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Report to Congressional Requesters:

May 2003:

HUMAN CAPITAL:

OPM Can Better Assist Agencies in Using Personnel Flexibilities:

GAO-03-428:

GAO Highlights:

Highlights of GAO-03-428, a report to Congressional Requesters

Why GAO Did This Study:

Congressional requesters asked GAO to provide information on actions 
that the Office of Personnel Management (OPM) has taken to facilitate 
the effective use of human capital flexibilities throughout the 
federal government and what additional actions OPM might take in this 
regard.  These flexibilities represent the policies and practices that
an agency has the authority to implement in managing its workforce.

What GAO Found:

OPM Has Taken Several Actions to Assist Agencies:

OPM has an important leadership role in identifying, developing, 
applying, and overseeing human capital flexibilities across the 
federal government.  OPM has taken several actions to assist federal 
agencies in effectively using the human capital flexibilities that are 
currently available to agencies.  For example, OPM has issued a 
handbook for agencies that identifies the various flexibilities 
available to help manage their human capital.  Also, OPM has taken 
various actions to assist agencies in identifying additional 
flexibilities that might be helpful to agencies in managing their 
workforces.  

Human Resources Directors Gave Mixed Views on OPM’s Role:

To yield indications of the progress that OPM has made in its 
important role related to assisting agencies in the use of human 
capital flexibilities, GAO surveyed the human resources directors of 
the federal government’s 24 largest departments and agencies in fall 
of 2001 and again in the fall of 2002.  There was little change in the 
directors’ level of satisfaction with OPM’s role in assisting agencies 
in using available flexibilities, which remained mixed.  For example, 
one director said OPM had effectively facilitated the use of work-life 
flexibilities, but others thought that OPM had placed its own 
restrictive interpretation on the use of other personnel 
flexibilities.  The level of satisfaction with OPM’s role in 
identifying additional flexibilities was greater in 2002 than in 2001, 
but still remained below the satisfaction level for assistance with 
existing flexibilities.  Several directors said that OPM had not 
worked diligently enough in supporting authorization of governmentwide 
use of new flexibilities that have been sufficiently tested and deemed 
successful. 

Additional OPM Actions Could Further Facilitate Use of Flexibilities:

Although OPM has recently taken numerous actions, OPM could more fully 
meet its leadership role to assist agencies in identifying, 
developing, and applying human capital flexibilities across the 
federal government.  In its ongoing internal review of its existing 
regulations and guidance, OPM could more directly focus on determining 
the continued relevance and utility of its regulations and guidance by 
asking whether they provide the flexibility that agencies need in 
managing their workforces while also incorporating protections for 
employees.  In addition, OPM can maximize its efforts to make human 
capital flexibilities and effective practices more widely known to 
agencies by compiling, analyzing, and sharing information about when, 
where, and how the broad range of flexibilities are being used, and 
should be used, to help agencies meet their human capital management 
needs.  OPM also needs to more vigorously identify new flexibilities 
that would help agencies better manage their human capital and then 
work to build consensus for the legislative action needed.

What GAO Recommends:

To better facilitate the effective use of human capital flexibilities 
throughout the federal government and consistent with OPM’s ongoing 
efforts in this regard, GAO recommends that the Director of OPM 

* review existing OPM regulations and guidance to determine whether 
they provide agencies with needed flexibility,
* more thoroughly research, compile, and analyze information on the 
effective and innovative use of flexibilities, and  
* identify and build consensus for legislation to authorize new  
flexibilities that would help agencies better manage their human 
capital.

OPM commented on a draft of this report and agreed with the 
conclusions and recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-03-428.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact J. Christopher Mihm at (202) 512-6806 or 
mihmj@gao.gov.

[End of section]

Letter:

Results in Brief:

Background:

OPM Has Taken Several Actions to Assist Agencies in Using 
Flexibilities:

Agencies' Human Resources Directors Gave Mixed Views on OPM's Role 
Related to Flexibilities:

Additional OPM Actions Could Further Facilitate Agencies' Use of 
Flexibilities:

Conclusions:

Recommendations for Executive Action:

Agency Comments:

Appendixes:

Appendix I: Objectives, Scope, and Methodology:

Appendix II: Comments from the Office of Personnel Management:

Appendix III: GAO Contacts and Staff Acknowledgments:

Table:

Table 1: Human Resources Directors' Responses to GAO Questionnaire on 
Human Capital Flexibilities (Fall 2001 and Fall 2002):

Figures:

Figure 1: Key Practices for Effective Use of Human Capital 
Flexibilities:

Figure 2: Human Resources Directors' Extent of Satisfaction with OPM's 
Role in Helping Their Agencies Use Available Human Capital 
Flexibilities (Fall 2001 and Fall 2002):

Figure 3: Human Resources Directors' Extent of Satisfaction with OPM's 
Role in Helping Their Agencies Identify Additional Human Capital 
Flexibilities That Could Be Authorized (Fall 2001 and Fall 2002):

Abbreviations :

CHCO: chief human capital officer:

DOJ: Department of Justice:

NAPA: National Academy of Public Administration:

OMB: Office of Management and Budget:

OPM: Office of Personnel Management:

Letter May 9, 2003:

The Honorable Joseph I. Lieberman
Ranking Minority Member
Committee on Governmental Affairs
United States Senate:

The Honorable Daniel K. Akaka
Ranking Minority Member
Subcommittee on Financial Management, the 
 Budget and International Security 
Committee on Governmental Affairs
United States Senate:

The Honorable George V. Voinovich
Chairman
The Honorable Richard J. Durbin
Ranking Minority Member
Subcommittee on Oversight of Government Management,
 the Federal Workforce and the District of Columbia
Committee on Governmental Affairs
United States Senate:

The Honorable Thad Cochran
United States Senate:

To deal with the challenges that federal agencies are experiencing in 
acquiring and retaining staff to meet current and expected needs, 
agencies need effective human capital flexibilities--with appropriate 
safeguards--to assist them. In broad terms, human capital flexibilities 
represent the policies and practices that an agency has the authority 
to implement in managing its workforce to accomplish its mission and 
achieve its goals. These flexibilities can include actions related to 
recruitment, retention, compensation, position classification, 
incentive awards and recognition, training and development, performance 
management and appraisals, realignment and reorganization, and work 
arrangements and work-life policies. The tailored use of such 
flexibilities for acquiring, developing, and 
retaining talent is an important cornerstone of our model of strategic 
human capital management.[Footnote 1]

As the federal government's human capital agency, the Office of 
Personnel Management (OPM) has an important leadership role in 
identifying, developing, and applying human capital flexibilities 
across the federal government. Given the importance of OPM's role, you 
asked us to provide information on the actions that OPM has taken to 
facilitate the effective use of human capital flexibilities throughout 
the federal government and what additional actions OPM might take in 
this regard. This report is the second of two reports responding to 
your request for information on the use of human capital flexibilities 
in the federal government. In December 2002, we reported on (1) the key 
practices that agencies should implement for effective use of human 
capital flexibilities and (2) agency and union officials' views related 
to the use of human capital flexibilities.[Footnote 2] In addition to 
the above addressees, both reports were also done at the request of the 
Honorable Fred Thompson, former ranking minority member of the Senate 
Committee on Governmental Affairs.

To address the issue of OPM's role in facilitating agencies' use of 
human capital flexibilities, we reviewed relevant reports and 
interviewed cognizant officials from OPM, the Merit Systems Protection 
Board, and the National Academy of Public Administration (NAPA). We 
also interviewed the individuals serving in the positions of human 
resources directors for the federal government's 24 largest departments 
and agencies. We surveyed these 24 human resources directors in the 
fall of 2001 and surveyed the individuals in these positions again in 
the fall of 2002. In addition, we reviewed previous GAO reports on a 
broad range of human capital issues. We conducted our work in 
accordance with generally accepted government auditing standards. (See 
app. I for additional information on our objectives, scope, and 
methodology.):

Results in Brief:

OPM recognizes its important leadership role in assisting federal 
agencies in identifying, developing, and applying human capital 
flexibilities across the federal government. As noted in its most 
recent strategic plan, OPM's strategy in fulfilling its mission is to 
provide human resources management leadership and services for all 
agencies in a manner that blends and balances flexibility and 
consistency. OPM seeks to maintain consistency in the federal 
government's human resources management systems for areas such as merit 
principles and accountability, while at the same time assist agencies 
to facilitate the effective use of available human capital 
flexibilities, as well as to identify and develop additional human 
capital flexibilities that could be authorized to help agencies manage 
their workforces.

