97-33458. Personnel Demonstration Project; Alternative Personnel Management System for the U.S. Department of Commerce

[Federal Register Volume 62, Number 247 (Wednesday, December 24, 1997)]
[Notices]
[Pages 67434-67463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33458]

[[Page 67433]]

_______________________________________________________________________

Part II

Office of Personnel Management

_______________________________________________________________________

Personnel Demonstration Project; Alternative Personnel Management
System for the U.S. Department of Commerce; Notice

Federal Register / Vol. 62, No. 247 / Wednesday, December 24, 1997 /
Notices

[[Page 67434]]

OFFICE OF PERSONNEL MANAGEMENT

Personnel Demonstration Project; Alternative Personnel Management
System for the U.S. Department of Commerce

AGENCY: Office of Personnel Management.

ACTION: Notice of approval of a demonstration project final plan.

-----------------------------------------------------------------------

SUMMARY: Title VI of the Civil Service Reform Act, now codified in 5
U.S.C. 4703, authorizes the Office of Personnel Management (OPM) to
conduct demonstration projects that experiment with new and different
human resources management concepts to determine whether changes in
policies and procedures result in improved Federal human resources
management. This demonstration project is designed to replicate many of
the features of the National Institute of Standards and Technology
(NIST) demonstration project created by Congress pursuant to the
National Bureau of Standards Authorization Act for Fiscal Year 1987
(Pub. L. 99-574). This project will cover units of four Department of
Commerce (DoC) organizations:
(1) Technology Administration
--Office of the Under Secretary
--Office of Technology Policy
(2) Economics and Statistics Administration
--Bureau of Economic Analysis
(3) National Telecommunications and Information Administration
--Institute for Telecommunication Sciences
(4) National Oceanic and Atmospheric Administration
--Units of the Office of Oceanic and Atmospheric Research
--Units of the National Environmental Satellite, Data, and
Information Service
--Units of the National Marine Fisheries Service

DATES: This demonstration project will be implemented on March 24,
1998.

FOR FURTHER INFORMATION CONTACT: (1) Department of Commerce: Darlene F.
Haywood, U.S. Department of Commerce, 1400 Constitution Avenue, N.W.,
Room 5004, Washington, DC 20230, 202-482-3620; (2) OPM: Judith B.
White, U.S. Office of Personnel Management, 1900 E Street, N.W., Room
7460, Washington, DC 20415, 202-606-1526.

SUPPLEMENTARY INFORMATION:

1. Background

The NIST Demonstration Project was successful and was made
permanent by Congress in 1996 (Pub. L. 104-113). Independent surveys
have demonstrated that a majority of NIST employees are satisfied with
the demonstration project. The Federal Employees Pay Comparability Act
of 1990 included many of the interventions tested successfully at NIST.
The DoC project is designed to test whether the interventions of the
NIST project can be successful in DoC environments with different
missions and different organizational hierarchies. Like the NIST
project, the DoC Demonstration Project involves simplified position
classification, pay for performance, and simplified recruiting and
examining processes.

2. Overview

A total of 67 oral and written comments were received in response
to the first Federal Register Notice of May 2, 1997. These comments
were a valuable source of input for the Department of Commerce
Demonstration Project. All comments have been considered, and changes
to the project plan have been made where deemed appropriate. Changes to
the plan involve supervisory pay, performance-based reduction-in-force
retention credit, and the extended probationary period for employees in
the Scientific and Engineering Career Path. In addition to these
changes, several sections of the plan have been clarified and expanded.
Some editorial changes and corrections were also made.

3. Summary of Comments

Nine speakers commented on the first Federal Register Notice at the
five public hearings. A total of 58 letters were received, with one
letter bearing 20 signatures. A variety of issues and concerns were
raised; however, recurring comments addressed five major topics:
(1) accountability, (2) reduction-in-force (RIF) retention credit,
(3) impact of the project on equal employment opportunity (EEO)/
Diversity, (4) pay administration, and
(5) performance appraisal. Other issues raised include
classification, employee input, project evaluation, and communication.
The following summarizes the written and oral comments by topic and
provides a response to each.

