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Report to Congressional Committees: 

July 2005: 

Human Capital: 

DOD's National Security Personnel System Faces Implementation 
Challenges: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-730]: 

GAO Highlights: 

Highlights of GAO-05-730, a report to Congressional Committees

Why GAO Did This Study: 

The Department of Defense’s (DOD) new personnel system¾the National 
Security Personnel System (NSPS)¾will have far-reaching implications 
not just for DOD, but for civil service reform across the federal 
government. The National Defense Authorization Act for Fiscal Year 2004 
gave DOD significant authorities to redesign the rules, regulations, 
and processes that govern the way that more than 700,000 defense 
civilian employees are hired, compensated, promoted, and disciplined. 
In addition, NSPS could serve as a model for governmentwide 
transformation in human capital management. However, if not properly 
designed and effectively implemented, it could severely impede progress 
toward a more performance- and results-based system for the federal 
government as a whole. 

This report (1) describes DOD’s process to design its new personnel 
management system, (2) analyzes the extent to which DOD’s process 
reflects key practices for successful transformations, and (3) 
identifies the most significant challenges DOD faces in implementing 
NSPS. 

What GAO Found: 

DOD’s current process to design its new personnel management system 
consists of four stages: (1) development of design options, (2) 
assessment of design options, (3) issuance of proposed regulations, and 
(4) statutory public comment, meet and confer with employee 
representatives, and congressional notification. DOD’s initial design 
process was unrealistic and inappropriate. However, after a strategic 
reassessment, DOD adjusted its approach to reflect a more cautious and 
deliberative process that involved more stakeholders. 

DOD’s NSPS design process generally includes four of six selected key 
practices for successful organizational transformations. First, DOD and 
OPM have developed a process to design the new personnel system that is 
supported by top leadership in both organizations. Second, from the 
outset, a set of guiding principles and key performance parameters have 
guided the NSPS design process. Third, DOD has a dedicated team in 
place to design and implement NSPS and manage the transformation 
process. Fourth, DOD has established a timeline, albeit ambitious, and 
implementation goals. The design process, however, is lacking in two 
other practices. First, DOD developed and implemented a written 
communication strategy document, but the strategy is not comprehensive. 
It does not identify all internal stakeholders and their concerns, and 
does not tailor key messages to specific stakeholder groups. Failure to 
adequately consider a wide variety of people and cultural issues can 
lead to unsuccessful transformations. Second, while the process has 
involved employees through town hall meetings and other mechanisms, it 
has not included employee representatives on the working groups that 
drafted the design options. It should be noted that 10 federal labor 
unions have filed suit alleging that DOD failed to abide by the 
statutory requirements to include employee representatives in the 
development of DOD’s new labor relations system authorized as part of 
NSPS. A successful transformation must provide for meaningful 
involvement by employees and their representatives to gain their input 
into and understanding of the changes that will occur. 

DOD will face multiple implementation challenges. For example, in 
addition to the challenges of continuing to involve employees and other 
stakeholders and providing adequate resources to implement the system, 
DOD faces the challenges of ensuring an effective, ongoing two-way 
communication strategy and evaluating the new system. In recent 
testimony, GAO stated that DOD’s communication strategy must include 
the active and visible involvement of a number of key players, 
including the Secretary of Defense, for successful implementation of 
the system. Moreover, DOD must ensure sustained and committed 
leadership after the system is fully implemented and the NSPS Senior 
Executive and the Program Executive Office transition out of existence. 
To provide sustained leadership attention to a range of business 
transformation initiatives, like NSPS, GAO recently recommended the 
creation of a chief management official at DOD. 

What GAO Recommends: 

GAO is making recommendations to improve the comprehensiveness of the 
NSPS communication strategy and to evaluate the impact of NSPS. DOD did 
not concur with one recommendation and partially concurred with two 
others. 

www.gao.gov/cgi-bin/getrpt?GAO-05-730. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Derek B. Stewart at (202) 
512-5559 or stewartd@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

NSPS Design Process Evolved Into a Phased Approach: 

DOD's NSPS Design Process Generally Reflects Practices of Successful 
Transformations, but Some Key Practices Are Lacking: 

DOD Faces Multiple Challenges in Implementing NSPS: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: DOD Labor Unions, Estimated Number of Employees 
Represented, and Membership in the United Defense Workers Coalition: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: DOD Labor Unions, Estimated Number of Employees Represented, 
and Membership in the United Defense Workers Coalition (as of June 
2005): 

Figures: 

Figure 1: Key Elements of the NSPS Design Process: 

Figure 2: NSPS Design and Implementation Team Organization: 

Figure 3: NSPS Timeline and Implementation Goals: 

Abbreviations: 

DOD: Department of Defense: 

NSPS: National Security Personnel System: 

OIPT: Overarching Integrated Product Team: 

OPM: Office of Personnel Management: 

PEO: Program Executive Office: 

Letter July 14, 2005: 

Congressional Committees: 

The Department of Defense (DOD) is designing a new civilian personnel 
management system--the National Security Personnel System (NSPS)--that 
represents a huge undertaking for DOD, given its massive size and 
geographically and culturally diverse workforce. The National Defense 
Authorization Act for Fiscal Year 2004[Footnote 1] gave DOD significant 
authorities to redesign the rules, regulations, and processes that 
govern the way that more than 700,000 defense civilian employees are 
hired, compensated, promoted, and disciplined. The Congress provided 
these authorities to DOD in response to the department's position that 
the inflexibility of federal personnel systems was one of the most 
important constraints on its ability to attract, retain, reward, and 
develop a civilian workforce to meet the national security mission of 
the 21st century. In addition, DOD's new personnel management system 
will have far-reaching implications, not just for DOD, but for civil 
service reform across the federal government. NSPS could serve as a 
model for governmentwide transformation in human capital management. 
However, if not properly designed and effectively implemented, NSPS 
could severely impede progress toward a more performance-and results- 
based personnel management system for the federal government as a 
whole. 

Implementing large-scale change management initiatives, such as 
organizational transformations, can be a complex endeavor. Experience 
shows that failure to adequately address--and often even consider--a 
wide variety of personnel and cultural issues is at the heart of 
unsuccessful transformations. In our prior work, we identified nine key 
practices and lessons learned from major public and private sector 
organizational mergers, acquisitions, and transformations.[Footnote 2] 
These practices are to (1) ensure top leadership drives the 
transformation, (2) establish a coherent mission and integrated 
strategic goals to guide the transformation, (3) focus on a key set of 
principles and priorities at the outset of the transformation, (4) set 
implementation goals and a timeline to build momentum and show progress 
from day one, (5) dedicate an implementation team to manage the 
transformation process, (6) use the performance management system to 
define responsibility and assure accountability for change, (7) 
establish a communication strategy to create shared expectations and 
report related progress, (8) involve employees to obtain their ideas 
and gain their ownership for the transformation, and (9) build a world- 
class organization. 

In recent years, we have examined various aspects of DOD's human 
capital management of its civilian workforce. For example, we have 
reported on gaps in the defense components' civilian human capital 
plans, including the absence of results-oriented performance 
measures[Footnote 3] and the need for comprehensive strategic workforce 
plans and for data on the skills and competencies needed to 
successfully accomplish future missions.[Footnote 4] Prior to the 
enactment of NSPS legislation in November 2003, we raised a number of 
critical issues about the proposed system in a series of testimonies 
before three congressional committees.[Footnote 5] In recent testimony 
on DOD's transformation efforts, we indicated that DOD is challenged in 
its efforts to affect fundamental business management reform, such as 
NSPS, and indicated that our ongoing work continues to raise questions 
about DOD's chances of success.[Footnote 6] Our recently released 
report on the fiscal challenges the federal government faces in the 
21st century identifies several issues regarding DOD's civilian 
workforce that are ripe for reexamination, including whether DOD is 
pursuing the design and implementation of NSPS in a manner that 
maximizes the chance of success.[Footnote 7] To address challenges 
inherent in business transformation reforms, such as NSPS, we recently 
recommended installing a chief management official at DOD. 

In 2001, we designated strategic human capital management as a high- 
risk area because of the federal government's long-standing lack of a 
consistent strategic approach to marshaling, managing, and maintaining 
the human capital needed to maximize government performance and ensure 
its accountability.[Footnote 8] The strategic management of human 
capital was identified as a top priority of the President's Management 
Agenda in 2001, and the Congress also has sought to elevate human 
capital issues through a wide range of initiatives.[Footnote 9] 
Significant changes in how the federal workforce is managed are under 
way, but strategic human capital management remains high risk because 
federal human capital strategies are still not appropriately 
constituted to meet current and emerging challenges. These challenges 
include providing the sustained leadership essential to completing 
multiyear transformations, developing effective strategic workforce 
plans, creating effective hiring processes and using flexibilities and 
incentives to retain critical talent and reshape workforces, and 
reforming performance management systems so that pay and awards are 
linked to performance and organizational results. 

We prepared this report under the Comptroller General's authority and 
are providing it to you to assist the Congress in evaluating federal 
human capital management systems. This report addresses DOD's efforts 
to design its new civilian personnel management system. Specifically, 
this report (1) describes DOD's process to design its personnel 
management system, (2) analyzes the extent to which DOD's process 
reflects key practices for successful transformations, and (3) 
identifies the most significant challenges DOD faces in implementing 
NSPS. 

To describe DOD's design process, we interviewed key agency officials 
at DOD and the Office of Personnel Management (OPM), as well as design 
team participants, DOD employee representatives, and experts in federal 
labor relations and federal adverse actions and personnel appeals 
systems. We also examined documents relevant to NSPS design efforts 
(e.g., focus group reports and town hall meeting schedules, 
requirements and other planning documents, and briefings on the results 
of various design options), and applicable laws and regulations 
governing federal civilian personnel management.[Footnote 10] Using six 
of the nine key practices for organizational transformations from our 
prior work, we determined the extent to which DOD's NSPS design process 
incorporated key practices of successful transformations. The six key 
practices that we used are: (1) ensuring that top leadership drives the 
transformation, (2) focusing on a key set of principles and priorities, 
(3) setting implementation goals and a timeline, (4) dedicating an 
implementation team, (5) establishing a communication strategy, and (6) 
involving employees. We did not evaluate the key practices 
"establishing a coherent mission and integrated strategic goals to 
guide the transformation" because in March 2003, we reported on the 
department's strategic planning efforts for civilian personnel and 
assessed whether DOD and selected defense components' goals and 
objectives contained in strategic plans for civilian personnel were 
aligned with overarching missions of the organizations.[Footnote 11] In 
addition, we did not evaluate the key practices of "using a performance 
management system to define responsibility and assure accountability 
for change" and "building a world-class organization" because DOD has 
considerable work ahead to design and implement NSPS and assess the 
overall system. To identify the most significant challenges DOD faced 
in developing NSPS, we interviewed key DOD, OPM, and other federal 
agency officials and DOD labor union representatives (referred to as 
employee representatives throughout this report) and reviewed and 
analyzed relevant documents. 

We conducted our review from October 2004 through June 2005 in 
accordance with generally accepted government auditing standards. 
Additional information on our scope and methodology can be found in 
appendix I. A list of recent GAO products related to DOD's civilian 
personnel management is included at the end of this report. 