OPM has several initiatives underway to assist federal agencies in 
effectively using the human capital flexibilities that are currently 
available to agencies. For example, OPM has issued a handbook[Footnote 
3] for agencies that identifies the various flexibilities available to 
help manage human capital and has several initiatives under way to 
address key personnel challenges in the area of hiring. OPM has also 
developed information on lessons learned for using human capital 
flexibilities and implementing change to improve federal human 
resources management. OPM has also committed the assistance of its 
various internal experts to serve as liaisons with agencies and to 
provide expedited services when needed, including assistance in the 
implementation of human capital flexibilities. Furthermore, OPM has 
reorganized its structure with the expectation that it will be able to 
better serve and respond to requests from agency customers and help 
ensure that all levels within OPM are supportive of agencies' efforts 
to use flexibilities.[Footnote 4]

OPM has also taken some actions to identify legislative options for 
additional flexibilities that might be helpful to agencies in managing 
their workforces. For example, OPM has suggested the broader 
application through legislation of various personnel flexibilities that 
have been tested and evaluated through pilot projects and alternative 
personnel systems over the past two decades. Also, OPM has been 
recently more active in supporting the passage of proposed legislation 
that would enhance the 
human capital flexibilities already available, including the 
governmentwide provisions in the Homeland Security Act of 
2002.[Footnote 5]

The views of human resources directors from across the federal 
government yield revealing indications of the progress that OPM has 
made in its important role related to assisting agencies in the use of 
human capital flexibilities. The human resources directors we surveyed 
in the fall of 2001 and again in the fall of 2002 gave mixed views on 
their satisfaction with OPM's role in assisting agencies in using 
available flexibilities. One director we interviewed, for example, 
praised OPM for the positive actions it had taken in facilitating work-
life programs for federal employees. On the other hand, several 
directors noted, for instance, that OPM often has placed its own 
restrictive interpretation on the use of personnel flexibilities, 
surrounding them with too many regulations that make the use of such 
flexibilities extremely complicated and more difficult than needed.

The human resources directors were generally less satisfied with OPM's 
role in identifying additional flexibilities that could be authorized 
for agencies to use in managing their workforces, although the level of 
satisfaction was greater in 2002 than in 2001. Several directors we 
interviewed said, for example, that although OPM had actively listened 
to agency officials' views about their various needs for additional 
flexibilities, OPM had not worked diligently enough in supporting 
efforts to bring about governmentwide authorization and implementation 
of innovative human capital practices and flexibilities that have been 
sufficiently tested and deemed successful.

Although OPM has recently taken numerous actions, OPM could take 
additional steps to assist agencies in identifying, developing, 
applying, and overseeing human capital flexibilities across the federal 
government. As part of its ongoing internal review of its existing 
regulations and guidance, OPM has focused chiefly on reviewing the 
clarity and readability of its regulations and guidance. OPM could more 
directly focus on determining the continued relevance and utility of 
its regulations and guidance by asking whether they provide the 
flexibility that agencies need in managing their workforces while also 
incorporating protections for employees. In addition, OPM could enhance 
its efforts to make human capital flexibilities and effective practices 
more widely known to agencies. Although OPM has made efforts to inform 
agencies of what flexibilities are generally available and why their 
use is important, OPM has yet to take full advantage of its ability to 
compile, analyze, and share information about when, where, and how the 
broad range of flexibilities are being used, and should be used, to 
help agencies meet their human capital management needs. It is also 
important for OPM to oversee the use of personnel flexibilities to 
ensure not only that the use of flexibilities are being maximized, but 
also, along with agencies, ensuring that flexibilities are being used 
consistent with the merit principles and other national goals and 
include appropriate safeguards. Finally, OPM could play a critical role 
in identifying and building a consensus for new flexibilities that 
would help agencies better manage their human capital.

These additional OPM actions are consistent with OPM's overall goal of 
aiding federal agencies in adopting human resources management systems 
that improve their ability to build successful, high-performance 
organizations. Because this role is critical to improved governmentwide 
strategic human capital management, this report contains 
recommendations to the Director of OPM for the more effective use of 
existing human capital flexibilities and for the identification of 
additional human capital flexibilities that might be needed within the 
federal government.

OPM commented on a draft of this report and agreed with the conclusions 
and recommendations. OPM pointed out that in future studies that 
address OPM leadership issues, in addition to surveying agency human 
resource directors, we should also survey agency chief operating 
officers. OPM believed that the chief operating officers have the "best 
perspective and the widest array of information about recruitment and 
retention issues." We agree that such future studies would benefit from 
the perspectives of chief operating officers. OPM's complete comments 
are shown in appendix II.

Background:

In serving as the federal government's human capital agency, OPM sees 
its role to be the President's strategic advisor on human capital 
issues, to develop tools and provide support to agencies in their human 
capital transformation efforts, and to assist in making the federal 
government a high-performing workplace. As such, OPM, in conjunction 
with the Office of Management and Budget (OMB), is charged with leading 
the federal government's strategic management of human capital 
initiative, one of five 
governmentwide initiatives of the President's Management 
Agenda.[Footnote 6] In carrying out this effort, OPM's strategy is to 
provide human resources management leadership and services to all 
agencies in a manner that blends and balances flexibility and 
consistency. As we noted in our recent report on OPM's management 
challenges, OPM carries out its leadership role in a decentralized 
environment where both it and the agencies have shared responsibilities 
for addressing the human capital and related challenges facing the 
federal government.[Footnote 7]

OPM's role in aiding federal agencies represents a considerable 
challenge because federal managers have complained for years about the 
rigid and elaborate procedures required for federal personnel 
administration and have often expressed the need for more flexibility 
within a system that has traditionally been based on uniform rules. 
Reformers have long sought to decentralize the personnel system and 
simplify the rules, arguing that however well the system may have 
operated in the past, it is no longer suited to meet the needs of a 
changing and competitive world. In 1983, for example, NAPA published a 
report critical of excessive restrictions on federal managers, 
including constraints on their human resources decisions.[Footnote 8] 
In response to these criticisms, OPM has, over time, decentralized and 
delegated many personnel decisions to the agencies and has encouraged 
agencies to use human capital flexibilities to help tailor their 
personnel approaches to accomplish their unique missions. Our strategic 
human capital management model also advocates that agencies craft a 
tailored approach to their use of available flexibilities by drawing on 
those flexibilities that are appropriate for their particular 
organizations and their mission accomplishment.[Footnote 9] Because of 
this tailoring, the federal personnel system is becoming more varied, 
notwithstanding its often-cited characterization as a "single 
employer.":

The overall trend toward increased flexibility has revealed itself in a 
number of ways, including the efforts of some agencies to seek 
congressional approval to deviate from the personnel provisions of 
Title 5 of the U.S. Code that have traditionally governed much of the 
federal government's civil service system.[Footnote 10] As observed in 
a 1998 OPM report,[Footnote 11] federal agencies' status relative to 
these Title 5 personnel requirements can be better understood by 
thinking of them on a continuum. On one end of the continuum are 
federal agencies that generally must follow Title 5 personnel 
requirements. These agencies do not have the authority, for example, to 
establish their own pay systems. On the other end of the continuum are 
federal agencies that have more flexibility in that they are exempt 
from many Title 5 personnel requirements. For example, the Congress 
provided the Tennessee Valley Authority and the Federal Reserve Board 
with broad authority to set up their own personnel systems and 
procedures. This trend toward greater flexibility, in fact, has gained 
momentum to the extent that about half of federal civilian employees 
are now exempt from at least some of the personnel-related requirements 
of Title 5. For example, the Federal Aviation Administration, the 
Internal Revenue Service, and the new Department of Homeland Security 
have exemption from key Title 5 requirements.

In addition to receiving congressional authorizations for exemptions 
from the personnel-related requirements of Title 5, other mechanisms 
are available to initiate human capital innovations and flexibilities 
within federal agencies. OPM has the authority to reassess and make 
changes to its existing regulations and guidance to supply agencies 
with additional flexibilities. Additionally, a federal agency can 
obtain authority from OPM to waive some existing federal human 
resources laws or regulations through an OPM-sponsored personnel 
demonstration project. The aim of these demonstration projects is to 
encourage experimentation in human resources management by allowing 
federal agencies to propose, develop, test, and evaluate changes to 
their own personnel systems. In some cases, Congress has allowed some 
agencies to implement alternatives that have been tested and deemed 
successful. For example, more flexible pay approaches that were tested 
within the Department of the Navy's China Lake (California) 
demonstration project in the early 1980s were eventually adopted by 
other federal agencies such as the Department of Commerce's National 
Institute of Standards and Technology.