(1) Accountability

Comments. A majority (about two-thirds) of the comments from
individuals and organized groups expressed a high level of concern that
the demonstration project gives more authority and responsibility to
supervisors and managers. Believing that many supervisors do not
properly and fairly execute supervisory responsibilities or utilize the
power and tools provided under the current management system, these
employees fear a new system that gives supervisors additional authority
over their career and pay. Employees specifically questioned whether
proper controls would be in place to prevent management abuse in the
administration of the performance appraisal and classification systems.
Comments focused on the potential for favoritism and unfair treatment
of employees in the distribution of ratings and awards. Employees also
questioned whether pay pool managers would have the requisite knowledge
to make fair decisions about the work of all employees in the pay pool.
Response. The Department will implement a number of measures to
ensure management accountability. These will include: (1) employee
focus groups, (2) supervisory training, and (3) oversight.
Employee focus groups: Annual project evaluations will utilize
employee focus groups as an important source of data in measuring the
degree to which project interventions are accomplishing desired
objectives.
Training: Supervisors and managers will receive detailed training
in the new authorities they are to exercise. Classification training
will emphasize the underlying principles of project classification and
will instruct supervisors on the application of these principles to
classification decisions. Training on the performance appraisal system
will cover performance planning, monitoring, feedback, and appraisal.
In addition, supervisors will receive training on the automated
performance pay increase system and will be required to conduct a
simulation of the performance evaluation and rewards system prior to
the actual end-of-year performance appraisal. The training will also
cover the pay pool manager's responsibilities for reviewing and
reconciling ratings and ensuring equity and consistency in performance
plans and ratings.
Oversight: The authorities delegated to supervisors under this
demonstration project will be subject to three levels of oversight. The
Office of Personnel Management will oversee the project under the
authority of 5 U.S.C. 4703. The DoC Departmental Personnel Management
Board (DPMB) will manage and oversee authority delegated to the
Operating Personnel Management Boards (OPMBs) in participating

[[Page 67435]]

organizations, and OPMBs will monitor authorities delegated to
supervisors, withdrawing them when warranted.
(a) Classification: Under authority delegated by the OPMBs,
servicing human resources management staff will monitor and review
classification decisions made by managers to ensure consistent and
uniform application of classification policies and guidelines. When
classification actions are found to be inconsistent with established
policies, the servicing human resources management specialist will
attempt to resolve the inconsistency with the responsible supervisor.
If agreement cannot be reached, the issue will be referred to a
Classification Review Panel (CRP). The CRP is an ad hoc advisory panel
established by authority of the OPMB to review proposed classification
actions referred to it by the servicing Human Resources Manager.
(b) Performance Evaluation: OPMBs will oversee the operating unit
annual performance appraisal process, from development of plans to
individual pay increases and bonuses. OPMBs will also establish
operating unit guidelines on performance elements.

(2) Reduction-in-Force (RIF) Retention Credit

About half of all comments received addressed two related concerns
with respect to RIF retention credit: loss of current performance-based
credit and the percentage of employees eligible for credit under the
project.
(a) Loss of current credit
Comments. Employees thought it unfair that conversion to the
demonstration project would result in the loss of performance-based RIF
credit acquired under the current system.
Response. The demonstration project will introduce a new ``pay-for-
performance'' personnel system, and it is intended that all employees
enter the system on an equal basis, i.e, on a ``level playing field.''
Allowing some employees to bring forward performance-based RIF credit
gained under the current system would give those employees an unfair
advantage.
(b) Percentage of Employees Eligible for Credit
Comments. A number of employees objected to the provision that
would award performance-based credit for only those employees who rank
in the top ten percent of their career paths.
Response. The objective of this feature is to reward performance
that is truly outstanding. Consequently, the group of employees
receiving this credit must, by definition, be limited. However, in
order to more closely parallel agency historical experience, the
project plan has been revised to grant performance-based RIF retention
credit to employees who rank in the top 20 percent of their career path
within a pay pool, rather than the top 10 percent.