Results in Brief: 

DOD's current process to design its new personnel management system 
consists of four stages: (1) development of design options, (2) 
assessment of design options, (3) issuance of proposed regulations, and 
(4) a statutory public comment period, a meet and confer period with 
employee representatives, and a congressional notification period. 
DOD's initial process to design NSPS was unrealistic and inappropriate 
because of a broad range of legal, policy, and technical issues that, 
according to OPM, needed to be addressed. However, after a strategic 
reassessment of the assumptions, roles, strategies, and schedules for 
the new system, DOD adjusted its approach to reflect a more cautious 
and deliberative process that involved more stakeholders, including 
OPM. Under the adjusted approach, senior experts representing various 
disciplines within DOD, OPM, and the Office of Management and Budget 
established a management framework to guide the design and 
implementation of NSPS, including a NSPS Senior Executive and a Program 
Executive Office (PEO), which was based on DOD's acquisition management 
model. In the first stage of the design process, the PEO formed six 
multidisciplinary design teams (referred to as working groups) that 
reviewed research on human capital approaches, received input from 
employees and employee representatives, and developed a range of 
potential design options. Second, the design options were assessed by 
an advisory group of senior DOD and OPM executives, who made 
recommendations for proposed regulations to the NSPS Senior Executive. 
The NSPS Senior Executive then submitted his recommendations to the 
Secretary of Defense and the Director of OPM for consideration as 
proposed NSPS regulations. Third, the Secretary and Director proposed 
draft NSPS regulations and jointly released them for public comment in 
the Federal Register on February 14, 2005. Fourth, the proposed 
regulations were subjected to a statutory 30-day public comment period, 
after which DOD held a 30-day meet and confer period with employee 
representatives. As allowed by statute, DOD extended the meet and 
confer process. Lastly, DOD is to engage in a 30-day congressional 
notification period. 

DOD's NSPS design process generally reflects four of six selected key 
practices for successful transformations. First, DOD and OPM have 
developed a process to design the new personnel system that is 
supported by top leadership in both organizations. Top leadership that 
is clearly involved in transformations provides stability and sets the 
direction, pace, and tone for the transformation. Second, from the 
outset, a set of guiding principles and key performance parameters have 
guided the NSPS design process. These principles and performance 
parameters can serve as core values for human capital management at 
DOD. Third, DOD has a dedicated team in place to design and implement 
NSPS and manage the transformation process. Dedicating an 
implementation team is important to ensuring that the day-to-day 
management of the transformation receives the focused, full-time 
attention needed to be successful. Fourth, DOD has established a 
timeline, albeit ambitious, and implementation goals for its new 
personnel system. While it is appropriate to develop and integrate NSPS 
within the department in a quick and seamless manner, moving too 
quickly or prematurely can significantly raise the risk of doing it 
wrong. Having an ambitious timeline is reasonable only insofar as it 
does not impact the quality of the human capital management system that 
is created. The design process, however, is lacking in two other 
practices. First, DOD developed and implemented a written communication 
strategy document that provides a structured and planned approach to 
communicate timely and consistent information about NSPS, but the 
strategy is not comprehensive. For example, the written communication 
strategy document does not identify all key internal stakeholders and 
their concerns. Failure to adequately consider a wide variety of people 
and cultural issues can lead to unsuccessful transformations. 
Furthermore, the written communication strategy document does not 
tailor key messages to specific stakeholder groups of employees, such 
as DOD human resource personnel, executives and flag officers, and 
supervisors and managers, even though these employee groups may have 
divergent interests and specific information needs. Tailoring 
information is important because it helps employees feel that their 
concerns are specifically addressed. An organization must develop a 
comprehensive communications strategy that reaches out to employees, 
customers, and stakeholders and seeks to genuinely engage them in the 
transformation process. Second, while the process involved employees 
through town hall meetings and other mechanisms, it has not included 
employee representatives on the working groups that drafted the design 
options for the new system. It should be noted that 10 federal labor 
unions have filed suit alleging that DOD failed to abide by the 
statutory requirements to include employee representatives in the 
development of DOD's new labor relations system authorized as part of 
NSPS. The composition of the team is important because it helps 
employees see that they are being represented and that their views are 
being considered in the decision-making process. A successful 
transformation must provide for meaningful involvement by employees and 
their representatives to, among other things, gain their input into and 
understanding of the changes that will occur in the organization. 

As DOD implements its new personnel management system, it will face 
multiple challenges in both the early and later stages of 
implementation. 

Early Implementation Challenges: 

* Establishing an overall communications strategy. Ensuring an 
effective and ongoing two-way communications strategy that creates 
shared expectations about, and reports related progress on, the 
implementation of the new system is a key practice of a change 
management initiative. DOD acknowledges that a comprehensive outreach 
and communications strategy is essential for designing and implementing 
NSPS, but the proposed regulations do not identify a process for the 
continuing involvement of employees during the implementation of NSPS. 

* Providing adequate resources for implementing the new system. Another 
challenge facing DOD is to allocate necessary resources to ensure 
sufficient implementation, training, and evaluation of the new system. 
Implementation of NSPS will result in costs for, among other things, 
developing and delivering training, modifying automated personnel 
information systems, and starting up and sustaining the National 
Security Labor Relations Board. DOD estimates that the overall cost 
associated with implementing NSPS will be approximately $158 million 
through fiscal year 2008. However, it has not completed an 
implementation plan for NSPS, including an information technology plan 
and a training plan; thus, the full extent of the resources needed to 
implement NSPS may not be well understood at this time. 

* Involving employees and other stakeholders in implementing the 
system. DOD faces a significant challenge in involvingæand continuing 
to involveæits employees, employee representatives, and other 
stakeholders in implementing NSPS. For example, while providing for 
continuing collaboration with employee representatives, DOD does not 
identify a process for the continuing involvement of employees in the 
implementation of NSPS. High-performing organizations have found that 
actively involving employees and stakeholders, such as unions or other 
employee associations, when developing results-oriented performance 
management systems helps improve employees' confidence and belief in 
the fairness of the system and increases their understanding and 
ownership of organizational goals and objectives. This involvement must 
be active and continuing if employees are to gain a sense of 
understanding and ownership of the changes that are being made. 

Later Implementation Challenges: 

* Ensuring sustained and committed leadership. As DOD implements this 
large-scale organizational change, its challenge will be to elevate, 
integrate, and institutionalize leadership responsibility for NSPS to 
ensure its success. DOD may face a future leadership challenge when the 
NSPS Senior Executive and the PEO transition out of existence once NSPS 
is fully implemented in 2009. According to a PEO official, at that 
time, ongoing implementation responsibility for NSPS would come under 
the Civilian Personnel Management Service, which is part of the Office 
of the Under Secretary of Defense for Personnel and Readiness. One way 
to ensure sustained leadership over NSPS (and all DOD's business 
transformation efforts) would be to create the position of Deputy 
Secretary of Defense for Management, who would serve as the 
department's chief management official. This position would elevate, 
integrate, and institutionalize within DOD the high-level attention 
essential for ensuring that a strategic business transformation plan 
such as NSPS--as well as the business policies, procedures, systems, 
and processes that are necessary for successfully implementing and 
sustaining overall business transformation efforts--are implemented and 
sustained. 

* Evaluating the new personnel management system. DOD's ongoing 
challenge will be to continually review and revise NSPS based on data- 
driven lessons learned and changing needs in the work environment. 
Evaluating the impact of NSPS provides DOD managers with more authority 
and responsibility for managing the new system. Collecting and 
analyzing data will be essential for measuring the effectiveness of 
these approaches in support of DOD's mission and goals. Adequate 
evaluation procedures of NSPS would facilitate better congressional 
oversight; allow for any midcourse corrections; assist DOD in 
benchmarking its progress with other efforts; and help document best 
practices and lessons learned with employees, stakeholders, other 
federal agencies, and the public. DOD is planning to establish 
procedures to evaluate the implementation of its new personnel 
management system. 

We are making three recommendations to improve the comprehensiveness of 
the NSPS communication strategy and to evaluate the impact of NSPS. DOD 
provided written comments on a draft of this report that did not concur 
with one recommendation and partially concurred with two others. In not 
concurring with our recommendation to identify all key internal 
stakeholders and their concerns, the department stated that, among 
other things, it adopted a multifaceted communications outreach 
strategy to inform and involve key stakeholders. However, our review of 
DOD's written communication strategy document showed that not all key 
internal stakeholders and their concerns were identified. In partially 
concurring with our recommendation to customize key messages to be 
delivered to groups of employees to meet their divergent needs, the 
department noted that, among other things, it recently released NSPS 
brochures tailored to key internal stakeholders. Our review of these 
brochures showed that they do in fact tailor and customize key messages 
for some, but not all, employee groups. Furthermore, we believe that 
DOD's written communication strategy document should serve as the 
single, comprehensive source of DOD's key messages, which are tailored 
to and customized for all employee groups. In partially concurring with 
our recommendation to develop procedures for evaluating NSPS that 
contain results-oriented performance measures and reporting 
requirements, the department stated that it has begun developing an 
evaluation plan and will ensure that the plan contains results-oriented 
performance measures and reporting mechanisms. If the department 
follows through with this effort, we believe that it will be responsive 
to our recommendation. 

Background: 

The National Defense Authorization Act for Fiscal Year 2004[Footnote 
12] provided DOD with authority to establish (1) a pay and performance 
management system, (2) an appeals process, and (3) a labor relations 
system--which together comprise NSPS. The legislation permits 
significant flexibility for designing NSPS, allowing for a new 
framework of rules, regulations, and processes to govern how defense 
civilian employees are hired, compensated, promoted, and disciplined. 
The law granted DOD certain exemptions from laws governing federal 
civilian personnel management found in Title 5 of the U.S. 
Code.[Footnote 13] The Congress provided these flexibilities in 
response to DOD's position that the inflexibility of federal personnel 
systems was one of the most important constraints to the department's 
ability to attract, retain, reward, and develop a civilian workforce to 
meet the national security mission of the 21st century. 

Initial NSPS Design Process: 

The initial proposals for NSPS were developed by DOD and were based on 
a 2002 compilation of best practices generated by demonstration 
projects that experimented with different personnel management 
concepts. After these proposals were sent to OPM for review, OPM 
identified a broad range of legal, policy, and technical concerns, and 
also noted that the labor-management relations proposal was developed 
without any prior OPM involvement or union input. OPM also indicated 
that the initial proposals had been crafted with only token employee 
involvement, and it noted a high level of concern expressed by 
congressional oversight committees, stakeholders, and constituent 
groups. In addition to OPM, assistant secretaries for the military 
services' manpower organizations also expressed concerns that NSPS as 
designed would not work. 

Subsequently, the Secretary of Defense established a 3-week 
reassessment of system requirements, process issues, personnel and 
communication strategies, and program schedules and milestones. The 
Overarching Integrated Product Team (OIPT), an advisory group co- 
chaired by the Principal Deputy Under Secretary of Defense for 
Personnel and Readiness and OPM, and including the military services' 
assistant secretaries for manpower and reserve affairs, oversaw this 
reassessment. 