In December 2002, we reported on agency officials' and union 
representatives' views regarding various issues related to 
flexibilities. According to the agency officials and union 
representatives we interviewed, existing flexibilities that are most 
effective in managing the workforce are work-life policies and 
programs, such as alternative and flexible work schedules, transit 
subsidies, and child care assistance; monetary recruitment and 
retention incentives, such as recruitment bonuses and retention 
allowances; special hiring authorities, such as student employment and 
outstanding scholar programs; and incentive awards for notable job 
performance and contributions, such as cash and time-off awards. Agency 
and union officials also identified five categories of additional human 
capital flexibilities as most helpful if authorized for their agencies: 
(1) more flexible pay approaches, (2) greater flexibility to streamline 
and improve the federal hiring process, (3) increased flexibility in 
addressing employees' poor job performance, (4) additional workforce 
restructuring options, and (5) expanded flexibility in acquiring and 
retaining temporary employees. Furthermore, we reported that the agency 
managers and supervisors and human resources officials we interviewed 
generally agreed that additional human capital flexibilities could be 
authorized and implemented in their agencies while also ensuring 
protection of employees' rights. Union representatives, however, 
expressed mixed views on the ability of agencies to protect employee 
rights with the authorization and implementation of additional 
flexibilities. Specifically, several union representatives said that 
managers could more easily abuse their authority when implementing 
additional flexibilities, and that agency leaders often do not take 
appropriate actions in dealing with abusive managers.

Based on our interviews with human resources directors from across the 
federal government and our previous human capital work, we also 
reported on six key practices that agencies should implement to use 
human capital flexibilities effectively. Figure 1 identifies these key 
practices.

Figure 1: Key Practices for Effective Use of Human Capital 
Flexibilities:

[See PDF for image]

[End of figure]

Lastly, also in our December 2002 report, we noted that agency and 
union officials identified several significant reasons why agencies 
have not made greater use of the human capital flexibilities that are 
available to them. These reported barriers that have hampered agencies 
in maximizing their use of available flexibilities included: agencies' 
weak strategic human capital planning and inadequate funding for using 
these flexibilities given competing priorities; managers' and 
supervisors' lack of awareness and knowledge of the flexibilities; 
managers' and supervisors' belief that approval processes to use 
specific flexibilities are often burdensome and time-consuming; and 
managers' and supervisors' concerns that employees will view the use of 
various flexibilities as inherently unfair, particularly given the 
common belief that all employees must be treated essentially the same 
regardless of job performance and agency needs.

As noted in our report, the recently enacted Homeland Security Act of 
2002 provided agencies with a number of additional flexibilities 
relating to governmentwide human capital management. For example, 
agencies will now be permitted to offer buyouts to their employees 
without the requirement to reduce their overall number of employees. 
The legislation also permits agencies to use a more flexible approach 
in the rating and ranking of job candidates (categorical rating) during 
the hiring and staffing process. The Act also created chief human 
capital officer (CHCO) positions for the largest federal departments 
and agencies, an interagency CHCO Council, and a requirement that 
agencies discuss their human capital approaches in their annual 
performance plans and reports under the Government Performance and 
Results Act.

OPM Has Taken Several Actions to Assist Agencies in Using 
Flexibilities:

OPM deems that its role related to human capital flexibilities is 
broader than merely articulating polices that federal agencies use in 
managing their workforces. OPM sees that it has an important leadership 
role in identifying, developing, and applying human capital 
flexibilities across the federal government. As such, OPM has several 
initiatives underway with the goal of assisting federal agencies in 
using available flexibilities and identifying additional flexibilities 
that might be beneficial for agencies.

OPM Has Initiatives to Assist Agencies in Using Available 
Flexibilities:

One of OPM's primary functions related to assisting agencies in the use 
of human capital flexibilities is to serve as a clearinghouse for 
information through a variety of sources, including its Web site. For 
example, OPM prepared and posted on its Web site a handbook on 
personnel flexibilities generally available to federal agencies. This 
handbook, Human Resources Flexibilities and Authorities in the Federal 
Government, describes the flexibilities that agencies can use to manage 
their human capital challenges and provides information about the 
statutory and regulatory authorities for the specific flexibilities. 
OPM has also established Web-based clearinghouses of information on 
best practices in two areas of human resources management: employee 
performance management and accountability. OPM said that it has 
received positive feedback on these two Web-based clearinghouses and 
that many of OPM's customers have said that the information has been 
useful to them in researching information and when redesigning human 
resources-related programs.

OPM is also developing a Preferred Practices Guide that it said would 
highlight efficient and effective hiring practices using existing 
hiring flexibilities. To assist in developing this guide, OPM in July 
2002 asked federal human resources directors to share information with 
OPM about their improved results in areas related to hiring by using 
newly developed practices, strategies, and methods that could assist 
other agencies in addressing similar challenges. According to OPM, the 
contents of this Web-based document will likely parallel the steps of 
the federal hiring process and encompass areas such as workforce 
planning, recruitment, assessment, and retention. The guide is also 
expected to include actual examples of agency hiring practices, such as 
the Emerging Leaders Program, a 2-year career development intern 
program created by the Department of Health and Human Services, and the 
Recruitment "Timely Feedback" Executive Tool, a monthly reporting and 
accountability system for gauging progress on recruiting initiatives 
that was established at the Social Security Administration. This 
Preferred Practices Guide, which OPM plans to post on its Web site in 
early 2003, would complement other ongoing OPM hiring-related efforts 
to encourage agencies to (1) provide interested persons with timely and 
informed responses to questions about the federal recruiting process, 
(2) develop clear and understandable job announcements, and (3) provide 
job applicants with regular updates on the status of their applications 
as significant decisions are reached.

OPM has also issued a report entitled Demonstration Projects and 
Alternative Personnel Systems: HR Flexibilities and Lessons Learned, 
which contains lessons learned about implementing change to improve 
federal human capital management. According to OPM, these lessons 
learned are based on the testing of several personnel flexibilities in 
a wide variety of demonstration projects and alternative personnel 
systems at federal agencies over the past 20 years.[Footnote 12] OPM 
said that agency officials from the various projects collaborated with 
OPM staff in developing the report. The lessons learned in OPM's report 
are similar to the key practices that we recently reported on for 
effectively using human capital flexibilities.

OPM has also committed the assistance of its various experts to help 
agencies with human capital issues and challenges, including use of the 
various flexibilities available to agencies. OPM has established a 
human capital team of desk officers who serve as liaisons with agencies 
and who are to work closely with the agencies to help them in 
responding to the President's Management Agenda. For some agencies with 
less planning and actions on strategic human capital management, these 
desk officers provide coaching and assistance and establish contacts 
with OPM's program office experts. OPM said that when working with 
their assigned agency representatives, the desk officers take full 
advantage of all available OPM resources, including clearinghouse 
information, to help agencies identify available flexibilities. For 
example, OPM said that its desk officer for the Department of Education 
fielded an inquiry that led to on-site assistance in the planning and 
implementation of a demonstration project for that department.

OPM has also formed "strike force teams," created on an ad hoc basis, 
to provide expedited service to agencies with critical, time-sensitive 
human capital needs. These strike force teams are to serve a single 
focal point through which agencies can get assistance and advice on a 
wide range of topics and issues, including the implementation of human 
capital flexibilities. OPM has created strike force teams for several 
agencies, including the Department of Housing and Urban Development, 
the Department of Justice (DOJ), and the Transportation Security 
Administration. For example, at the request of the Assistant Attorney 
General, a strike force team worked with DOJ human resources staff to 
develop and present a briefing on human resource flexibilities for DOJ 
political appointees. OPM is also working jointly with the new 
Department of Homeland Security to prescribe regulations for the 
department's human resources management system.

OPM also holds conferences, training sessions, and other meetings to 
share information with agency officials, including material on the 
availability of flexibilities. For example, OPM conducts an annual 
conference to provide federal managers and human resources 
practitioners with updates and other information about the federal 
compensation environment, including topics such as pay and leave 
administration, performance management, position classification, and 
efforts to improve the compensation tools available to support agency 
missions. As an example of its training function, OPM, in collaboration 
with OMB, presented a half day of training on personnel authorities 
available to agencies as part of transition training for new political 
appointees. OPM said that it also held one-on-one meetings with more 
than 30 agencies to discuss telework, learn about agency initiatives in 
this area, and find out how OPM can assist agencies in expanding 
telework opportunities.

In addition, OPM has realigned its own organizational structure and 
workforce. OPM's goal was to create a new, flexible structure that will 
"de-stovepipe" the agency; enable it to be more responsive to its 
primary customers, federal departments and agencies; and allow it to 
focus on the agency's core mission. For example, OPM has decided to put 
its various program development offices under the control of one 
associate director and its product and services functions under another 
associate director to ensure that it appropriately and efficiently 
responds to its customers. Effective implementation of OPM's latest 
organizational and workforce realignment will be crucial to maximizing 
its performance as the federal government's human capital leader, 
assuring its own and other agencies' accountability, and ultimately 
achieving its goals.