(3) Impact of the Project on EEO and Diversity

Comments. Several employees expressed concern that the
demonstration project would not support existing EEO and Diversity
goals. Specific questions were raised about the impact of the project
on the hiring of women and minorities and whether these groups would
receive an equitable share of promotions, pay increases, and bonuses.
Response. EEO and Diversity goals of the Department will not change
under the demonstration project. On an annual basis, the Department
will continue to submit an annual report and update of affirmative
employment to the Equal Employment Opportunity Commission. In addition,
Diversity Plans and Diversity Councils now in place will continue to be
required for organizations participating in the demonstration project.
Also, Senior Executive Service managers will continue to be rated on a
Diversity critical element. The Project Evaluation Model will include
criteria that will track hiring, award, promotion, and retention data
in order to closely monitor the impact of the project on workforce
diversity. A variety of data sources will be used. These include
records in servicing human resources management offices (including
records of recruitment sources) and records of EEO complaints.

(4) Pay Administration

Two major compensation issues were raised. Several employees
objected to the manner in which they would be compensated for time
credited toward their next within-grade increase. In addition, some
employees questioned the appropriateness of the supervisory pay
differential.
(a) Within-Grade Increase (WIGI) Payout
Comments. Employees objected to the one-time lump sum payment for
time credited toward the next within-grade increase on the grounds that
it would result in a negative impact on their salary and retirement
contributions and earnings. In lieu of the lump sum, some suggested
that the WIGI payout be processed as a base pay increase. Others felt
that they should be given a choice between a one-time payment and a
permanent salary increase.
Response. Organizations participating in the demonstration project
will be required to maintain compensation costs at the levels they
would have reached under the current system. A decision to grant
permanent salary increases for time credited toward within-grade
increases would result in immediate cost escalation prior to
implementation that would distort base cost calculations. Such a
decision would be counter to Departmental cost containment goals.
Moreover, under the demonstration project, the salaries of good
performers will soon overtake salaries they would have reached with
WIGIs through the following provisions of the project plan:
(1) Annual Performance Pay Increases: The new pay system provides
an opportunity for a performance pay increase each year, regardless of
an employee's position in the band. This is in contrast to the waiting
periods of one to three years for a WIGI in the General Schedule (GS)
system. The potential size of a performance pay increase in the new
system is significantly higher than the size of a GS within-grade
increase.
(2) Removal of Grade Barriers: Broad banding removes the pay
barriers between the GS grades that are placed in the same band. For
example, because grades GS-7 and GS-8 will be placed in the same band
in the Support Career Path, employees who previously reached the top of
the GS-7 grade will now have access to the GS-8 pay range.
(3) Potential for Higher Pay Increases Upon Promotion: When an
employee is promoted to a higher band, the employee's salary may be set
at any point in the range of the higher band as long as the new salary
represents an increase of at least 6 percent.
(4) Supervisory Performance Pay: Through pay for performance,
supervisors have salary potential 6 percent higher than the normal
ceiling of a band.
(b) Supervisory Performance Pay
Comments. Several employees questioned the appropriateness of the
immediate salary increase that supervisors would receive under the
demonstration project. Some stated that supervisors would receive
additional compensation because they would convert to a higher pay band
on the basis of their supervisory duties, and therefore, an automatic
pay increase would result in double compensation for supervision. Some
asserted that this policy conflicts with the basic ``pay-for-
performance'' concept and suggested that any pay incentive awarded
supervisors should be given after the