Employees Covered by NSPS: 

NSPS labor relations provisions will be implemented across the entire 
department once final NSPS regulations are issued and effective, and 
they will apply to all DOD employees currently covered by the labor 
relations provisions of Title 5, U.S. Code, Chapter 71. In contrast, 
NSPS regulations governing the new pay and performance management 
system and appeals process will be phased in and will not apply to some 
employees, as stipulated by law (e.g., intelligence personnel and 
employees in DOD's laboratory demonstration organizations). The 
authorizing legislation stipulates that these latter regulations may 
not apply to organizations with more than 300,000 employees until the 
Secretary of Defense determines and certifies that the department has a 
performance management system in place that meets the statutory 
criteria established for NSPS. 

The first phase of implementation--Spiral One--will provide the basis 
for this certification prior to the deployment of Spiral Two. Spiral 
One includes approximately 300,000 general schedule defense civilian 
employees, who will be converted to the new system over a period of 18 
months. DOD currently plans to initiate Spiral One, beginning in early 
fiscal year 2006. Spiral Two will include the remainder of DOD's 
eligible workforce, including wage-grade employees. Spiral Three will 
apply to demonstration laboratory employees no earlier than October 1, 
2008, and then only to the extent the Secretary of Defense determines 
that NSPS provides greater personnel management flexibilities to the 
laboratories than those currently implemented. 

DOD's Employee Unions: 

According to DOD, almost two-thirds of its more than 700,000 civilian 
employees are represented by 43 labor unions, including over 1,500 
separate bargaining units. Table 1 in appendix II lists current DOD 
labor unions, the estimated number of employees represented by each 
union, and which unions belong to the United Defense Workers 
Coalition.[Footnote 14] According to a DOD official, since 2000, 
defense civilian employee membership in DOD's labor unions has remained 
about the same; however, the number of unions has dropped from about 60 
unions to the current 43 unions, primarily the result of mergers and 
consolidation among the unions. 

Practices and Implementation Steps for Mergers and Transformations: 

In our prior work, we identified key practices and lessons learned from 
major public and private sector organizational mergers, acquisitions, 
and transformations.[Footnote 15] This work was undertaken to help 
federal agencies implement successful cultural transformations in 
response to governance challenges. While no two mergers or 
transformation efforts are exactly alike and the "best" approach 
depends on a variety of factors specific to each context, there was 
general agreement on a number of key practices, which are as follows: 

1. Ensure top leadership drives the transformation. Leadership must set 
the direction, pace, and tone and provide a clear, consistent rationale 
that brings everyone together behind a single mission. 

2. Focus on a key set of principles and priorities at the outset of the 
transformation. A clear set of principles and priorities serves as a 
framework to help the organization create a new culture and drive 
employee behaviors. 

3. Set implementation goals and a timeline to build momentum and show 
progress from day one. Goals and a timeline are essential because the 
transformation could take years to complete. 

4. Dedicate an implementation team to manage the transformation 
process. A strong and stable team is important to ensure that the 
transformation receives the needed attention to be sustained and 
successful. 

5. Establish a communication strategy to create shared expectations and 
report related progress. The strategy must reach out to employees, 
customers, and stakeholders and engage them in a two-way exchange. 

6. Involve employees to obtain their ideas and gain their ownership for 
the transformation. Employee involvement strengthens the process and 
allows them to share their experiences and shape policies. 

NSPS Design Process Evolved Into a Phased Approach: 

DOD's current process to design NSPS is divided into four stages: (1) 
development of options for the personnel system, (2) assessment of the 
options and translation into recommended proposals, (3) issuance of 
proposed regulations, and (4) a statutory public comment period, a meet 
and confer period with employee representatives, and a congressional 
notification period. As discussed earlier, DOD's initial process to 
design NSPS was unrealistic and inappropriate. However, after a 3-week 
reassessment, DOD adjusted its approach and attempted to create a more 
cautious and deliberate process that would involve all of the key 
stakeholders, including OPM. At this time, DOD adopted a management 
framework to guide the design of NSPS based on DOD's acquisition 
management model and adopted an analytical framework to identify system 
requirements as well as a phased approach to implementing the new 
system, also based on the acquisition management model.[Footnote 16] 
Figure 1 presents the four stages in DOD's current process in terms of 
the key organizational elements, inputs, and outputs. 

Figure 1: Key Elements of the NSPS Design Process: 

[See PDF for image]

[End of figure]

In the first stage, the NSPS PEO[Footnote 17] convened six 
multidisciplinary design teams--called working groups--that were 
functionally aligned to cover the following personnel program areas: 
(1) compensation (classification and pay banding); (2) performance 
management; (3) hiring, assignment, pay setting, and workforce shaping; 
(4) employee engagement; (5) adverse action and appeals; and (6) labor 
relations. The working groups were co-chaired by DOD and OPM, and they 
were largely staffed from the defense components. The working groups 
reviewed and analyzed data from alternative federal personnel systems 
and laboratory and acquisition demonstration projects, research 
materials from the Department of Homeland Security's personnel system 
design process, and private industry practices. According to DOD, the 
working groups also received input and participation from DOD human 
resources practitioners, attorneys, financial management experts, and 
equal employment opportunity specialists. The working groups also 
reviewed input gathered from DOD employee and employee representatives. 
The PEO was responsible for conducting outreach to employees and 
employee representatives, in conjunction with NSPS program managers in 
the DOD components;[Footnote 18] their efforts included 106 focus 
groups, more than 50 town hall meetings worldwide, and 10 meetings with 
DOD employee representatives. The working groups provided a broad range 
of options for the OIPT in September and October 2004; they did not 
prioritize the design options. 

In the second stage of the design process, OIPT assessed the design 
options, and then submitted them to the NSPS Senior Executive in 
November 2004. The Senior Executiveæappointed by the Secretary of 
Defense to design and implement NSPS on his behalf--reviewed and 
approved the design options and presented them as proposed enabling 
regulations to submit to the Secretary of Defense and the Director of 
OPM for a decision. Throughout this period, the OIPT, PEO, and working 
group members continued to participate, both in drafting and reviewing 
the proposed regulations. 

In the third stage, the Secretary of Defense and Director of OPM 
reviewed the proposals submitted by the NSPS Senior Executive. After 
finalizing the proposed regulations, the Secretary and Director jointly 
released them for public comment in the Federal Register on February 
14, 2005. 

In the fourth stage, the NSPS proposed regulations were subjected to a 
statutory 30-day public comment period, after which DOD held a 30-day 
meet and confer period (which began on April 18, 2005), with employee 
representatives to discuss their views; the meetings were facilitated 
by the Federal Mediation and Conciliation Service. As allowed by 
statute, DOD extended the meet and confer process. Lastly, DOD is to 
engage in a 30-day congressional notification period. As called for in 
the authorizing legislation, the proposed regulations are subject to 
change based on consideration of formal comments received during the 30-
day public comment period and the results of a 30-day meet and confer 
process with employee representatives. As provided for in the 
authorizing legislation, DOD can immediately implement those parts of 
the regulations upon which they have reached agreement with employee 
representatives. DOD can implement those parts of the proposed 
regulations not agreed to only after another 30 calendar days have 
elapsed after (1) notifying the Congress of the decision to proceed 
with implementation and (2) explaining why implementation is 
appropriate. 

DOD's NSPS Design Process Generally Reflects Practices of Successful 
Transformations, but Some Key Practices Are Lacking: 

DOD's NSPS design process generally reflects four of six key practices 
we identified that have consistently been found at the center of 
successful transformations. The design process generally reflects the 
following four practices. First, DOD and OPM have developed a process 
to design the new personnel system that is supported by top leadership 
in both organizations. Second, from the outset, a set of guiding 
principles have guided the NSPS design process. Third, DOD has a 
dedicated team in place to design and implement NSPS and manage the 
transformation process, to include program managers from DOD 
components. Fourth, DOD has established a timeline, albeit ambitious, 
and implementation goals for implementing its new personnel system. The 
design process, however, does not fully reflect two other key 
practices. First, DOD developed and implemented a written communication 
strategy document, but it is not comprehensive. Second, while the NSPS 
design has involved employees through town hall meetings and other 
mechanisms, it has not included employee representatives on the working 
groups that drafted the design options for the new system. 

Top DOD and OPM Leadership Drives Human Capital Transformation: 

DOD and OPM have developed a process to design DOD's new human capital 
resources management system that is supported by top leadership in both 
organizations. As previously discussed, DOD's initial process to design 
NSPS was unrealistic and inappropriate; however, after a strategic 
reassessment, DOD adjusted its approach to reflect a more cautious, 
deliberative process that involved top DOD and OPM leadership. In our 
report on key practices for successful transformations, we noted that 
top leadership that is clearly and personally involved in 
transformations provides stability and an identifiable source for 
employees to rally around during tumultuous times.[Footnote 19] In 
addition, we noted that leadership should set the direction, pace, and 
tone for the transformation. In our prior reports and testimonies, we 
observed that top leadership must play a critical role in creating and 
sustaining high-performing organizations.[Footnote 20]

Senior leaders from DOD and OPM are directly involved in the NSPS 
design process. For example, the Secretary of Defense tasked the 
Secretary of the Navy to be the NSPS Senior Executive overseeing the 
implementation of NSPS. Also, the Under Secretary of Defense for 
Personnel and Readiness and the NSPS Senior Executive provided an open 
letter to all DOD civilian employees stating that DOD is tasked to 
design a transformation system for the department's civilian employees 
that supports its national security mission while treating workers 
fairly and protecting their rights. In addition, the Principal Deputy 
Under Secretary of Defense for Personnel and Readiness, the Assistant 
Secretaries for Manpower and Reserve Affairs from each military 
service, and the OPM Senior Advisor to the Director for the Department 
of Defense are members of an integrated executive management teamæthe 
OIPTæthat, among other things, provides overall policy and strategic 
advice on the implementation of NSPS. Similarly, senior-level 
executives from DOD and OPM are members of a group, known as the Senior 
Advisory Group, that provides advice on general NSPS conceptual, 
strategic, and implementation issues. Finally, senior leaders from DOD 
and the military components participated in town hall meetings at DOD 
installations worldwide to discuss the concept and design elements of 
NSPS. 

Experience shows that successful major change management initiatives in 
large private and public sector organizations can often take at least 5 
to 7 years. This length of time and the frequent turnover of political 
leadership in the federal government have often made it difficult to 
obtain the sustained and inspired attention to make needed changes. The 
development of the position of Deputy Secretary of Defense for 
Management, who would act as DOD's Chief Management Officer, is 
essential to elevate, integrate, and institutionalize responsibility 
for the success of DOD's overall business transformation efforts, 
including its new personnel management system. 

As DOD embarks on a large-scale change initiative, such as DOD's new 
personnel management system, ensuring sustained and committed 
leadership is crucial in developing a vision, initiating organizational 
change, maintaining open communications, and creating an environment 
that is receptive to innovation. Without the clear and demonstrated 
commitment of agency top leadership, organizational cultures will not 
be transformed and new visions and ways of doing business will not take 
root. 