OPM Also Has Some Initiatives to Assist in Identifying Additional 
Flexibilities:

OPM has furthermore initiated some efforts to assist agencies in 
identifying additional flexibilities that might be effective in helping 
the agencies manage their workforces. For example, OPM said that it has 
actively supported passage of proposed legislation that would enhance 
human capital flexibilities and provide more latitude for flexible 
implementing regulations. OPM told us, for example, that it developed 
and drafted a significant portion of the proposed Managerial 
Flexibility Act of 2001,[Footnote 13] a bill intended to give federal 
managers tools and flexibility in areas such as personnel, budgeting, 
and property management and disposal. This proposed legislation did not 
pass the 107th Congress, although several related provisions were 
included in the recently enacted Homeland Security Act of 2002. OPM 
officials told us that these legislative efforts should serve as 
evidence that OPM can and does identify areas where changes to statute 
would provide more flexibility to agencies. Moreover, one component of 
the proposed legislation, which was not enacted, includes streamlining 
the process for implementing demonstration projects and creating a 
mechanism to export tested innovations to other federal organizations. 
OPM believes that to get a better return on investment from years of 
demonstration project evaluations, a method should exist--short of 
separate legislation--for converting successfully tested alternative 
systems and flexibilities to permanent programs and for making them 
available to other agencies.

OPM has taken other actions to assist agencies in identifying 
additional flexibilities that they could use to manage their 
workforces. For example, in its HR Flexibilities and Lessons Learned 
report, OPM identified personnel flexibilities that have been tested 
and evaluated through demonstration projects or alternative personnel 
systems over the last 20 years. OPM said that during the development of 
the Managerial Flexibility Act, the President's Management Council 
requested information on existing flexibilities and that OPM created 
its report in response to that request in an effort to catalogue these 
flexibilities in one document. OPM said that some of the flexibilities 
catalogued in its report have been thoroughly tested over time in a 
variety of environments, while others have more limited agency 
applicability and thus have more limited data to show their success. 
Some of these flexibilities outlined in the report correspond to the 
types of flexibilities that agency and union officials told us could be 
beneficial for their agencies, such as broadbanded pay systems, 
categorical rating for hiring, and expanded probationary periods for 
new employees.[Footnote 14]

OPM recognizes that additional efforts are needed to address key 
personnel challenges within the federal workforce, particularly in the 
areas of pay and hiring. In April 2002, OPM released a report that 
presents the case for the need for reform of the white-collar federal 
pay system under which 1.2 million General Schedule federal employees 
are paid.[Footnote 15] Without recommending a specific solution, OPM's 
report stresses the importance of developing a contemporary pay system 
that is more flexible, market-sensitive, and performance-oriented as 
well as a better tool for improving strategic human capital management. 
Also, OPM said that in the coming months it will identify additional 
projects and proposals that will address systemic problems associated 
with the hiring process. These additional initiatives will include 
deploying competency-based qualifications, improving entry-level 
hiring, and updating and modernizing exam scoring policy. According to 
OPM officials, as it moves forward on these pay and hiring initiatives, 
OPM will assess what additional flexibilities and tools might be needed 
for agencies as they look for ways to better manage their workforces.

Agencies' Human Resources Directors Gave Mixed Views on OPM's Role 
Related to Flexibilities:

Although federal agencies have the primary responsibility to maximize 
their use of human capital flexibilities, OPM also plays a key role in 
facilitating agencies' use of existing flexibilities as well as 
identifying new personnel authorities that agencies might need in 
managing their workforces. The views of agencies' human resources 
directors can help to provide indications of the progress that OPM has 
made in its important role related to human capital flexibilities. We 
therefore surveyed the human resources directors for the 24 largest 
departments and agencies in the federal government to obtain their 
views on OPM's role related to flexibilities.

Directors' Views Varied on OPM's Role Related to Using Available 
Flexibilities:

In the surveys we conducted in the fall of 2001 and again in the fall 
of 2002, the human resources directors for the largest departments and 
agencies gave mixed views on their satisfaction with OPM's role in 
assisting their agencies in using available human capital 
flexibilities. Figure 2 depicts the directors' responses on this issue 
for both 2001 and 2002.[Footnote 16] In 2002, 7 of the 24 responding 
directors said that they were satisfied to "little or no" or "some" 
extent regarding OPM's role in assisting their agencies in using 
available flexibilities. Conversely, 7 of the 24 responding directors 
in 2002 said that they were satisfied to a "great" or "very great" 
extent with OPM's role in assisting their agencies with available 
flexibilities. Overall for 2002 on this issue, the average satisfaction 
level of the human resource directors was unchanged between 2001 and 
2002. Specifically, for 2002 our survey showed that for five agencies, 
the director's level of satisfaction was greater than the level of 
satisfaction for that agency's human resources director from the 
previous year; for five agencies, the directors' level of satisfaction 
was less than the level of satisfaction for that agency's human 
resources director from the previous year.

Figure 2: Human Resources Directors' Extent of Satisfaction with OPM's 
Role in Helping Their Agencies Use Available Human Capital 
Flexibilities (Fall 2001 and Fall 2002):

[See PDF for image]

[End of figure]

In our interviews with the human resources directors regarding the 
issue of OPM's role in assisting agencies in the use of available 
flexibilities, several of the directors said that OPM communicates well 
with agencies through e-mails, meetings, workgroups, and its Web site 
and has taken some action to disseminate information about existing 
flexibilities. One director, for example, commended OPM for effectively 
using its Web site to share information about what flexibilities are 
generally available to agencies. Another director praised OPM for the 
positive actions it had taken with respect to facilitating work-life 
programs for federal employees. However, directors frequently commented 
that OPM often puts its own restrictive interpretation on the use of 
flexibilities, surrounding them with too many regulations that can make 
their use unduly complicated and more difficult; regulations and 
guidance on implementing the Federal Career Intern Program were 
mentioned frequently in this regard, for example. Several directors 
argued that their agencies should be able to implement human capital 
flexibilities in the most flexible fashion, not the most restrictive. 
One director expressed the opinion that, although the upper management 
of OPM may support using flexibilities, middle management and lower-
level staff within the agency seemed resistant to change and sometimes 
hampered the efforts of agencies in the use of flexibilities. This 
director wanted to see OPM play a more facilitative and consultative 
role, working in concert with agencies. In addition, directors from 
several agencies stated that OPM needs to host additional forums to 
share experiences on the use of existing human capital flexibilities, 
with OPM more fully serving as a clearinghouse in making flexibilities 
and effective practices more widely known to agencies.

Directors Were Somewhat Less Satisfied with OPM's Role Related to 
Identifying Additional Flexibilities:

While the human resources directors we surveyed gave mixed views on 
their satisfaction with OPM's role related to available flexibilities, 
the directors were less satisfied with OPM's role in assisting agencies 
in identifying additional human capital flexibilities that could be 
authorized. However, the directors' extent of satisfaction on this 
issue, as measured in our survey, was greater in 2002 than in 2001. 
Figure 3 depicts the directors' responses on this issue for both 2001 
and 2002. In 2002, 11 of the 24 responding directors said that they 
were satisfied to "little or no" or "some" extent regarding OPM's role 
in identifying additional flexibilities that could be authorized for 
agencies. Conversely, 6 of the 24 responding directors said that they 
were satisfied to a "great" or "very great" extent regarding OPM's role 
in identifying additional flexibilities. For seven agencies, the 
director's level of satisfaction was greater in 2002 than the level of 
satisfaction for that agency's human resources director from the 
previous year; for four agencies, the director's level of satisfaction 
was less than the level of satisfaction for that agency's human 
resources director from the previous year.

Figure 3: Human Resources Directors' Extent of Satisfaction with OPM's 
Role in Helping Their Agencies Identify Additional Human Capital 
Flexibilities That Could Be Authorized (Fall 2001 and Fall 2002):

[See PDF for image]

[End of figure]

One human resources director we interviewed said, for example, that OPM 
has done a commendable job of listening to agencies' concerns about the 
need for additional flexibilities, particularly through the Human 
Resources Management Council, an interagency organization of federal 
human resources directors.[Footnote 17] However, several directors said 
that OPM needs to play a more active role in identifying flexibilities 
that agencies might use to manage their workforces. Several human 
resources directors said that OPM should be doing more to conduct or 
coordinate personnel management research on additional flexibilities 
that might prove effective for agencies to use in managing their 
workforces. Several of these directors also told us that OPM should 
work more diligently to support efforts in authorizing and implementing 
governmentwide those innovative human capital practices and 
flexibilities that have been sufficiently tested and deemed to be 
successful, such as those tested in OPM-sponsored personnel 
demonstration projects.

