On February 14, 2005, the Department of Defense (DoD) and the Office of Personnel Management (OPM) published the National Security Personnel System (NSPS) proposed rule in the Federal Register. The sheer size of the DoD civilian workforce, coupled with the attention generated by the Department of Homeland Security’s (DHS) new human capital plan, and a general focus on modernizing human capital management across the federal government, make this a vital topic for human capital managers and managers of human capital alike.

Understanding the key elements of both the DoD and DHS plans, as well as their similarities and differences, can inform thinking around future human capital changes in other agencies. In fact, the DoD and DHS plans, not surprisingly, are very similar: “In developing the National Security Personnel System … the Secretary [of DoD] and the Director [of OPM] were extensively informed by the DHS experience, in terms of both process and results, in designing, developing, and drafting these proposed regulations.” (Federal Register, Vol. 70, No. 29, February 14, 2005, p. 7553.) Both regulations provide flexibilities in pay, performance management, labor relations, adverse actions and appeals. The plans seek to provide management flexibilities to respond to mission and operational demands.

It should be noted, however, leaders also recognize that needs may vary from agency to agency: “…this proposed regulation should not be viewed (or judged) in comparison to DHS, but rather as an independent effort, informed by the DHS experience, yet focused on DoD’s mission and requirements.” (Federal Register, Vol. 70, No. 29, February 14, 2005, p. 7553.)

Recent GAO testimony (GAO-05-517T) focuses on five key areas of the DoD proposed plan:

GAO directly addressed three of these five areas (starred in the above listing) and indirectly addressed the remaining two issues in it’s earlier testimony (GAO-05-320T) on the final DHS human capital regulation, highlighting the importance of these issues in the discussion of any alternative human capital management plan.

Pay and Performance Management
Individual Performance Expectations
The proposed DoD regulations would align individual performance expectations with the department’s overall mission, strategic goals, objectives, plans, and performance measures, a widely accepted practice in progressive human capital management plans. The DoD plan has yet to provide detail around how it will achieve this alignment.

The NSPS aims to refocus pay and performance management on individual accountability by setting and communicating individual performance expectations for each employee and holding them accountable for meeting those expectations. Supervisors are tasked with involving employees in the establishment of those expectations, inasmuch as possible, but are the ultimate decision-makers. Supervisors are accountable for managing employees to the predetermined expectations. The point of this system is to provide flexibility for managers to address the organization’s most pressing needs.

Under the proposed regulations, performance expectations may take several different forms, including, but not limited to:

As with the DHS plan, the GAO strongly recommends that the use of core competencies be required, not recommended. Also similar to the DHS plan, the NSPS proposes at least three levels of employee performance, while the GAO urges the use of four levels to provide greater distinction and differentiation, as well as to provide clearer links to the SES’ four-level plan.

Pay Issues
Both the DHS and the DoD plans establish a form of pay banding, which would replace the GS system. Proponents argue that pay banding will enable pay for performance, which the current system precludes, as well as match currently accepted human capital management practices outside the government. While the DoD has yet to establish detailed plans for its pay bands, essentially it would develop, in coordination with OPM, broad occupational career groups around type of work, mission, developmental or career path, and competencies. Within these career groups, DoD would establish pay bands.

Both the DHS’ final regulations and the DoD’s proposed regulations prohibit a reduction in pay rate at conversion. The proposed NSPS incorporates the establishment of a control point within bands that limits increases in the rate of basic pay and may require certain criteria be met—such as the achievement of an “exceeds expectation” rating—before an employee can receive additional increases above that point. The DHS’ proposed plan included the implementation of control points, but eliminated them in the final regulation; it is unclear if control points will survive comments on the DoD plan.

Ensuring Fairness and Guarding Against Abuse
DoD’s plan, as required by the authorizing legislation, indicates that its system will:

As with the DHS plan, the DoD proposed plan includes limited details on how it will promote consistency, administer the plan in a fair, credible, and transparent manner, achieve equity, and ensure nondiscrimination and nonpoliticization. As current “meet and confer” acrimony indicates, the DoD has a long way to go in better defining these specific issues.

Staffing and Employment Flexibilities
The authorizing legislation for NSPS provides the DoD with specific hiring and employment flexibilities:

These flexibilities enable DoD to bypass some of the competitive examination requirements when there is a critical need or severe shortage. The NSPS proposed regulations indicate that the DoD will abide by veterans’ preference principles, and will comply with merit principles and the Title 5 provision addressing prohibited personnel practices.

Workforce Shaping
The proposed regulations include revised reduction in force (RIF) procedures that enable the DoD to reduce, realign, and reorganize the department’s workforce. For example, the plan swaps the order of performance and length of service in the retention list in a RIF situation, so that employees would be placed on the retention list in the following order:

The proposed regulation also offers greater flexibility by allowing for more precision in defining both geographic area and competitive grouping as outlined below.

Adverse Actions and Appeals
The proposed DoD regulations establish a single process for performance-based and conduct-based actions. It also reduces the time of the adverse action process by eliminating the requirement for a performance improvement plan, and shortens the claim filing and processing time at the Merit Systems Protection Board (MSPB).

As does the DHS plan, the DoD proposed regulations require a higher level of proof for adverse actions—“preponderance of evidence” rather than “substantial evidence.” In exchange for carrying a higher burden of proof, managers would not be required to provide a performance improvement period when pursuing performance management actions.

The NSPS proposed rules retain the employees’ rights to appeal decisions to the MSPB. Unlike the DHS plan, the DoD plan allows for an internal DoD review of the MSPB adjudicating official’s initial decision. Upon review, the DoD can reverse the decision or remand it back to the adjudicating official for additional consideration. The DoD can modify or reverse an MSPB adjudicating official’s decision where it determines that the decision has a direct and substantial adverse impact on the agency’s national security mission, the decision is based on erroneous interpretation of law or regulation, the decision is based on a material error of fact, or new material evidence emerges.

Like the DHS plan, the DoD proposal reduces the notification period before an adverse action can become effective and accelerates the MSPB adjudication process.

Also like the DHS plan, the NSPS proposed regulation allows the Secretary of Defense to identify specific offenses for which removal is mandatory. Employees alleged to have committed these offenses will have the same right to review by an MSPB adjudicating official as other employees against whom actions are taken. In contrast to the DHS final regulation, which provides for the publishing of these mandatory removal offenses in the Federal Register, the DoD proposed rule indicates only that employees will be made aware of these offenses.

Labor Management Relations
The NSPS plan, like the DHS plan, recognizes the right of employees to organize and engage in collective bargaining. However, both agencies’ plans call for reducing the scope of bargaining, by:

Also, like DHS’ Homeland Security Labor Relations Board, DoD plans to develop an internal National Security Labor Relations Board to effectively replace the Federal Labor Relations Authority. The proposed board would have at least three members selected by the Secretary of Defense, with one member selected in consultation with the Director of OPM. Unlike DHS, however, under the proposed DoD rules the Secretary of Defense would not be required to consult with employees in the selection of members to the Board.

No doubt, pending lawsuits and the “meet and confer” period will have significant impact on the final resolution of the DoD NSPS. Regardless of resolution of specific issues, however, a new human capital management plan will be established and implemented for the more than 700,000 civilian employees of the DoD. Once that hurdle is passed, other agencies cannot be far behind.