Guiding Principles and Key Performance Parameters Steer Design Process: 

During the strategic reassessment of the NSPS design process, DOD and 
OPM senior leadership developed a set of guiding principles to direct 
efforts throughout all phases of NSPS development. We have reported 
that in bringing together the originating components, the new 
organization must have a clear set of principles and priorities that 
serve as a framework to help the organization create a new culture and 
drive employee behaviors.[Footnote 21] Principles are the core values 
of the new organization and can serve as an anchor that remain valid 
and enduring while organizations, personnel, programs, and processes 
may change. Focusing on these principles and priorities helps the 
organization maintain its drive towards achieving the goals of the new 
transformation. 

According to DOD, its guiding principles translate and communicate the 
broad requirements and priorities outlined in the legislation into 
concise, understandable requirements that underscore the department's 
purpose and intent in creating NSPS. The NSPS guiding principles are: 

* put mission first--support national security goals and strategic 
objectives,

* respect the individual--protect rights guaranteed by law,

* value talent, performance, leadership and commitment to public 
service,

* be flexible, understandable, credible, responsive, and executable,

* ensure accountability at all levels,

* balance personnel interoperability with unique mission requirements, 
and: 

* be competitive and cost effective. 

Senior DOD and OPM leadership also approved a set of key performance 
parameters, which define the minimum requirements or attributes of 
NSPS. The key performance parameters are: 

* high-performing workforce and management: employees and supervisors 
are compensated and retained based on performance and contribution to 
mission,

* agile and responsive workforce management: workforce can be easily 
sized, shaped, and deployed to meet changing mission requirements,

* credible and trusted: system assures openness, clarity, 
accountability, and merit principles,

* fiscally sound: aggregate increases in civilian payroll, at the 
appropriations level, will conform to Office of Management and Budget 
fiscal guidance, and managers will have flexibility to manage to budget,

* supporting infrastructure: information technology support, and 
training and change management plans are available and funded, and: 

* schedule: NSPS will be operational and demonstrate success prior to 
November 2009. 

These principles and key performance parameters can serve as core 
values for human capital management at DODævalues that define the 
attributes that are intrinsically important to what the organization 
does and how it will do it. Furthermore, they represent the 
institutional beliefs and boundaries that are essential to building a 
new culture for the organization. Finally, they appropriately identify 
the need to support the mission and employees of the department, 
protect basic civil service principles, and hold employees accountable 
for performance. 

Team Established to Manage the NSPS Design and Implementation Process: 

As previously discussed, DOD established a team to design and implement 
NSPS and manage the transformation process. Dedicating a strong and 
stable design and implementation team that will be responsible for the 
transformation's day-to-day management is important to ensuring that it 
receives the focused, full-time attention needed to be sustained and 
successful. Specifically, the design and implementation team is 
important to ensuring that various change initiatives are sequenced and 
implemented in a coherent and integrated way. Because a transformation 
process is a massive undertaking, the implementation team must have a 
"cadre of champions" to ensure that changes are thoroughly implemented 
and sustained over time. Establishing networks can help the design and 
implementation team conduct the day-to-day activities of the merger or 
transformation and help ensure that efforts are coordinated and 
integrated. To be most effective, establishing clearly defined roles 
and responsibilities within this network assigns accountability for 
parts of the implementation process, helps reach agreement on work 
priorities, and builds a code of conduct that will help all teams to 
work effectively. 

The Secretary of Defense appointed a NSPS Senior Executive to, among 
other things, design, develop, and establish NSPS. Under the Senior 
Executive's authority, the PEO was established as the central policy 
and program office to conduct the design, planning and development, 
deployment, assessment, and full implementation of NSPS. Specifically, 
its responsibilities include designing the labor relations, appeals, 
and human resource/pay for performance systems; developing a 
communication strategy and training strategy; modifying personnel 
information technology; and drafting joint enabling regulations and 
internal DOD implementing regulations. As the central DOD-wide program 
office, the PEO provides direction and oversight of the components' 
NSPS program managers who are dual-hatted under their parent component 
and the NSPS PEO. These program managers also serve as their 
components' action officers and participate in the development of NSPS 
and plan and implement the deployment of NSPS. Figure 2 shows the 
organization of the NSPS design and implementation team. 

Figure 2: NSPS Design and Implementation Team Organization: 

[See PDF for image] 

[A] Includes the U.S. Navy and the U.S. Marine Corps. 

[B] Represents defense agencies, DOD field activities, the Joint Chiefs 
of Staff, Office of the Inspector General, U.S. Court of Appeals for 
the Armed Services, and Office of the Secretary of Defense. 

[End of figure] 

Ambitious Timeline and Implementation Goals Established: 

DOD established an ambitious 18-month timeline and implementation goals 
for completing the design process and beginning the phased 
implementation of NSPS. We have reported that successful practices of 
mergers and transformations have noted that the establishment of a 
timeline with specific milestones allows stakeholders to track the 
organization's progress towards its goals.[Footnote 22] Figure 3 shows 
the current timeline and implementation goals for designing and 
implementing NSPS. 

Figure 3: NSPS Timeline and Implementation Goals: 

[See PDF for image] 

[End of figure] 

Although DOD established a clear timeline with specific implementation 
goals, they have allotted about 6 months for completing the design 
process and beginning implementation of NSPS (as shown in the shaded 
area of figure 3). Specifically, the authorizing legislation provides 
for a meet and confer process for not less than 30 calendar days with 
the employee representatives in order to attempt to reach agreement. 
However, as allowed by statute, DOD extended the 30-day meet and confer 
period with employee representatives. After the meet and confer process 
is concluded, the Secretary of Defense must notify the Congress of 
DOD's intent to implement any portions of the proposal where agreement 
has not been reached, but only after 30 calendar days have elapsed 
after notifying the Congress of the decision to implement those 
provisions. In addition, DOD and OPM must jointly develop and issue the 
final NSPS regulations, which must go through an interagency 
coordination process before they are published in the Federal Register. 
Also, DOD must develop and conduct in-depth and varied training for its 
civilian employees, military and civilian supervisors, and managers. 
Moreover, DOD must modify its existing automated human resource 
information systems, including personnel and payroll transaction 
process systems departmentwide, before NSPS can become operational. 
Finally, DOD plans to roll out the NSPS labor relations system and 
establish the National Security Labor Relations Board before the 
initial roll out of the NSPS performance management system in early 
fiscal year 2006. The board must be staffed with both board members as 
well as about 100 professional staff, which will support the board. 

A large-scale organizational change initiative, such as DOD's new 
personnel management system, is a substantial commitment that will take 
years before it is completed, and therefore must be carefully and 
closely managed. As a result, it is essential to establish and track 
implementation goals and establish a timeline to pinpoint performance 
shortfalls and gaps and suggest midcourse corrections. While it is 
appropriate to develop and integrate personnel management systems 
within the department in a quick and seamless manner, moving too 
quickly or prematurely can significantly raise the risk of doing it 
wrong. Having an ambitious timeline is reasonable only insofar as it 
does not impact the quality of the human capital management system that 
is created. In recent hearings on the NSPS proposed regulations, we 
testified that DOD's new personnel management system will have far- 
reaching implications for the management of the department and for 
civil service reform across the federal government.[Footnote 23] We 
further testified that NSPS could, if designed and implemented 
properly, serve as a model for governmentwide transformation. However, 
if not properly designed and implemented, NSPS could impede progress 
toward a more performance-and results-based system for the federal 
government as a whole. 

Communication Strategy Not Comprehensive: 

DOD developed and implemented a written communication strategy document 
that provides a structured and planned approach to communicate timely 
and consistent information about NSPS, but this strategy is not 
comprehensive. It does not contain some elements that we have 
identified as important to successful communication during 
transformations. As a result, the written communication strategy 
document may not facilitate two-way communication between employees, 
employee representatives, and management, which is central to forming 
effective partnerships that are vital to the success of any 
organization. 

Specifically, the strategy does not identify all key internal 
stakeholders and their concerns. For example, the strategy acknowledges 
that employee representatives play an important role in the design and 
implementation of NSPS, but it does not identify them as a key 
stakeholder. Instead, DOD's written communication strategy document 
characterizes union leadership as a "detractor," in part due to their 
criticism of NSPS. Consequently, DOD identified the following four 
objectives as its most urgent communications priorities, which are to 
(1) demonstrate the rationale for and the benefits of NSPS, (2) express 
DOD's commitment to ensuring that NSPS is applied fairly and equitably 
throughout the organization, (3) demonstrate openness and transparency 
in the design and process of converting to NSPS, and (4) mitigate and 
counter any potential criticism of NSPS from such detractors as unions 
and their support groups. Experience shows that failure to adequately 
consider a wide variety of people and cultural issues can lead to 
unsuccessful transformations. 

Furthermore, although the written communication strategy document 
identified key messages for those internal and external stakeholders 
that are identified, it does not tailor these messages to specific 
stakeholder groups. For example, the strategy does not tailor key 
messages to such groups of employees as human resource personnel, DOD 
executives and flag officers, supervisors, and managers, even though 
these employees may have divergent interests and information needs. 
Tailoring information helps employees to feel that their concerns are 
specifically addressed. We have reported that organizations undergoing 
a transformation should develop a comprehensive communications strategy 
that reaches out to employees, customers, and stakeholders and seeks to 
genuinely engage them in the transformation process and facilitate a 
two-way honest exchange with and allow for feedback from employees, 
customers, and stakeholders.[Footnote 24]

NSPS Design Process has Involved Employees: 

While the design process has involved employees through many 
mechanisms, including focus groups, town hall meetings, a NSPS Web site 
for employee comments, and meetings with employee representatives, it 
has not included employee representatives on the working groups that 
drafted the design options.[Footnote 25] The composition of the team is 
important because it helps employees see that they are being 
represented and that their views are being considered in the decision- 
making process. A successful transformation must provide for meaningful 
involvement by employees and their representatives to, among other 
things, gain their input into and understanding of the changes that are 
occurring in the organization. Employee involvement strengthens the 
transformation process by including frontline perspectives and 
experiences. Further, employee involvement helps increase employee's 
understanding and acceptance of organizational goals and objectives, 
and gain ownership for new policies and procedures. Involving employees 
in planning helps to develop agency goals and objectives that 
incorporate insights about operations from a front-line perspective. It 
can also serve to increase employees' understanding and acceptance of 
organizational goals and improve motivation and morale. 

The PEO sponsored a number of focus group sessions and town hall 
meetings at various sites across DOD and around the world to provide 
employees and managers an opportunity to participate in the development 
of NSPS. During a 3-week period beginning in July 2004, over 100 focus 
groups were held throughout DOD, including overseas locations. The 
purpose of the focus groups was to elicit perceptions and concerns 
about current personnel policies and practices as well as new ideas 
from the DOD workforce to inform the NSPS design process. Separate 
focus groups were held for employees, civilian and military 
supervisors, and managers and practitioners from the personnel, legal, 
and equal employment opportunity communities. According to DOD 
officials, bargaining unit employees and employee representatives were 
invited to participate. DOD officials stated that over 10,000 comments, 
ideas, and suggestions were received during the focus group sessions 
and were summarized and provided to NSPS working groups for use in 
developing options for the labor relations, appeals, adverse actions, 
and personnel design elements of NSPS. 

