPS positions, specificity is achieved in this system
through issuances of position classification standards and functional
guides. As stated earlier under subpart B general comments, we have
added a new paragraph to Sec. 9901.201 to address these criteria under
NSPS. Section 9901.201(b) provides the basis for classification under
NSPS. The basis for classification under NSPS takes into account
information about the duties and r