According to many of the human resources directors we interviewed, OPM 
needs to play a larger role in acting as a change agent to get human 
capital legislation passed and implemented. While recognizing that OPM 
cannot promote legislation that is inconsistent with the 
administration's views of the civil service, human resources directors 
said that OPM should be the policy leader in the area of human capital 
and, as the leader, should push harder for major civil service reform. 
In the human resources directors' opinions, OPM needs to look at 
personnel reforms in a new, open, and objective way and develop changes 
to current laws and regulations to ensure that agencies can effectively 
obtain and manage their workforces. In addition, some directors 
expressed frustration about the lack of coordination between OPM and 
OMB in responding to OMB's request for agencies to complete workforce 
planning and restructuring analyses.[Footnote 18] Further, they said 
that OPM, OMB, and Congress need better communication and coordination 
in developing budgets and recognizing the costs involved in using human 
capital flexibilities.

Additional OPM Actions Could Further Facilitate Agencies' Use of 
Flexibilities:

Assisting federal agencies in using available flexibilities and in 
identifying additional flexibilities is an important part of OPM's 
overall goal of aiding agencies in adopting human resources management 
systems that improve their ability to build successful, high-
performance organizations. In testimony before Congress in February of 
2001, we suggested two areas in which OPM could make substantial 
additional contributions in addressing the federal government's human 
capital challenges.[Footnote 19] The first was in reviewing existing 
OPM regulations and guidance to determine their continued relevance and 
utility by asking whether they provide agencies with the flexibilities 
they need while incorporating protections for employees. The second 
area was in making existing human capital flexibilities and effective 
practices more widely known to the agencies, and in taking fullest 
advantage of OPM's ability to facilitate information-sharing and 
outreach to human capital managers throughout the federal government. 
Although OPM has taken concerted action in some areas to assist 
agencies in using flexibilities, OPM has taken limited actions related 
to these two areas. Moreover, OPM could do more to assist agencies in 
identifying additional human capital flexibilities that could be 
authorized and also be actively working to build consensus to support 
related legislation that might be needed. Greater attention to these 
areas could allow OPM to more fully fulfill its leadership role to 
assist agencies in identifying, developing, and applying human capital 
flexibilities across the federal government. As we noted in the 
previous testimony, as OPM continues to move from "rules to tools," its 
more valuable contributions in the future will come less from 
traditional compliance activities than from its initiatives as a 
strategic partner to agencies.

OPM's Review of Regulations Could Provide Opportunity to Give 
Additional Flexibility to Agencies:

Just as agencies need to streamline and improve their own internal 
administrative processes to effectively use flexibilities, OPM 
similarly needs to ensure that its regulations and guidance provide 
adequate flexibility while also recognizing the importance of ensuring 
fairness and incorporating employee protections. As we noted in our 
December 2002 report, if senior managers within agencies want 
supervisors to make effective use of flexibilities, supervisors must 
view agencies' internal processes to use the flexibility worth their 
time compared to the expected benefit to be gained in implementing the 
flexibility. Similarly, if OPM wants agencies to make effective use of 
flexibilities, agencies must view OPM's regulatory requirements for 
using the flexibility worth the expected benefits that the flexibility 
would provide.

In comments that it provided in response to our December 2002 report, 
OPM said that it is undertaking a review of its regulations and 
guidance. According to OPM, the purpose of this regulatory review, 
which began in December 2001, is to restate regulations in plainer 
language wherever possible to eliminate redundant or obsolete material 
and to revise regulations to make them more easily usable by a variety 
of readers. OPM said that because it has focused chiefly on making the 
regulations as readable as possible, rather than making substantive 
changes, the agency did not anticipate making changes to provide 
additional flexibility as part of this effort. OPM said that its Office 
of General Counsel, which is leading the regulatory review, has been 
carrying it out by working with OPM's program offices to establish 
basic protocols, selecting provisions that require elimination or 
redrafting, soliciting drafts from the offices, and then reviewing and 
revising these drafts in conjunction with the OPM program staff. OPM 
said that it amends its regulations to provide flexibility, on an as-
needed basis, in the ordinary course of carrying out the OPM Director's 
policies.

In response to our request for examples of regulations that it has 
redrafted under this effort, OPM said it was reviewing all of the 
regulations in chapter I of Title 5 of the U.S. Code of Federal 
Regulations but that it was not yet in a position to supply examples 
because it had recently begun to submit some of the redrafted material 
to OMB for clearance. Nonetheless, a report we recently issued included 
an example of where OPM revised regulations to, at least in part, 
provide additional flexibility to agencies.[Footnote 20] In the fall of 
2000, OPM amended regulations on evaluating the job performance of 
senior executives within the federal government. OPM's goal in 
developing these regulations was to help agencies hold their senior 
executives accountable by increasing agency flexibility, focusing on 
results, emphasizing accountability, and improving links between pay 
and performance. These changes were to balance the agencies' desire for 
maximum flexibility with the need for a corporate approach that 
safeguards merit principles. OPM's changes to the regulations included 
paring back many of the previous requirements to those in statute to 
give agencies more flexibility to tailor their performance management 
systems to their unique mission requirements and organizational 
cultures. OPM made these regulatory changes in part because performance 
management systems have tended to focus on process over results.

Because providing additional flexibility has not been a fundamental 
purpose of its current regulatory review, OPM is not taking advantage 
of a crucial opportunity to provide additional flexibility, where 
appropriate, on a systematic basis rather than through a piece-meal, ad 
hoc approach. Human resources directors we interviewed often said that 
OPM should provide agencies with greater delegation to carry out their 
human capital programs. For example, some directors commented that 
agencies should be able to waive the annuity offsets for reemployed 
annuitants without authority by OPM.[Footnote 21] Some directors also 
told us that OPM should allow 
agencies to extend the probationary periods for newly hired employees 
beyond the standard 1-year period.[Footnote 22] Directors also said 
that OPM's guidance for implementing human capital programs could 
sometimes be overly restrictive and burdensome. For example, some 
directors said that OPM's internal approval and evaluation processes 
for personnel demonstration projects needed to be streamlined to make 
the program more practical.[Footnote 23] One director told us, for 
instance, that her agency had considered applying as a demonstration 
project but demurred because officials at her agency viewed OPM's 
requirements as too burdensome.

It is important to note that human resources directors we interviewed 
also expressed interest in gaining increased flexibilities that would 
require changes in federal statute and thus are outside of OPM's 
authority to change independently. Directors commented on such areas as 
decreasing some of the limitations and parameters of allowable 
personnel demonstration projects. As we noted in recent testimony, OMB 
and the Congress have key roles in improving human capital management 
governmentwide, including the important responsibility of determining 
the scope and appropriateness of additional human capital flexibilities 
agencies may seek through legislation.[Footnote 24] In recent testimony 
on using strategic human capital management to drive transformational 
change, we noted the potential benefits of providing additional 
flexibility in the government's personnel systems by suggesting, for 
example, that the Congress may wish to explore the benefits of allowing 
agencies to apply to OPM on a case-by-case basis (i.e., case 
exemptions) for authority to establish more flexible pay systems for 
certain critical occupations or, even more broadly, allowing OPM to 
grant governmentwide authority for all agencies (i.e., class 
exemptions) to use more flexible pay systems for their critical 
occupations.[Footnote 25]

A More Comprehensive Clearinghouse and Increased Information Sharing 
about Flexibilities Could Better Assist Agencies:

In our December 2002 report on human capital flexibilities, we noted 
that one of the key factors for effectively using flexibilities is 
educating agency managers and employees on the availability of these 
flexibilities as well as about the situations where the use of those 
flexibilities is most appropriate. Ultimately the flexibilities within 
the personnel system are only beneficial if the managers and 
supervisors who would carry them out are aware of not only their 
existence but also the best manner in which they could be used. With a 
comprehensive clearinghouse and broad information sharing about 
flexibilities, OPM can greatly assist agencies in educating their 
managers and supervisors as well as preparing their human capital 
managers for their consultative role regarding the best manner in which 
the full range of flexibilities should be implemented.[Footnote 26] 
This information would also be useful to support OPM's oversight of 
agencies' use of personnel flexibilities.

