DOD Is Terminating the National Security Personnel System, but Needs a Strategic Plan to Guide Its Design of a New System
GAO-11-524R: Published: Apr 28, 2011. Publicly Released: Apr 28, 2011.
The Department of Defense (DOD) is one of the largest and most complex organizations in the world and faces challenges in managing its human capital--particularly its diverse civilian workforce. Our prior work has noted that over time federal positions, including those within DOD, have become increasingly specialized and more highly skilled, resulting in a need for managers to have greater flexibility in hiring and compensating employees. As a result, the department took steps--pursuant to the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2004--to provide managers with greater flexibility in hiring and implemented a performance management system that sought to reward civilian employees' performance and contributions to the agencies' missions rather than to reward longevity in a position. Specifically, in 2004, DOD established the National Security Personnel System (NSPS)--a human capital system that significantly redesigned the rules, regulations, and processes that governed the way civilian employees were hired, compensated, and promoted at DOD. In 2006, the department began converting its civilian employees to NSPS. From its inception, NSPS was criticized and faced challenges from unions and employees regarding several issues, including inconsistent application of the system, pay inequities, and a lack of stakeholder involvement. Since 2003, we have reported on NSPS, covering issues such as DOD's initial regulations for the system and the pace at which it was implemented. We noted in these reports that how human capital reform is done, when it is done, and the basis upon which it is done can make a difference in whether such efforts are successful. In light of the concerns and challenges facing NSPS, the NDAA for FY 2010 contained provisions to terminate the system. Specifically, the act repealed the statutory authority for NSPS and directed the Secretary of Defense to begin, no later than 6 months from the enactment of the law, to take all actions necessary to provide for the orderly termination of NSPS and the conversion of all NSPS employees and positions from NSPS. The act also provided direction regarding DOD's pay and personnel system and a new performance management system. More specifically, regarding the pay and personnel systems, the act directed the Secretary to (1) convert employees, no later than January 1, 2012, to the statutory pay system and all other aspects of the personnel system that last applied or would have applied if NSPS had not been established and (2) ensure that no employee shall suffer any loss of or decrease in pay as a result of the conversion. Regarding the new performance management system, the act directed the Secretary to promulgate, in coordination with the Director of the Office of Personnel Management, regulations providing for, among other things, (1) a fair, credible, and transparent performance appraisal system for employees that links bonuses and other performance-based actions to performance appraisals; (2) a process for ensuring ongoing feedback and dialogue; and (3) development of a plan designed to give employees training, counseling, mentoring, and other assistance. The act did not specify a date for completion of DOD's new performance management system. At the time that DOD's authority for NSPS was repealed, approximately 226,000 DOD civilian employees throughout the department were under the system
During fiscal year 2010, DOD achieved its initial goal of transitioning approximately 75 percent of NSPS employees to their successor pay and personnel system--that is, the General Schedule system--despite having to overcome some challenges. DOD plans to transition the remaining NSPS employees by the January 1, 2012, mandated deadline. Specifically, according to DOD's October 2010 report, the department transitioned, as planned, approximately 172,000 of the 226,000 NSPS employees to the General Schedule system. Regarding challenges, component officials told us that they completed the reclassifications of employees back to the General Schedule system even though in some cases it was difficult to meet deadlines--occasionally requiring the use of contractors or overtime. For the remaining NSPS employees--approximately 53,000--the department plans to complete those transitions in five groups. More specifically, employees in 30 health care provider occupations will return to the General Schedule system from July to December 2011, and employees in other miscellaneous categories (e.g., deployed civilians and those affected by base realignment and closure activities) will transition to the appropriate pay and personnel system no later than December 2011. The remaining three groups of NSPS employees will transition to the following alternative pay and personnel systems during the time frames noted: Science and Technology Reinvention Laboratories from February to April 2011, Acquisition Demonstration Project from March to June 2011, and Physicians and Dentists Pay Plan in June 2011. The Transition Office issued guidance to the components for tracking the costs of the NSPS termination; however, the office did not sufficiently document and support termination costs, and we found inconsistencies in some reported costs. The guidance instructed the components to, among other things, (1) report only the costs that were directly attributable to NSPS termination and (2) include five categories of costs in the cost tracking reports--one category being Within-Grade Increase Buy-Ins, Performance Awards, and Quality Step Increases. Regarding insufficient documentation, we found, for example, that the Transition Office reported $238.6 million (as projected by the Transition Office and Comptroller's Office) to Congress as the estimated fiscal year 2011 departmentwide costs for increased compensation resulting from the termination. However, despite our repeated requests during the course of our review, DOD did not provide documentation to support this estimate or the methodology used to develop this estimate. Transition Office officials told us that the department had experienced turnover in both the Comptroller's Office and the Transition Office since those estimates had been developed. Internal control standards state that all transactions and other significant events need to be clearly documented and that documentation should be readily available for examination. To promote an efficient use of resources and to better plan for the design of a new performance management system, we recommend that the Secretary of Defense direct the Deputy Assistant Secretary of Defense for Civilian Personnel Policy to take the following two actions: (1) in conjunction with the DOD Comptroller, help ensure that information identifying and supporting the costs of the NSPS termination and new performance management system is documented, reliable, traceable to a source document, and readily available for examination, and (2) develop a plan with documented near-term design and implementation goals and a timeline for meeting these goals to build momentum and show progress for the development of an enterprisewide performance management system and to facilitate an assessment of what is being achieved as a result of the resources being spent.
Recommendations for Executive Action
Comments: GAO staff met with DOD officials in October 2019 to discuss the status of the department's new performance management system and any efforts to address this recommendation. DOD officials agreed to provide documentation related to these efforts, but, as of November 2019, this documentation. has not been received. Further updates will be made once that documentation is received and reviewed.
Recommendation: To promote an efficient use of resources and to better plan for the design of a new performance management system, the Secretary of Defense should direct the Deputy Assistant Secretary of Defense for Civilian Personnel Policy to, in conjunction with the DOD Comptroller, help ensure that information identifying and supporting the costs of the NSPS termination and new performance management system is documented, reliable, traceable to a source document, and readily available for examination.
Agency Affected: Department of Defense
Status: Closed - Implemented
Comments: Section 1102(b) of the National Defense Authorization Act for Fiscal Year 2013, Public Law 112-81 requires the Secretary of Defense to report semiannually on the progress on the implementation of a new performance management system and other flexibilities related to appointments. To date, DOD has issued five progress reports. In the most recent progress report, dated June 29, 2015, the Department stated that it continues to demonstrate progress toward full implementation of the personnel authorities. The report discusses prior actions taken by DOD, in conjunction with the labor unions, in an effort to build momentum and show progress for the development of a new performance management system. The report provides a target timeframe of April 2015 to begin phased implementation of the new DOD Performance Management and Appraisal Program. P.L. 112-81 requires continued reporting on the progress until all personnel authorities are fully implemented, which will facilitate and help ensure the department's efforts to assess what is being achieved given the resources spent.
Recommendation: To promote an efficient use of resources and to better plan for the design of a new performance management system, the Secretary of Defense should direct the Deputy Assistant Secretary of Defense for Civilian Personnel Policy to develop a plan with documented near-term design and implementation goals and a timeline for meeting these goals to build momentum and show progress for the development of an enterprisewide performance management system and to facilitate an assessment of what is being achieved as a result of the resources being spent.
Agency Affected: Department of Defense