In addition, town hall meetings were held and, according to DOD, are 
still being conducted at DOD facilities around the world. According to 
DOD officials, these town hall meetings have provided an opportunity to 
communicate with the workforce, provide the status of the design and 
development of NSPS, and solicit thoughts and ideas. The format for 
town hall meetings included an introductory presentation by a senior 
leader followed by a question and answer session where any employee in 
the audience was free to ask a question or make a comment. To 
facilitate the widest possible dissemination, some of the town hall 
meetings were broadcast live, as well as videotaped and rebroadcast on 
military television channels and Web sites. 

DOD's NSPS Web site was available for DOD employees as well as 
interested parties to view and comment on the proposed regulations as 
well as for the most recent information and announcements regarding 
NSPS. After the proposed NSPS regulations were published in the Federal 
Register, there was a 30-day public comment period, providing all 
interested parties the opportunity to submit comments and 
recommendations on the content of the proposal. The proposed 
regulations were published on February 14, 2005, and the 30-day comment 
period ended on March 16, 2005. During this time period, according to 
DOD, it received more than 58,000 comments. 

Prior to the publication of the proposed NSPS regulations, DOD and OPM 
conducted 10 joint meetings with officials of DOD's 43 labor unions to 
discuss NSPS design elements. According to DOD officials, these 
meetings involved as many as 80 union leaders at any one time, 
addressed a variety of topics, including (1) the reasons change is 
needed and the department's interests; (2) the results of 
departmentwide focus group sessions held with a broad cross-section of 
DOD employees; (3) the proposed NSPS implementation schedule; (4) 
employee communications; and (5) proposed design options in the areas 
of labor relations and collective bargaining, adverse actions and 
appeals, and pay and performance management. According to DOD 
officials, these meetings provided the opportunity to discuss the 
design elements, proposals under consideration for NSPS, and solicit 
employee representative feedback. 

According to DOD, the focus group sessions and town hall meetings, as 
well as the working groups and union meetings, assured that DOD 
employees, managers, supervisors, employee representatives, and other 
stakeholders were involved in and given ample opportunity to provide 
input into the design and implementation of NSPS. 

Opportunities for employee involvement were limited between the 
conclusion of the town hall meetings and focus groups in July 2004 and 
the publishing of the proposed NSPS regulations in February 2005; the 
primary means for employees to provide feedback during this time was 
through the NSPS Web site. 

DOD Faces Multiple Challenges in Implementing NSPS: 

As DOD implements its new personnel management system, it will face 
multiple implementation challenges in both the early and later stages 
of implementation. At recent hearings on the proposed NSPS regulations, 
we highlighted multiple challenges: (1) establishing an overall 
communications strategy, (2) providing adequate resources for the new 
system, (3) involving employees and other stakeholders in implementing 
the system, (4) ensuring sustained and committed leadership, and (5) 
evaluating the new personnel management system after it has been 
implemented.[Footnote 26]

Early Implementation Challenges: 

* Establishing an overall communications strategy. A significant 
challenge for DOD is to ensure an effective and ongoing two-way 
communications strategy, given its size, geographically and culturally 
diverse audiences, and different command structures across DOD 
organizations. We have reported that a communications strategy that 
creates shared expectations about, and reports related progress on, the 
implementation of the new system is a key practice of a change 
management initiative. The communications strategy must include the 
active and visible involvement of a number of key players, including 
the Secretary of Defense, and a variety of communication means and 
mediums for successful implementation of the system. DOD acknowledges 
that a comprehensive outreach and communications strategy is essential 
for designing and implementing its new personnel management system, but 
the proposed regulations do not identify a process for continuing 
involvement of employees in the planning, development, and 
implementation of NSPS. 

* Providing adequate resources for implementing the new system. 
Experience has shown that additional resources are necessary to ensure 
sufficient planning, implementation, training, and evaluation for human 
capital reform. According to DOD, the implementation of NSPS will 
result in costs for, among other things, developing and delivering 
training, modifying automated personnel information systems, and 
starting up and sustaining the National Security Labor Relations Board. 
Major cost drivers in implementing pay-for-performance systems are the 
direct costs associated with salaries and training. DOD estimates that 
the overall cost associated with implementing NSPS will be 
approximately $158 million through fiscal year 2008. However, it has 
not completed an implementation plan for NSPS, including an information 
technology plan and a training plan; thus, the full extent of the 
resources needed to implement NSPS may not be well understood at this 
time. 

* Involving employees and other stakeholders in implementing the 
system. DOD faces a significant challenge in involvingæand continuing 
to involveæits employees, employee representatives, and other 
stakeholders in implementing NSPS. DOD's proposed NSPS regulations, 
while providing for continuing collaboration with employee 
representatives, do not identify a process for the continuing 
involvement of employees and other stakeholders in the planning, 
development, and implementation of NSPS. The active involvement of all 
stakeholders will be critical to the success of NSPS. The involvement 
of employees and their representatives both directly and indirectly is 
crucial to the success of new initiatives, including implementing a pay-
for-performance system. High-performing organizations have found that 
actively involving employees and stakeholders, such as unions or other 
employee associations, when developing results-oriented performance 
management systems helps improve employees' confidence and belief in 
the fairness of the system and increases their understanding and 
ownership of organizational goals and objectives. This involvement must 
be early, active, and continuing if employees are to gain a sense of 
understanding and ownership of the changes that are being made. 

Later Implementation Challenges: 

* Ensuring sustained and committed leadership. As DOD implements this 
massive human capital reform, its challenge will be to elevate, 
integrate, and institutionalize leadership responsibility for NSPS to 
ensure its success. DOD may face a future leadership challenge when the 
NSPS Senior Executive and the PEO transition out of existence once NSPS 
is fully implemented. According to a PEO official, at that time, 
ongoing implementation responsibility for NSPS would come under the 
Civilian Personnel Management Service, which is part of the Office of 
the Under Secretary of Defense for Personnel and Readiness. In recent 
testimony on the transformation of DOD business operations, we stated 
that as DOD embarks on large-scale business transformation efforts, 
such as NSPS, the complexity and long-term nature of these efforts 
requires the development of an executive position capable of providing 
strong and sustained change management leadership across the 
department--and over a number of years and various 
administrations.[Footnote 27] One way to ensure such leadership would 
be to create by legislation a full-time executive-level II position for 
a chief management official, who would serve as the Deputy Secretary of 
Defense for Management. This position would elevate, integrate, and 
institutionalize the high-level attention essential for ensuring that a 
strategic business transformation plan--as well as the business 
policies, procedures, systems, and processes that are necessary for 
successfully implementing and sustaining overall business 
transformation efforts, like NSPS, within DOD--are implemented and 
sustained. In previous testimony on DOD's business transformation 
efforts, we identified the lack of clear and sustained leadership for 
overall business transformations as one of the underlying causes that 
has impeded prior DOD reform efforts.[Footnote 28]

* Evaluating the new personnel management system. Evaluating the impact 
of NSPS will be an ongoing challenge for DOD. This is especially 
important because NSPS would give managers more authority and 
responsibility for managing the new personnel system. High-performing 
organizations continually review and revise their human capital 
management systems based on data-driven lessons learned and changing 
needs in the work environment. Collecting and analyzing data will be 
the fundamental building block for measuring the effectiveness of these 
approaches in support of the mission and goals of the department. 

* According to DOD, the department is planning to establish procedures 
to evaluate the implementation of its new personnel management system. 
During testimony on the proposed NSPS regulations, we stated that DOD 
should consider conducting evaluations that are broadly modeled on 
demonstration projects. Under the demonstration project authority, 
agencies must evaluate and periodically report on results, 
implementation of the demonstration project, costs and benefits, 
impacts on veterans and other equal employment opportunity groups, 
adherence to merit system principles, and the extent to which the 
lessons learned from the project can be applied governmentwide. We 
further testified that a set of balanced measures addressing a range of 
results, and customer, employee, and external partner issues may also 
prove beneficial. An evaluation such as this would facilitate 
congressional oversight; allow for any midcourse corrections; assist 
DOD in benchmarking its progress with other efforts; and provide for 
documenting best practices and lessons learned with employees, 
stakeholders, other federal agencies, and the public. 

Conclusions: 

DOD's efforts to design and implement a new personnel management system 
represent a huge undertaking. However, if not properly designed and 
implemented, the new system could severely impede DOD's progress toward 
a more performance-and results-based system that it is striving to 
achieve. Although DOD's process to design its new personnel management 
system represents a phased, deliberative process, it does not fully 
reflect some key practices of successful transformations. Because DOD 
has not fully addressed all of these practices, it does not have a 
comprehensive written communication strategy document that effectively 
addresses employee concerns and their information needs, and 
facilitates two-way communication between employees, employee 
representatives, and management. Without a comprehensive written 
communication strategy document, DOD may be hampered in achieving 
employee buy-in, which could lead to an unsuccessful implementation of 
the system. 

In addition, evaluating the impact of NSPS will be an ongoing challenge 
for DOD. Although DOD has plans to establish procedures to evaluate 
NSPS, it is critical that these procedures be adequate to fully measure 
the effectiveness of the program. Specifically, adequately designed 
evaluation procedures include results-oriented performance measures and 
reporting requirements that facilitate DOD's ability to effectively 
evaluate and report on NSPS's results. Without procedures that include 
outcome measures and reporting requirements, DOD will lack the 
visibility and oversight needed to benchmark progress, make system 
improvements, and provide the Congress with the assessments needed to 
determine whether NSPS is truly the model for governmentwide 
transformation in human capital management. 

Recommendations for Executive Action: 

To improve the comprehensiveness of the NSPS communication strategy, we 
recommend that the Secretary of Defense direct the NSPS Senior 
Executive and NSPS Program Executive Office to take the following two 
actions: 

* Identify all internal stakeholders and their concerns. 

* Tailor and customize key messages to be delivered to groups of 
employees to meet their divergent interests and information needs. 

To evaluate the impact of DOD's new personnel management system, we 
recommend that the Secretary of Defense direct the NSPS Senior 
Executive and NSPS Program Executive Office to take the following 
action: 

* Develop procedures for evaluating NSPS that contain results-oriented 
performance measures and reporting requirements. These evaluation 
procedures could be broadly modeled on the evaluation requirements of 
the OPM demonstration projects. 

Agency Comments and Our Evaluation: 

DOD provided written comments on a draft of this report. The department 
did not concur with our recommendation to identify all key internal 
stakeholders and their concerns. The department partially concurred 
with our recommendation to tailor and customize key messages to be 
delivered to groups of employees to meet their divergent interests and 
information needs. Also, the department partially concurred with our 
recommendation to develop procedures for evaluating NSPS that contain 
results-oriented performance measures and reporting requirements. 