OPM has not, however, fully maximized its efforts to make human capital 
flexibilities and effective practices more widely known to agencies. 
Although OPM has made efforts to inform agencies of what flexibilities 
are generally available and why their use is important, OPM has yet to 
take full advantage of its ability to compile, analyze, and distribute 
information about when, where, and how the broad range of flexibilities 
are being used, and should be used, to help agencies meet their human 
capital management needs. Human resources directors we interviewed 
frequently brought up that OPM needs to take further determined action 
on this issue. One human resources director said, for example, that OPM 
should be setting benchmarks and identifying best practices for using 
flexibilities. Another director added that OPM should provide agencies 
with different scenarios of how flexibilities can be used. Another 
director commented that OPM needs to develop more educational and 
training aids to inform agency officials about these best practices. 
Yet another director added that OPM should evaluate the effectiveness 
of many different flexibilities and share the results with other 
agencies.

OPM officials told us that they do not generally know which federal 
agencies have done effective jobs in using specific flexibilities nor 
which practices these agencies employed to produce effective results. 
OPM could use its outreach and information-sharing efforts to more 
thoroughly identify which federal agencies are specifically using the 
various flexibilities in effective ways and reporting on the particular 
practices that these agencies are using to implement their 
flexibilities. Examination of information from OPM's database of 
federal civilian employees, the Central Personnel Data File, could help 
OPM in such analysis, including identifying possible correlations 
between an agency's use of flexibilities and factors such as employees' 
occupations, grade levels, and duty stations. This compilation, 
analysis, and distribution of information could also include research 
OPM conducts or sponsors that may shed light on effective practices for 
implementing existing flexibilities.

OPM could also use this analysis of agencies' use of flexibilities in 
its oversight role. OPM's new Human Capital Assessment and 
Accountability Framework provides guidance for agencies to maximize 
their human capital management and is being used by OPM to evaluate 
agencies' progress. For example, under one of the framework's six 
standards for success,[Footnote 27] key questions to consider include 
the following:

* Does the agency use flexible compensation strategies to attract and 
retain quality employees who possess mission-critical competencies?

* Does the agency provide work/life flexibilities, facilities, 
services, and programs to make the agency an attractive place to work?

The information gathered on personnel flexibilities could assist OPM in 
its assessment of this standard. In addition, OPM has the 
responsibility to not only review whether agencies are maximizing the 
use of personnel flexibilities, but also, along with agencies, ensure 
that flexibilities are being used fairly and are consistent with the 
merit principles and other national goals and include appropriate 
safeguards.

Additional Efforts to Identify New Flexibilities Needed:

The human resource directors we interviewed said that OPM could do more 
to assist agencies in identifying additional human capital 
flexibilities that could be authorized. The information gathered on 
agencies' use of flexibilities could also be used to gain greater 
insight into agencies' needs related to additional flexibilities that 
might be helpful for agencies' management of their human capital. In 
our discussions with OPM about its efforts in assisting agencies with 
flexibilities, OPM officials told us that it was not feasible to 
identify or track all agency requests for additional flexibilities 
because such requests are received throughout the organization and 
range from casual questions to formal requests for exceptions or 
demonstration projects. Tracking such requests, however, could assist 
OPM in gaining a clearer picture of agency concerns and requests for 
additional tools and flexibilities as well as more comprehensively 
documenting agency needs for the benefit of policymakers as statutory 
and regulatory changes are proposed and considered. The recently 
legislated Chief Human Capital Officers Council, chaired by the OPM 
Director, could also aid in disseminating information about effective 
human capital practices. We have reported that the use of the similar 
interagency councils of chief financial officers and chief information 
officers to, among other things, share information about effective 
practices, was one of the major positive public management developments 
over the past decade.[Footnote 28]

Once OPM determines that additional flexibilities are needed, it could 
actively work to build consensus to support needed legislation. As 
noted earlier, OPM actively supported legislation in the last Congress 
to authorize additional flexibilities to agencies. Specifically, OPM 
drafted and supported a significant portion of the proposed Managerial 
Flexibility Act of 2001. OPM could continue to support such legislation 
and identify additional personnel flexibilities that are needed.

Conclusions:

The ineffective use of flexibilities can significantly hinder the 
ability of federal agencies to recruit, hire, retain, and manage their 
human capital. To deal with their human capital challenges, it is 
important for agencies to assess and determine which human capital 
flexibilities are the most appropriate and effective for managing their 
workforces. As we previously reported, to ensure more effective use of 
human capital flexibilities, it is important that agencies (1) plan 
strategically and make targeted investments, (2) ensure stakeholder 
input in developing policies and procedures, (3) educate managers and 
employees on the availability and use of flexibilities, (4) streamline 
and improve administrative processes, (5) build accountability into 
their systems, and (6) change their organizational cultures. By more 
effectively using flexibilities, agencies would be in a better position 
to manage their workforces, assure accountability, and transform their 
cultures to address current and emerging demands.

OPM provides the necessary link to agencies to accomplish their goals 
by making existing human capital flexibilities more widely known and 
easier to use and by identifying additional flexibilities that can help 
agencies better manage their workforces. While it has taken some 
actions to inform agencies about what flexibilities are generally 
available and why their use is important, OPM has significant 
opportunities to strengthen its role as its moves forward to assist 
agencies as an integral part of the administration's human capital 
transformation efforts. By taking hold of these opportunities, OPM 
could more successfully aid agencies with more comprehensive 
information about the tools and authorities available to them for 
managing their workforce and the most effective ways that these 
flexibilities can be implemented. The new CHCO Council could be an 
excellent vehicle to assist in these areas.

Recommendations for Executive Action:

Given the importance of the effective use of flexibilities as a 
critical part of improved human capital management within the federal 
government and consistent with OPM's ongoing efforts in this regard, we 
recommend that the Director of OPM take the following actions.

* Review existing OPM regulations and guidance to determine whether 
they provide agencies with needed flexibility while also incorporating 
protection for employees.

* Work with and through the new Chief Human Capital Officers Council to 
more thoroughly research, compile, and analyze information on the 
effective and innovative use of human capital flexibilities and more 
fully serve as a clearinghouse in sharing and distributing information 
about when, where, and how the broad range of flexibilities are being 
used, and should be used, to help agencies meet their human capital 
management needs.

* Continue to identify additional personnel flexibilities needed to 
better manage the federal workforce and then develop and build 
consensus for needed legislation.

Agency Comments:

OPM commented on a draft of this report and agreed with the conclusions 
and recommendations. OPM pointed out that in future studies that 
address OPM leadership issues, in addition to surveying agency human 
resource directors, we should also survey agency chief operating 
officers. OPM believed that the chief operating officers have the "best 
perspective and the widest array of information about recruitment and 
retention issues." We agree that such future studies would benefit from 
the perspectives of chief operating officers. OPM's complete comments 
are shown in appendix II.

:

As agreed with your offices, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
from its date. At that time, we will send copies to the Chairman, 
Senate Committee on Governmental Affairs, and the Chairman and Ranking 
Minority Member, House Committee on Government Reform, and other 
interested congressional parties. We will also send copies to the 
Director of OPM. We also will make copies available to others upon 
request. In addition, the report will be available at no charge on the 
GAO Web site at http://www.gao.gov.

If you have any questions about this report, please contact me on (202) 
512-6806. Key contributors to this report are listed in appendix III.

[See PDF for image]

[End of figure]

J. Christopher Mihm
Director, Strategic Issues:

Signed by J. Christopher Mihm:

[End of section]

Appendixes:

Appendix I: Objectives, Scope, and Methodology:

This report is the second of two reports responding to a request from 
the Senate Committee on Governmental Affairs and two of its 
subcommittees regarding the use of human capital flexibilities in 
managing agency workforces. The objectives of our first report, issued 
in December 2002, were to provide information on (1) actions that 
federal agencies can take to more effectively implement human capital 
flexibilities and (2) agency and union officials' views related to the 
use of human capital flexibilities.[Footnote 29] The objectives of this 
report were to provide information on actions that the Office of 
Personnel Management (OPM) has taken to facilitate the effective use of 
human capital flexibilities throughout the federal government as well 
as what additional actions OPM might take in this regard. Our work in 
responding to this request was conducted in two phases. Phase one of 
our work primarily involved surveying and interviewing the human 
resources directors from the 24 largest departments and agencies. Phase 
two of our work involved conducting semi-structured interviews with 
managers and supervisors, human resources officials, and local union 
representatives from seven federal agencies we selected for more 
detailed review.[Footnote 30] This report was developed primarily from 
our work during phase one.

To respond to the objectives of this report, we gathered information 
from a variety of sources using several different data collection 
techniques. During phase one of our work, we interviewed 
representatives from OPM, the federal government's human resources 
agency; Merit Systems Protection Board, a federal agency that hears and 
decides civil service cases, reviews OPM regulations, and conducts 
studies of the federal government's merit systems; and the National 
Academy of Public Administration, an independent, nonpartisan, 
nonprofit, congressionally chartered organization that assists 
federal, state, and local governments in improving their performance. 
We interviewed representatives of these three organizations to gather 
background information on the federal government's experiences with and 
use of human capital flexibilities and OPM's role in assisting agencies 
in their use of personnel flexibilities. We also reviewed numerous 
reports issued by these organizations on governmentwide human capital 
issues, the use of various human capital flexibilities in federal 
agencies, and the role of OPM. In addition, we reviewed previous GAO 
reports on a broad range of human capital issues.