DOD did not concur with our recommendation that the department identify 
all key internal stakeholders and their concerns. The department stated 
that, among other things, it adopted a broad-based, event-driven 
approach to the design and implementation of NSPS that included a 
multifaceted communications outreach strategy to inform and involve key 
stakeholders, and that it took great care to ensure that materials and 
messages addressed stakeholders' concerns, both known and anticipated. 
However, our review of DOD's written communication strategy document 
showed that not all key internal stakeholders and their concerns were 
identified. For example, the written communication strategy document 
does not identify employee representatives as a key stakeholder but, 
instead, characterizes union leadership as "NSPS' biggest detractor." 
Since the development and implementation of the written communication 
strategy document, DOD notes that specific plans were developed to 
identify key internal and external stakeholders and provided key 
messages and communications products to inform those groups. DOD 
provided us with these plans after we provided the department with our 
draft report for comment. Our review of these plans shows that they are 
not comprehensive. For example, the plans for the most part do not 
identify employee representatives as a key stakeholder or identify 
their concerns. Consequently, we continue to believe that our 
recommendation has merit and should be implemented. 

DOD partially concurred with our recommendation that the department 
tailor and customize key messages to be delivered to groups of 
employees to meet their divergent interest and information needs. The 
department stated that it believes that it has been successful so far 
in developing, customizing, and delivering key messages to employees 
and provided us with several examples to illustrate its efforts. 
Although DOD's written communication strategy document contained key 
messages for some employee groups, the messages were general in content 
and not tailored to specific employee groups. DOD acknowledges that 
each stakeholder group has a unique focus and recently released NSPS 
brochures tailored to such groups of employees as human resource 
personnel, senior leaders, supervisors and managers, and employees. DOD 
provided us with these brochures after we provided the department with 
our draft report for comment. Our review of these brochures shows that 
they do in fact tailor and customize key messages for some, but not 
all, employee groups. Furthermore, we believe that DOD's written 
communication strategy document should serve as the single, 
comprehensive source of DOD's key messages, which are tailored to and 
customized for groups of employees. Consequently, we continue to 
believe that this recommendation has merit and should be implemented. 

DOD partially concurred with our recommendation to develop procedures 
for evaluating NSPS that contain results-oriented performance measures 
and reporting requirements that could be broadly modeled on the 
evaluation requirements of the OPM demonstration projects. The 
department stated that it has begun developing an evaluation plan and 
will ensure that the plan contains results-oriented performance 
measures and reporting mechanisms. If the department follows through 
with this effort, we believe that it will be responsive to our 
recommendation. 

DOD's comments are reprinted in appendix III. DOD also provided 
technical comments, which we have incorporated in the final report 
where appropriate. 

We are sending copies of this report to the Chairman and Ranking 
Member, Senate Committee on Armed Services; the Chairman and Ranking 
Member, Senate Committee on Homeland Security and Governmental Affairs; 
the Chairman and Ranking Member, Subcommittee on Oversight of 
Government Management, the Federal Workforce, and the District of 
Columbia, Senate Committee on Homeland Security and Governmental 
Affairs; the Chairman and Ranking Member, House Committee on Armed 
Services; the Chairman and Ranking Member, Subcommittee on the Federal 
Workforce and Agency Organization, House Committee on Government 
Reform; and other interested congressional parties. We also are sending 
copies to the Secretary of Defense and Director of the Office of 
Personnel Management. We will make copies available to other interested 
parties upon request. This report also will be made available at no 
charge on GAO's Web site at [Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-5559 or by e-mail at [Hyperlink, 
stewartd@gao.gov]. For further information on governmentwide human 
capital issues, please contact Eileen R. Larence, Director, Strategic 
Issues, at (202) 512-6512 or [Hyperlink, larencee@gao.gov]. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of the report. GAO staff who made major 
contributions to this report are listed in appendix IV. 

Signed by: 

Derek B. Stewart, Director: 
Defense Capabilities and Management: 

List of Congressional Committees: 

The Honorable John W. Warner: 
Chairman: 
The Honorable Carl Levin: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Susan M. Collins: 
Chairman: 
The Honorable Joseph I. Lieberman: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable George V. Voinovich: 
Chairman: 
The Honorable Daniel K. Akaka: 
Ranking Member: 
Subcommittee on Oversight of Government Management, the Federal 
Workforce, and the District of Columbia: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Duncan Hunter: 
Chairman: 
The Honorable Ike Skelton: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Jon C. Porter: 
Chairman: 
The Honorable Danny K. Davis: 
Ranking Member: 
Subcommittee on the Federal Workforce and Agency Organization: 
Committee on Government Reform: 
House of Representatives: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

In conducting our review of the Department of Defense's (DOD) National 
Security Personnel System (NSPS), we met with officials in key offices 
within DOD and the Office of Personnel Management (OPM) that have 
responsibility for designing and implementing DOD's new performance 
management system. We also met with DOD employee representatives, whose 
members are affected by the transformation. We conducted our work in 
Washington, D.C., at DOD, including the NSPS Program Executive Office 
(PEO) and NSPS Program Management Offices in the Army, the Navy, the 
Marine Corps, the Air Force, and Washington Headquarters Service. We 
also met with members of the NSPS Overarching Integrated Product Team 
(OIPT) and Senior Advisory Group. 

At OPM, we met with the Senior Advisor to the Director for the 
Department of Defense and Senior Policy Advisor and Chief Human Capital 
Officer in the Office of the Director. We also met with key officials 
in OPM's Office of Congressional Relations, Division for Strategic 
Human Resources Policy, Homeland Security and Intelligence Group in the 
Division for Human Capital Leadership and Merit System Accountability, 
and the Office of the Chief Financial Officer. In addition, we met with 
the OPM co-chairs of each of the DOD working groups that designed NSPS. 

We met with representatives from the United Defense Workers Coalition, 
which represents 36 DOD employee unions, as well as employee 
representatives for the Fraternal Order of Police and National 
Association of Independent Labor, which are not members of the 
Coalition. We contacted the other non-Coalition unions, but their 
representatives told us that they had not been actively involved in the 
NSPS design process and, therefore, declined our offer to meet with 
them. Finally, we met in Washington, D.C., with key officials in other 
federal agencies that are statutorily involved in the NSPS design 
process: Federal Labor Relations Authority, Federal Mediation and 
Conciliation Service, and U.S. Merit Systems Protection Board. 

To describe DOD's design process, we examined the authorizing 
legislation and other applicable laws and regulations and collected and 
analyzed documentary and testimonial information from key sources. We 
met with the Director and Deputy Director of the NSPS PEO and the DOD 
and OPM co-chairs of all six working groups; members of the OIPT, 
including the OPM co-chair, and Senior Advisory Group; DOD employee 
representatives; and experts in federal labor relations and federal 
adverse actions and personnel appeals systems. We also examined NSPS 
policy guidance, directives, draft regulations, instructions, manuals, 
and memorandums related to the design process and NSPS charters 
outlining the roles and responsibilities of the OIPT and PEO. 

To evaluate the extent to which DOD's process reflects elements of 
successful transformations, we reviewed prior GAO reports, testimonies, 
and forums on mergers and organizational transformations to identify 
assessment criteria, and we applied those criteria to the descriptive 
information collected for the first objective. Although there are a 
total of nine key practices of successful transformations, our 
evaluation focused on six key practices: (1) ensure top leadership 
drives the transformation, (2) focus on a key set of principles and 
priorities at the outset of the transformation, (3) set implementation 
goals and a timeline to build momentum and show progress from day one, 
(4) dedicate an implementation team to manage the transformation 
process, (5) establish a communication strategy to create shared 
expectations and report related progress, and (6) involve employees to 
obtain their ideas and gain their ownership for the transformation. 

We did not evaluate the key practice "establishes a coherent mission 
and integrated strategic goals to guide the transformation" because we 
have previously reported on the department's strategic planning efforts 
for civilian personnel and assessed whether DOD and selected defense 
components' goals and objectives contained in strategic plans for 
civilian personnel were aligned with overarching missions of the 
organizations. We did not apply two other key practices, "uses a 
performance management system to define responsibility and assure 
accountability for change" and "builds a world-class organization" 
because it would be premature to apply them to the NSPS design process 
given that DOD has considerable work ahead to design and implement NSPS 
and assess the overall system. 

To identify the most significant challenges DOD faced in developing 
NSPS, we interviewed officials from DOD, OPM, and other federal 
agencies as well as representatives from DOD unions. We also examined 
related documentation, previously identified, and reviewed prior GAO 
reports, testimonies, and observations related to these challenges. 

Data on DOD labor unions and the number of employees associated with 
each union were compiled by DOD from three sources: (1) the OPM book, 
entitled Union Recognition in the Federal Government, (2) data from the 
Defense Civilian Personnel Data System, and (3) a DOD survey of the 
military departments and defense agencies. The data are current as of 
June 2005. To assess the reliability of these data, we interviewed the 
DOD official responsible for compiling the data and performed some 
basic reasonableness checks of the data against other sources of 
information (e.g., previous DOD reports that identified DOD labor 
unions in past years and information directly from unions). However, we 
were unable to determine the reliability of the precise numbers of 
employees represented by each union. Because of this, and since some of 
the data are not current, these data are only sufficiently reliable for 
use as estimates rather than precise numbers of union employees. We use 
these data in appendix II to identify current DOD labor unions, an 
estimate of the number of employees represented by each union, and 
which unions belong to the United Defense Workers Coalition. 

We conducted our review from October 2004 through June 2005 in 
accordance with generally accepted government auditing standards. We 
include a comprehensive list of related GAO products on DOD's civilian 
personnel management at the end of this report. 

[End of section]

Appendix II: DOD Labor Unions, Estimated Number of Employees 
Represented, and Membership in the United Defense Workers Coalition: 

Table 1 lists current DOD labor unions, the estimated number of 
employees represented by each union, and which unions belong to the 
United Defense Workers Coalition. 

Table 1: DOD Labor Unions, Estimated Number of Employees Represented, 
and Membership in the United Defense Workers Coalition (as of June 
2005). 

Members of the United Defense Workers Coalition: 
DOD labor unions[A]: 

1. American Federation of Government Employees (AFGE); 
Estimated number of employees represented: 260,521. 

2. American Federation of Teachers (AFT); 
Estimated number of employees represented: 734. 

3. American Federation of State, County and Municipal Employees 
(AFSCME)[ B]; 
Estimated number of employees represented: 367. 

4. American Nurses Association (ANA); 
Estimated number of employees represented: 18. 

5. Antilles Consolidated Education Association (ACEA); 
Estimated number of employees represented: 463. 

6. Association of Civilian Technicians (ACT); 
Estimated number of employees represented: 22,173. 

7. Communications Workers of America (CWA)[C]; 
Estimated number of employees represented: 104. 

8. Fairchild Federal Employees Union (FFEU); 
Estimated number of employees represented: 646. 

9. Federal Education Association, Inc. (FEA); 
Estimated number of employees represented: 7,240. 

10. Hawaii Council of Defense Commissary Unions (HCDCU); 
Estimated number of employees represented: 454. 

11. International Association of Firefighters (IAFF); 
Estimated number of employees represented: 39. 

12. International Association of Machinists and Aerospace Workers 
(IAMAW); 
Estimated number of employees represented: 16,875. 

13. International Association of Tool Craftsman (IATC); 
Estimated number of employees represented: 17. 

14. International Brotherhood of Boilermakers (IBB)[D]; 
Estimated number of employees represented: Information not available. 

15. International Brotherhood of Electrical Workers (IBEW); 
Estimated number of employees represented: 3,066. 

16. International Brotherhood of Teamsters, Chauffeurs, Warehousemen 
and Helpers of America (IBT); 
Estimated number of employees represented: 2,960. 

17 International Federation of Professional and Technical Engineers 
(IFPTE); 
Estimated number of employees represented: 13,131. 

18. International Guard Union of America (IGUA); 
Estimated number of employees represented: 34. 

19. International Organization of Masters, Mates and Pilots (IOMMP); 
Estimated number of employees represented: 433. 

20. International Union of Operating Engineers (IUOE); 
Estimated number of employees represented: 99. 

21. International Union of Painters and Allied Trades (BPAT); 
Estimated number of employees represented: 33. 

22. Laborers International Union of North America (LIUNA); 
Estimated number of employees represented: 7,381. 

23. Marine Engineers Beneficial Association (MEBA); 
Estimated number of employees represented: 611. 

24. Metal Trades Department/Council (MTD/MTC); 
Estimated number of employees represented: 18,260. 

25. National Air Traffic Controllers Association (NATCA); 
Estimated number of employees represented: 36. 

26. National Association of Aeronautical Examiners (NAAE); 
Estimated number of employees represented: 242. 

27. National Association of Government Employees (NAGE); 
Estimated number of employees represented: 22,614. 

28. National Association of Government Inspectors (NAGI); 
Estimated number of employees represented: 161. 

29. National Federation of Federal Employees (NFFE); 
Estimated number of employees represented: 8,449. 

30. Professional Airways Systems Specialists (PASS); 
Estimated number of employees represented: 43. 

31. Retail, Wholesale and Department Store Union (RWDSU); 
Estimated number of employees represented: 857. 

32. Seafarers International Union of North America (SIUNA); 
Estimated number of employees represented: 3,675. 

33. Service Employees International Union (SEIU); 
Estimated number of employees represented: 3,875. 

34. Sport Air Traffic Controllers (SPORT); 
Estimated number of employees represented: 16. 

35. United Association of Plumbing and Pipe Fitting Industry of the 
United States and Canada (UA); 
Estimated number of employees represented: 83. 

36. United Power Trades Organization (UPTO); 
Estimated number of employees represented: 490. 

Non-Coalition members: 

37. Fraternal Order of Police (FOP); 
Estimated number of employees represented: 449. 

38. Graphic Communications International Union (GCIU); 
Estimated number of employees represented: 232. 

39. Hotel Employees and Restaurant Employees International Union 
(HERE); 
Estimated number of employees represented: 781. 

40. International Chemical Worker's Union (ICWU); 
Estimated number of employees represented: 20. 

41. National Association of Independent Labor (NAIL); 
Estimated number of employees represented: 2,500. 

42. National Conference of Firemen and Oilers (SEIU) (Formerly 
International Brotherhood of Firemen and Oilers (IBFO); 
Estimated number of employees represented: 47. 

43. United Food Commercial Workers Union (UFCW); 
Estimated number of employees represented: 24,376. 

Total; 
Estimated number of employees represented: 424,605. 

Source: DOD. 

[A] Data on DOD labor unions and the number of employees associated 
with each union was compiled by DOD from the Office of Personnel 
Management (OPM) book entitled Union Recognition in the Federal 
Government, data from the Defense Civilian Personnel Data System, and a 
DOD survey of the military departments and defense agencies. The data 
are current as of June 2005 and the numbers of employees should be 
considered as estimates rather than precise numbers. 

[B] The American Federation of State, County, and Municipal Employees 
union represents two DOD unions. The Federation of Physicians & 
Dentists/Alliance of Health Care & Professional Employees represents 
269 employees, while the United Nurses Association of California (UNAC) 
and Balboa RN Association (BNA) represent 98 employees. 

[C] This includes the United Telegraph Workers Union (UTWU), which 
merged with the Communications Workers of America in 1987. 

[D] The International Brotherhood of Boilermakers (IBB) is affiliated 
with the Metal Trades Department. IBB representatives attended the 
meetings between the United Defense Workers Coalition and 
representatives from DOD and OPM. 

[End of table]

[End of section]

Appendix III: Comments from the Department of Defense: 

DEPARTMENT OF DEFENSE:
PROGRAM EXECUTIVE OFFICE: 
NATIONAL SECURITY PERSONNEL SYSTEM: 
1400 KEY BOULEVARD: 
ARLINGTON, VA 22209-5144: 

June 29, 2005: 

Mr. Derek Stewart:
Director, Defense Capabilities & Management: 
U.S. Government Accountability Office:
441 G Street, N.W.: 
Washington, DC 20548: 

Dear Mr. Stewart,

This is the Department of Defense (DoD) response to the Government 
Accountability Office (GAO) draft report, "Human Capital: DoD's 
National Security Personnel System Faces Implementation Challenges," 
dated June 8, 2005 (GAO Code 350575/GAO-05-730). On behalf of the 
Department, I want to thank you for the opportunity to review and 
comment on the draft report. 

Generally, we believe that the report accurately portrays our design 
process for the National Security Personnel System (NSPS), and we 
appreciate the thorough and professional job performed by you and your 
team. We appreciate your recognition of the importance and significance 
of the improvements in human capital management that NSPS will achieve, 
as well as the challenges we face in implementing this system. We have 
noted some technical issues in the report that we would like to clarify 
or correct, and we are also providing responses to your specific 
recommendations. The enclosure contains those comments and responses. 

Again, thank you for the opportunity to comment and respond, and we 
appreciate the hard work that went into researching and drafting this 
report. The Department and the Program Executive Office benefited from 
the experience. If you have any questions regarding this response, 
please do not hesitate to contact me. 

Sincerely,

Signed by: 

Brad Bunn: 
Deputy Program Executive Officer: 

Enclosure: 

ENCLOSURE: 

GAO DRAFT REPORT - DATED June 8, 2005 GAO CODE 350575/GAO-05-730: 

"HUMAN CAPITAL: DoD's National Security Personnel System Faces 
Implementation Challenges"

DOD RESPONSES TO RECOMMENDATIONS: 

RECOMMENDATION 1: The draft GAO report (page 35) recommends that the 
Secretary of Defense direct the NSPS Senior Executive and NSPS Program 
Executive Office to identify all internal stakeholders and their 
concerns. 

DOD RESPONSE: Nonconcur. The Program Executive Office and the Component 
Program Management Offices recognize the importance of reaching out to 
and engaging all stakeholders, both internal and external. Following 
the strategic engagement and under the leadership of Secretary England 
as the Senior Executive for NSPS, we adopted a broad based, event- 
driven approach to the design and implementation of NSPS. This included 
a multi-faceted communications outreach strategy to inform and involve 
key stakeholders. The internal stakeholders are: 

* Employees; 
* Employee representatives (unions): 
* Senior leaders; 
* Civilian managers and supervisors: 
* Military leaders; 
* Practitioners (human resources, EEO, legal, financial). 

In developing communications products and opportunities, we took great 
care to ensure that the materials and messages addressed their 
concerns, both known and anticipated. In addition, the DoD Components 
identified their key internal stakeholders at a more refined level and 
targeted messages and products to them. This was in line with the 
overall communications strategy, under which the Program Executive 
Office developed high level products and messages, and the Components 
tailored those products for their specific environments. 

The communications plan drafted in spring of 2004 (provided to GAO 
during its research) presented a broad, overarching strategy. Since 
then, specific plans were developed for major milestone events, 
including: (1) Announcement of Spiral One organizations in December 
2004; (2) "Rollout" of the proposed NSPS regulations in February 2005; 
and (3) the "Way Ahead" for NSPS, announcing schedule adjustments and 
next steps in the design and implementation process in June 2005. In 
each of these plans, we identified key internal and external 
stakeholders and provided key messages and communications products to 
inform those groups. 

In light of this information, we respectfully recommend that the draft 
report be revised to reflect these facts. 

RECOMMENDATION 2: The draft GAO report (page 35) recommends that the 
Secretary of Defense direct the NSPS Senior Executive and NSPS Program 
Executive Office to tailor and customize key messages to be delivered 
to groups of employees to meet their divergent interest and information 
needs. 

DOD RESPONSE: Partially concur. We agree with the change management 
principle that you can never communicate enough when attempting to 
implement a major transformation initiative. The diversity of the 
Department's organization and workforce coupled with the significance 
of change that NSPS brings makes that principle particularly important 
to the NSPS communications strategy. For that reason, we concur that we 
can expand our efforts in this area, and have been planning to do so as 
the NSPS design matures and we begin to enter the implementation phase 
of this program. We have found that our key internal stakeholders, 
particularly employees, are anxious to learn more of the details of 
NSPS, and we have been unable to satisfy that desire because many of 
those details were not yet developed. As that changes, we will be able 
to more effectively tailor key messages and communications products to 
meet their needs. 

Nevertheless, we believe we have been successful so far in developing, 
customizing, and delivering key messages to employees. The Program 
Executive Office works collaboratively with the DOD Components to 
develop strategies, methods, and products that incorporate overall, 
consistent messages and information, while providing for customization 
and supplementation by Components. There are a variety of examples to 
illustrate these efforts. 

* Focus Groups: Over 100 focus groups were conducted to engage internal 
stakeholders in the early design process. Over a thousand employees 
participated in these focus groups, including employees (bargaining 
unit and non-bargaining unit), supervisors, managers, and human 
resources practitioners. These focus groups provided us the opportunity 
to talk directly to employees about NSPS, as well as provide a 
mechanism to gather employee input on key design issues. 

Town Hall Meetings: Over 50 town hall meetings have been held and 
continue to be held worldwide and are directed at employees and other 
internal stakeholders. These have been particularly effective because 
employees hear about NSPS from senior leaders within their chain of 
command, demonstrating leadership commitment to the process. 

NSPS website: The NSPS website is available to both internal and 
external stakeholders. The website is a primary communications tool 
that is regularly updated with current NSPS information. The "Contact 
Us" feature on the website allows visitors to submit questions 
concerning NSPS, which are answered by the NSPS Communications Team. 
Approximately 100 questions are received each week, and each question 
is answered in a timely manner. We have found that the vast majority of 
these inquiries come from DOD employees, and we use these questions to 
continually update the Frequently Asked Questions (FAQ) portion of the 
website. 

* Spiral 1.1 Conference: In January 2005, the PEO NSPS sponsored the 
NSPS Spiral 1.1 Conference, held at MacDill AFB, Tampa, Florida. The 
conference was targeted for senior leaders, supervisors and managers, 
human resource practitioners, and labor attorneys. Over 500 attendees 
participated in the conference, which included guest speakers, panels 
of officials with experience in alternative personnel systems, and 
breakout sessions. We tailored the information and messages to these 
stakeholders, who represent the first group of organizations that will 
take advantage of the NSPS human resources flexibilities. 

* Video: In May 2005, the NSPS released a 17 minute video entitled 
"NSPS: Towards a Mission-Centered Workforce." The video highlights the 
NSPS design process through the development of the proposed 
regulations. It also includes commentary from numerous participants in 
ongoing personnel demonstration projects within DOD, and is targeted 
primarily for interested employees, but will also be effective for 
other stakeholders. 

* "Preparing for NSPS" Brochures: In May 2005, the PEO NSPS released 
four brochures to help employees, supervisors, senior leaders, and 
human resource practitioners prepare for the transition to NSPS. While 
everyone needs general information, each group has a unique: 

focus so the brochures were designed for a specific stakeholder. 