In the fall of 2001, we also gathered information for our objectives by 
conducting semistructured interviews with the human resources directors 
of the 24 largest federal departments and agencies. To produce a 
general summary of the human resources directors' views, we first 
reviewed their responses to the open-ended questions we had posed to 
them. Based on our analysis of those responses, we identified a set of 
recurring themes and then classified each director's responses in 
accord with these recurring themes. At least two staff reviewers 
collectively coded the responses from each of the 24 interviews and the 
coding was verified when entered into a database we created for our 
analysis. In addition, prior to our interviews with the 24 human 
resources directors, each of the 24 officials completed a survey of 
seven closed-ended questions dealing with agencies' use of human 
capital flexibilities, OPM's role related to these flexibilities, and 
the federal hiring process.

To update this information, we resurveyed the 24 individuals serving in 
the agencies' human resources director positions in the fall of 2002, 
asking the same seven questions. During the period between the 2001 and 
2002 surveys, 16 of the 24 individuals serving in the positions of 
human resources directors had changed. Table 1 shows the questions from 
these surveys along with a summary of the answers provided. For each 
item, respondents were to indicate the strength of their perception on 
a 5-point scale, from "little or no extent" to "very great extent.":

Our audit work on both phases of our review was done from May 2001 
through November 2002. We conducted our audit work in accordance with 
generally accepted government auditing standards.

Table 1: Human Resources Directors' Responses to GAO Questionnaire on 
Human Capital Flexibilities (Fall 2001 and Fall 2002):

1. To what extent are managers and supervisors within your 
department/agency aware of the human capital flexibilities available to 
them?; Fall 2001; Little or no extent: 1; Some 
extent: 2; Moderate extent: 14; Great extent: 7; Very great extent: 0; 
No basis to judge/NA: 0.

Fall 2002; Little or no extent: 0; Some extent: 1; Moderate extent: 
13; Great extent: 10; Very great extent: 0; No basis to judge/NA: 0.

2. To what extent has the U.S. Office of Personnel Management (OPM) 
assisted your department/agency in using human capital flexibilities 
that are already available to your department/agency?; Fall 2001; 
Little or no extent: 1; Some extent: 5; Moderate extent: 9; Great
extent: 6; Very great extent: 3; No basis to judge/NA: 0.

Fall 2002; Little or no extent: 2; Some extent: 6; Moderate extent: 9; 
Great extent: 4; Very great extent: 3; No basis to judge/NA: 0.

3. To what extent are you satisfied with the role that OPM has played 
in helping your department/agency use these available human capital 
flexibilities?; Fall 2001; Little or 
no extent: 0; Some extent: 7; Moderate extent: 8; Great
extent: 7; Very great extent: 0; No basis to judge/NA: 2.

Fall 2002; Little or no extent: 2; Some
extent: 5; Moderate extent: 9; Great
extent: 4; Very great extent: 3; No basis to judge/NA: 1.

4. To what extent has OPM assisted your department/agency in 
identifying additional human capital flexibilities that could be 
authorized?; Fall 2001; Little or 
no extent: 4; Some extent: 10; Moderate extent: 4; Great
extent: 3; Very great extent: 0; No basis to judge/NA: 3.

Fall 2002; Little or no extent: 4; Some
extent: 9; Moderate extent: 5; Great
extent: 3; Very great extent: 1; No basis to judge/NA: 2.

5. To what extent are you satisfied with the role that OPM has played 
in helping your department/agency identify additional human capital 
flexibilities that could be authorized?; Fall 2001; Little or 
no extent: 3; Some
extent: 9; Moderate extent: 6; Great
extent: 3; Very great extent: 0; No basis to judge/NA: 3.

Fall 2002; Little or no extent: 5; Some
extent: 6; Moderate extent: 4; Great
extent: 4; Very great extent: 2; No basis to judge/NA: 3.

6. To what extent is the time needed to fill a position, or "hiring 
time," a problem within your department/agency?; Fall 2001; Little or 
no extent: 0; Some extent: 2; Moderate extent: 7; Great
extent: 13; Very great extent: 2; No basis to judge/NA: 0.

Fall 2002; Little or no extent: 0; Some
extent: 3; Moderate extent: 8; Great
extent: 10; Very great extent: 3; No basis to judge/NA: 0.

7. Overall, would you say that OPM has helped or hindered the hiring 
process in your department/agency?; Fall 2001; Little or 
no extent: 0; Some extent: 5; Moderate extent: 5; Great
extent: 11; Very great extent: 2; No basis to judge/NA: 1.

Fall 2002; Little or no extent: 2; Some
extent: 2; Moderate extent: 9; Great
extent: 7; Very great extent: 3; No basis to judge/NA: 1.

Source: GAO survey data.

Note: For the Fall 2001 and Fall 2002 surveys, N=24.

[End of table]

[End of section]

Appendix II: Comments from the Office of Personnel Management:

OFFICE OF THE DIRECTOR:

UNITED STATES OFFICE OF PERSONNEL MANAGEMENT WASHINGTON, DC 20415-1000:

April 24, 2003:

Mr. J. Christopher Mihm Director, Strategic Issues General Accounting 
Office Washington DC 20548:

Dear Mr. Mihm:

Thank you for the opportunity to comment on the General Accounting 
Office (GAO) draft report OPM Can Better Assist Agencies in Using 
Personnel Flexibilities. (GAO-03-428):

Before commenting more specifically on the contents of the report, I 
want to bring to your attention one aspect of the fundamental 
methodology you employed in exploring how well the Office of Personnel 
Management (OPM) has been assisting agencies. We have found that agency 
human resources directors are an energetic and important source of 
expertise on the human resources operations and opportunities facing 
their agencies. We have also found that agency chief operating 
officers, the individuals primarily responsible for implementing the 
President's Management Agenda, as well as conducting the overall 
administration of their organizations, often have the best perspective 
and the widest array of information about recruitment and retention 
issues across their agencies. For that reason, I urge you to poll their 
perceptions in any future studies intended to address broad-based 
leadership issues.

Having said that, I do appreciate that the report acknowledges the 
considerable work we at OPM have done to exercise our leadership in 
promoting the appropriate use of human resources management 
flexibilities in federal agencies. It mentions, for example, that our 
web site offers a handbook on available flexibilities and provides a 
clearinghouse of information on best practices in performance 
management and accountability. The report also credits us with working 
to bring about additional flexibilities, citing our studies on the pay 
system and the hiring process, and our efforts to streamline the 
process for implementing demonstration projects and for expanding the 
use of flexibilities proven useful in those projects.

It should also be noted that the OPM web site provides numerous 
resources on the human resources management flexibilities available to 
agencies, such as in-depth guidance, fact sheets, frequently asked 
questions, and sample model agency plans. This guidance covers 
recruitment and relocation bonuses, retention allowances, the student 
loan repayment program, special salary rates, superior qualifications 
appointments and other pay-setting flexibilities, and alternative work 
schedules.

Still, the report calls on us to do more to determine how these 
flexibilities are being used and to disseminate information about their 
most effective use. We agree with GAO and 
believe that the initiatives we have taken, most importantly our 
reorganization, will lay the groundwork for more aggressive and 
productive efforts.

We are now restructured, with new leadership and a clear focus on 
helping agencies make the best use of their human capital. The newly 
formed Division for Human Capital Leadership and Merit Systems 
Accountability includes human capital officers, who have been 
coordinating closely with the Office of Management and Budget (OMB) 
over the past year, to help agencies develop strategic human capital 
management plans. Most of those agencies are now beginning to implement 
those plans, and we are ready to explore with agencies what personnel 
flexibilities work best for them and share our findings with agencies 
facing similar challenges. As we work with agencies to develop a more 
strategic approach to human capital management, they will be able to 
make a business case for additional flexibilities that can help them 
meet specific goals. OPM has encouraged and will continue to encourage 
agencies to use these business cases to align the use of human 
resources management flexibilities with their overall budget 
strategies.

OPM welcomes GAO's suggestion to "more thoroughly research, compile, 
and analyze information on the effective and innovative use of 
flexibilities." We are looking forward to combining our assessments of 
human resource flexibilities with the work of the Chief Human Capital 
Officers Council established under Title XIII of the Homeland Security 
Act of 2002. We will work closely with the new Council to promote the 
use of the additional flexibilities provided in the Act.