In addition to these PEO sponsored products, the Components actively 
engage in communications outreach to their employees, with a variety of 
tools, for example: 

* Component NSPS websites that contain Component-specific information 
on NSPS; 
* Regular NSPS newsletters that are widely distributed to employees 
that give updates on NSPS status and information; 
* Standing senior leadership meetings with major command level 
organizations to advise the chain of command on NSPS matters; 
* Command-sponsored informational briefings for employees, so they 
learn about NSPS from their direct chain of command; 
* Designation of command NSPS "change agents" (Department of the Navy) 
responsible for preparing for NSPS at the command level; 
* Integration of NSPS speakers and content into Component-sponsored 
conferences and events. 

These examples illustrate the overarching communications strategy of 
developing core and consistent products, information, and messages, and 
using the chain of command and existing organizational infrastructures 
to cascade information to employees and other internal stakeholders. We 
respectfully recommend the draft report be modified to reflect these 
successful efforts. 

RECOMMENDATION 3: The draft GAO report (page 35) recommends that the 
Secretary of Defense direct the NSPS Senior Executive and NSPS Program 
Executive Office to develop procedures for evaluating NSPS that contain 
results-oriented performance measures and reporting requirements. These 
evaluation procedures could be broadly modeled on the evaluation 
requirements of the OPM demonstration projects. 

DOD RESPONSE: Partially concur. The NSPS Senior Executive chartered the 
Program Executive Office (PEO) to establish a program evaluation 
process for NSPS, and the PEO has initiated that process as part of 
implementation activities. The initial draft plan and key measures 
provided to GAO in January 2005 have been revised by an intra- 
Departmental working group and are being reviewed by senior officials. 
The draft plan cannot be finalized until the NSPS design is complete. 
The plan, measures, and initial evaluation activities will be adjusted 
to reflect the final NSPS regulations and implementing issuances. The 
Department has drawn upon our experience with demonstration projects 
and Office of Personnel Management evaluation methods and metrics; as a 
result, much of our approach is modeled on the evaluation requirements 
of the previous demonstration projects, as suggested by the draft GAO 
report recommendation. In addition, we have partnered with OPM 
throughout our design process, and have included OPM representatives in 
initial planning efforts for evaluating NSPS. We also expect to 
continue working with OPM in NSPS evaluation efforts, in conjunction 
with ongoing evaluation and accountability programs. The DOD plan 
addresses a variety of sources and analytic methods for in-progress and 
summary evaluative reports, and we are in the process of gathering 
baseline data. This comprehensive evaluation effort, consisting of 
formative and summation studies, has been developed jointly between DOD 
Components and the Program Executive Office to assess whether NSPS 
satisfies the requirements set out in the NSPS Guiding Principles, Key 
Performance Parameters, and the governing statute. To that end, we will 
ensure that our final evaluation plan contains results-oriented 
performance measures, as well as robust reporting mechanisms. 

[End of section]

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Derek B. Stewart, (202) 512-5559: 

Acknowledgments: 

In addition to the contact named above, Sandra F. Bell, Renee S. Brown, 
Rebecca L. Galek, Barbara L. Joyce, Julia C. Matta, Mark A. Pross, 
William J. Rigazio, John S. Townes, and Susan K. Woodward made key 
contributions to this report. 

[End of section]

Related GAO Products: 

Questions for the Record Related to the Department of Defense's 
National Security Personnel System. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-771R] 
Washington, D.C.: June 14, 2005. 

Questions for the Record Regarding the Department of Defense's National 
Security Personnel System. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-770R] 
Washington, D.C.: May 31, 2005. 

Post-hearing Questions Related to the Department of Defense's National 
Security Personnel System. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-641R] 
Washington, D.C.: April 29, 2005. 

Defense Management: Key Elements Needed to Successfully Transform DOD 
Business Operations. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-629T] 
Washington, D.C.: April 28, 2005. 

Human Capital: Preliminary Observations on Proposed Regulations for 
DOD's National Security Personnel System. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-559T] 
Washington, D.C.: April 14, 2005. 

Human Capital: Preliminary Observations on Proposed Department of 
Defense National Security Personnel System Regulations. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-517T] 
Washington, D.C.: April 12, 2005. 

Human Capital: Preliminary Observations on Proposed DOD National 
Security Personnel System Regulations. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-432T] 
Washington, D.C.: March 15, 2005. 

Department of Defense: Further Actions Are Needed to Effectively 
Address Business Management Problems and Overcome Key Business 
Transformation Challenges. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-140T] 
Washington, D.C.: November 18, 2004. 

DOD Civilian Personnel: Comprehensive Strategic Workforce Plans Needed. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-753] 
Washington, D.C.: June 30, 2004. 

Results-Oriented Cultures: Implementation Steps to Assist Mergers and 
Organizational Transformations. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-669] 
Washington, D.C.: July 2, 2003. 

Human Capital: Building on DOD's Reform Efforts to Foster 
Governmentwide Improvements. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-851T] 
Washington, D.C.: June 4, 2003. 

Human Capital: DOD's Civilian Personnel Strategic Management and the 
Proposed National Security Personnel System. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-493T] 
Washington, D.C.: May 12, 2003. 

Defense Transformation: DOD's Proposed Civilian Personnel System and 
Governmentwide Human Capital Reform. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-741T] 
Washington, D.C.: May 1, 2003. 

Defense Transformation: Preliminary Observations on DOD's Proposed 
Civilian Personnel Reforms. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-717T] 
Washington, D.C.: April 29, 2003. 

DOD Personnel: DOD Actions Needed to Strengthen Civilian Human Capital 
Strategic Planning and Integration with Military Personnel and Sourcing 
Decisions. 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-475] 
Washington, D.C.: March 28, 2003. 

(350575): 

FOOTNOTES

[1] Pub. L. No. 108-136, § 1101 (Nov. 24, 2003). 

[2] See GAO, Highlights of a GAO Forum: Mergers and Transformation: 
Lessons Learned for a Department of Homeland Security and Other Federal 
Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002) and Results- 
Oriented Cultures: Implementation Steps to Assist Mergers and 
Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 
2003). 

[3] GAO, DOD Personnel: DOD Actions Needed to Strengthen Civilian Human 
Capital Strategic Planning and Integration with Military Personnel and 
Sourcing Decisions, GAO-03-475 (Washington, D.C.: Mar. 28, 2003). 

[4] GAO, DOD Civilian Personnel: Comprehensive Strategic Workforce 
Plans Needed, GAO-04-753 (Washington, D.C.: June 30, 2004). 

[5] See GAO, Defense Transformation: Preliminary Observations on DOD's 
Proposed Civilian Personnel Reforms, GAO-03-717T (Washington, D.C.: 
Apr. 29, 2003); Defense Transformation: DOD's Proposed Civilian 
Personnel System and Governmentwide Human Capital Reform, GAO-03-741T 
(Washington, D.C.: May 1, 2003); and Human Capital: Building on DOD's 
Reform Effort to Foster Governmentwide Improvements, GAO-03-851T 
(Washington, D.C.: June 4, 2003). 

[6] GAO, Department of Defense: Further Actions Are Needed to 
Effectively Address Business Management Problems and Overcome Key 
Business Transformation Challenges, GAO-05-140T (Washington, D.C.: Nov. 
18, 2004). 

[7] GAO, 21st Century Challenges: Reexamining the Base of the Federal 
Government, GAO-05-325SP (Washington, D.C.: February 2005). 

[8] GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: 
January 2005), pp. 41-42. 

[9] For example, the Congress has taken the following four steps to 
improve the federal government's human capital management systems: (1) 
created Chief Human Capital Officer positions in 24 federal agencies 
and a Council to advise and assist agency leaders in their human 
capital efforts; (2) provided several agenciesæmost notably the 
Departments of Homeland Security and Defenseæwith authorities to design 
and manage their human capital systems; (3) provided agencies across 
the executive branch with additional human capital flexibilities, such 
as specific hiring authorities; and (4) in conjunction with the 
administration, reformed the performance management and compensation 
systems for senior executives to better link the institutional, unit, 
and individual performance and reward systems. 

[10] Pub. L. No. 108-136, § 1101 (Nov. 24, 2003) and relevant 
provisions of Title 5, U.S. Code. 

[11] GAO-03-475. 

[12] Pub. L. No. 108-136, § 1101 (Nov. 24, 2003). 

[13] The Congress did not exempt DOD from provisions of Title 5, U.S. 
Code, pertaining to veterans' preference, merit systems principles, 
prohibited personnel practices, and equal employment opportunity. 

[14] The United Defense Workers Coalition currently represents 36 of 
the 43 DOD labor unions. The Coalition was formed in February 2004 to 
more effectively represent the interests of its members during NSPS 
design meetings with DOD officials. The remaining unions, for various 
reasons, decided to remain independent of the Coalition. 

[15] GAO-03-293SP and GAO-03-669. 

[16] The acquisition management model is contained in DOD Directive 
5000.1 and DOD Instruction 5000.2, Operation of the Defense Acquisition 
System (May 12, 2003). 

[17] The PEO is the policy and program management office responsible 
for conducting the design, planning development, implementation, and 
assessment of NSPS. 

[18] Component program managers are dual-hatted under their parent 
components and the NSPS PEO. 

[19] GAO-03-669. 

[20] See GAO Managing for Results: Federal Managers' Views Show Need 
for Ensuring Top Leadership Skills, GAO-01-127 (Washington, D.C.: Oct. 
20, 2000); Management Reform: Using the Results Act and Quality 
Management to Improve Federal Performance, GAO/T-GGD-99-151 
(Washington, D.C.: July 29, 1999); and Management Reform: Elements of 
Successful Improvement Initiatives, GAO/T-GGD-00-26 (Washington, D.C.: 
Oct. 15, 1999). 

[21] GAO-03-669. 

[22] GAO-03-669. 

[23] GAO, Human Capital: Preliminary Observations on Proposed 
Regulations for DOD's National Security Personnel System, GAO-05-559T 
(Washington, D.C.: Apr. 14, 2005); Human Capital: Preliminary 
Observations on Proposed Department of Defense National Security 
Personnel System Regulations, GAO-05-517T (Washington, D.C.: Apr. 12, 
2005); and Human Capital: Preliminary Observations on Proposed DOD 
National Security Personnel System Regulations, GAO-05-432T 
(Washington, D.C.: Mar. 15, 2005). 

[24] GAO-03-669. 

[25] It should be noted that 10 federal labor unions have filed suit 
alleging that DOD failed to abide by the statutory requirements to 
include employee representatives in the development of DOD's new labor 
relations system authorized as part of NSPS. See American Federation of 
Government Employees, AFL-CIO et al v. Rumsfeld et al, No. 1:05cv00367 
(D.D.C. filed Feb. 23, 2005). 

[26] GAO-05-432T, GAO-05-517T, and GAO-05-559T. 

[27] GAO, Defense Management: Key Elements Needed to Successfully 
Transform DOD Business Operations, GAO-05-629T (Washington, D.C.: Apr. 
28, 2005). 

[28] GAO-05-140T. 

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