In addition, the President's budget for FY 2004 includes an additional 
$2.5 million to expand and enhance our program evaluation efforts. 
Information from improved program evaluation will be applied to 
enhancing guidance on the use of flexibilities.

OPM also recognizes the need to communicate with agencies at all levels 
and will be focusing our field staff to promote and monitor agency 
efforts at the bureau and installation levels, ensuring that managers 
throughout the organization are aware of flexibilities and are using 
them appropriately. For example, OPM will soon be issuing its report to 
Congress on the agencies' use of the Federal student loan repayment 
program in Fiscal Year 2002. The report provides a comprehensive 
summary of how the student loan repayment program is being used and the 
extent to which the program has been successful in helping agencies 
achieve their recruitment and retention goals.

OPM recognizes that the federal personnel system must become more 
varied and flexible. We will continue reviewing the existing OPM 
regulations and guidance with a renewed focus on identifying useful 
changes, as well as exploring broader interpretations of regulations. 
OPM's newly formed Division for Strategic Human Resources Policy 
includes a human resources studies unit that will perform in-depth 
planning and analysis
to identify policy needs. At the same time it is critically important 
that OPM's regulations be clear, flexible, and relevant to agency needs 
and be interpreted in a way that provides needed assistance and 
flexibility for agencies' human capital management programs.

Additionally, OPM intends to continue identifying legislative options 
for additional flexibilities, as well as encourage efforts to bring 
about governmentwide authorization and implementation of innovative 
practices and flexibilities that have been sufficiently tested and 
considered successful. OPM was gratified to see one of the 
flexibilities that it has successfully tested through numerous 
demonstration projects, category grouping, enacted governmentwide 
through the recent Homeland Security Act of 2002, and will continue to 
champion the use of such successful personnel flexibilities. In 
addition to actively supporting passage of proposed legislation that 
would enhance flexibilities and provide more latitude, OPM will 
increase other legislative efforts.

OPM is also aware of the need to educate the agencies. GAO's report 
notes that human resources directors for two-thirds of the agencies 
contacted had changed during the period between the 2001 and the 2002 
surveys. Armed with copies of the documents listed above, our outreach 
groups, strike forces, and human capital officers will seek 
opportunities to consult with these human resources directors and keep 
them abreast of available flexibilities. These OPM representatives will 
serve as liaisons to the agencies, facilitating the effective use of 
these personnel flexibilities. OPM will also assist agencies in 
identifying and developing additional flexibilities to help manage our 
greatest asset, human capital, in building successful, high-performance 
organizations.

GAO's report makes reference to an ongoing example of OPM's outreach 
efforts to educate agencies, i.e., the Department of Education. 
However, we would appreciate the opportunity to clarify Education's 
current initiatives and OPM's role in them as they are contained in the 
GAO report. We have been an active partner in the Department of 
Education's agency's comprehensive analysis of its workforce, 
personnel, and management issues in an effort to identify ways to 
improve its human capital system. While a demonstration project is one 
of the flexibilities under consideration, no project is currently being 
implemented at the Department of Education.

Finally, OPM appreciates your support for legislative remedies to 
buttress our efforts to expand the application of flexibilities that 
have proven to be successful in demonstration projects and to enhance 
the flexibilities provided for in the Homeland Security Act of 2002. We 
acknowledge GAO's vital interest in improving human capital management 
and continue to welcome your counsel.

Sincerely,


Coles Kay James 
Director:

Signed by Coles Kay James:

[End of section]

Appendix III: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

J. Christopher Mihm or Edward Stephenson, (202) 512-6806:

Acknowledgments:

In addition to the persons above, K. Scott Derrick, Charlesetta Bailey, 
Tom Beall, Ridge Bowman, Karin Fangman, Molly K. Gleeson, Judith 
Kordahl, Shelby D. Stephan, Gary Stofko, Mike Volpe, and Scott 
Zuchorski made key contributions to this report.

(450158):

:

FOOTNOTES

[1] U.S. General Accounting Office, A Model of Strategic Human Capital 
Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002).

[2] U.S. General Accounting Office, Human Capital: Effective Use of 
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-
2 (Washington, D.C.: Dec. 6, 2002).

[3] U.S. Office of Personnel Management, Human Resources Flexibilities 
and Authorities in the Federal Government (Washington, D.C.: Updated 
July 25, 2001).

[4] For additional information on OPM's restructuring efforts see our 
report: Major Management Challenges and Program Risks: Office of 
Personnel Management (GAO-03-115, January 2003).

[5] Pub. L. No. 107-296, Nov. 25, 2002.

[6] The President's Management Agenda includes five governmentwide 
initiatives: the strategic management of human capital, competitive 
sourcing, improved financial performance, budget and performance 
integration, and expanded electronic government.

[7] U.S. General Accounting Office, Major Management Challenges and 
Program Risks: Office of Personnel Management, GAO-03-115 (Washington, 
D.C.: January 2003).

[8] National Academy of Public Administration, Revitalizing Federal 
Management: Managers and Their Overburdened Systems (Washington, D.C.: 
1983).

[9] GAO-02-373SP.

[10] Title 5 laws (or requirements) refer to those personnel management 
laws, procedures, and associated functions generally applicable to 
federal employees. Most federal personnel laws governing topics such as 
classification, appointment, pay and benefits, and adverse action are 
contained in Title 5. Title 5 also contains laws unrelated to federal 
personnel issues, such as the Administrative Procedure Act and the 
Freedom of Information Act, that are also applicable to federal 
agencies.

[11] U.S. Office of Personnel Management, HRM Policies and Practices in 
Title 5-Exempt Organizations (Washington, D.C.: August 1998).

[12] U.S. Office of Personnel Management, Demonstration Projects and 
Alternative Personnel Systems: HR Flexibilities and Lessons Learned 
(Washington, D.C.: 2001).

[13] S. 1612, 107th Cong., 1ST sess.

[14] GAO-03-2.

[15] U.S. Office of Personnel Management, A Fresh Start for Federal 
Pay: The Case for Modernization (Washington, D.C.: April 2002).

[16] During the period between the 2001 and 2002 surveys, 16 of the 24 
individuals serving in the positions of human resources directors had 
changed.

[17] The recently enacted Homeland Security Act of 2002 establishes an 
Interagency Chief Human Capital Officer Council, which could replace 
the Human Resources Management Council.

[18] This requirement for workforce planning and restructuring analyses 
is contained in OMB Bulletin No. 01-07, dated May 8, 2001.

[19] GAO-01-357T. 

[20] U.S. General Accounting Office, Results-Oriented Cultures: Using 
Balanced Expectations to Manage Senior Executive Performance, GAO-02-
966 (Washington, D.C.: Sept. 27, 2002).

[21] Unless waived by OPM or an agency pursuant to a grant of authority 
by OPM, an amount equal to the annuity will be deducted from the 
reemployed annuitant's salary when the federal civilian retiree is 
reemployed. See 5 U.S.C. 8344 and 8468 and 5 CFR part 553.

[22] See 5 CFR 315, Subpart H.

[23] Guidance on developing, implementing, and evaluating an OPM-
sponsored personnel demonstration project can be found in OPM's 
Demonstration Projects Handbook and OPM's Demonstration Projects 
Evaluation Handbook.

[24] U.S. General Accounting Office, Human Capital: Meeting the 
Governmentwide High-Risk Challenge, GAO-01-357T (Washington, D.C.: 
Feb. 1, 2001).

[25] U.S. General Accounting Office, Managing For Results: Using 
Strategic Human Capital Management to Drive Transformational Change, 
GAO-02-940T (Washington, D.C.: July 15, 2002).

[26] We discussed agency actions to shift their human capital offices 
from primarily compliance activities to consulting activities in our 
report: Human Capital: Selected Agency Actions to Integrate Human 
Capital Approaches to Attain Mission Results (GAO-03-446, April 2003).

[27] The six human capital standards for success in OPM's Human Capital 
Assessment and Accountability Framework are strategic alignment, 
workforce planning and deployment, leadership and knowledge management, 
results-oriented performance culture, talent, and accountability.

[28] U.S. General Accounting Office, Government Management: 
Observations on OMB's Management Leadership Efforts, GAO/T-GGD/AIMD-
99-65 (Washington, D.C.: Feb. 4, 1999).

[29] U.S. General Accounting Office, Human Capital: Effective Use of 
Flexibilities Can Assist Agencies in Managing Their Workforces, GAO-03-
2 (Washington, D.C.: Dec. 6, 2002).

[30] The seven agencies were the Department of the Air Force, General 
Services Administration, Internal Revenue Service, International Trade 
Administration, U.S. Mint, Department of State, and Veterans Benefits 
Administration.

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