[[Page 67436]]

first performance appraisal cycle, if earned through performance.
Response. The proposed project plan provided for an automatic pay
differential for supervisors in the Scientific and Engineering (ZP)
Career Path only. The amount of this type of differential was to be
fixed at 3 percent or 6 percent, for first-level and second-level (and
higher) supervisors, respectively. However, as a result of comments
received, this feature of the system has been eliminated. ZP
supervisors will not be given an immediate salary increase upon
conversion to the demonstration project. Supervisors in all career
paths will be eligible for salaries up to 6 percent higher than the
maximum rates of their pay bands, and there will be no differentiation
in the amount of the increase based on supervisory level. Any employee
who meets the demonstration project definition of ``supervisor'' will
be eligible for the 6 percent increase, which may be reached through
performance pay increases granted through the regular performance
appraisal process (see Section III(D)(4) Supervisory Performance Pay).
1. (5) Performance Appraisal
About half of all comments received addressed the performance
appraisal process. Issues raised focused on three major areas: ranking
versus teamwork, linking the annual comparability increase to
performance, and the requirement for all performance elements to be
critical.
(a) Impact of Ranking on Teamwork
Comments. Several employees commented that ranking employees by
performance score will pit employees against each other, create a
competitive work environment, and destroy teamwork.
Response. Under the demonstration project, employees will be rated
against the criteria in their performance plans and ranked accordingly.
There will be no direct comparison of employees' performance. It is
expected that more competitive salaries that are directly tied to
performance will improve both individual and organizational
performance. Furthermore, the demonstration project performance
appraisal system is flexible enough to reward those aspects of work
that require cooperation and teamwork. For example, in units requiring
high levels of cooperation and teamwork to accomplish organizational
goals, supervisors may include contributions to the team's
accomplishments in performance plans and rate employees accordingly.
(b) Linking the Annual Comparability Increase to Performance
Comments. Several employees expressed concern about the proposal to
allow only those employees with a current annual performance rating of
Eligible to receive the annual general comparability increase. They
consider the annual increase a cost-of-living increase, which should
not be tied to performance.
Response. The annual General Schedule (GS) pay adjustment is
authorized under 5 U.S.C. 5303. It is based on the cost of labor, not
the cost of living. GS pay adjustments are linked to changes in the
Employment Cost Index (ECI), which measures the overall rate of change
in employers' compensation costs in the private and public sector,
excluding the Federal Government. The demonstration project is based on
the principle of pay for performance; therefore, all pay increases,
including the annual comparability increase, are tied to performance.
(c) Use of All Critical Elements in Performance Plans
Comments. Some employees expressed concern about the requirement
for all elements in a performance plan to be critical elements. In
their opinion, this will make it easier for supervisors to withhold pay
increases or bonuses, or even initiate removal, when one element is
rated Unsatisfactory.
Response. The requirement for all elements in a performance plan to
be critical is not a departure from the current performance appraisal
system. The demonstration project will not require that noncritical
elements used in the current system be changed to critical elements
under the project. The project simply eliminates noncritical elements.
Also, while noncritical elements may now be included in an employee's
performance plan, they have very little weight. Under the current
system, unacceptable performance in one critical element results in a
mandatory rating of Unacceptable. Likewise, under the demonstration
project, unsuccessful performance on one element will result in a
rating of Unsatisfactory.
(6) Other Comments
Employees addressed a number of other issues including
classification, employee input to the project, project evaluation, and
communication.
(a) Classification
Comments. One employee expressed concern that problems with the
current GS classification standards would carry over into the
demonstration project. Some questioned the basis for grouping
occupations into four career paths, and a few employees questioned the
career path decisions for their occupations. Others expressed
dissatisfaction with what they consider the ``arbitrary'' structure of
the pay bands, believing that employees who convert to the top of their
bands will have minimal opportunity for pay increases.
Response. (1) Classification Standards: Under the demonstration
project, OPM classification standards will not be used. They will be
replaced with more streamlined classification standards that have been
developed to cover the work in the participating organizations. Each
pay band in a career path will have a narrative standard that uses two
factors:
(1) Duties and Responsibilities and (2) Knowledge, Skills, and
Abilities (KSAs). At each successively higher band, the standards
describe a higher level of work and a higher level of KSAs required to
successfully perform the work. These standards will simplify the
classification process, make it more understandable to managers and
employees, and reduce the time required to make classification
decisions.
(2) Career Paths: The four career paths are intended to replace the
GS method of grouping occupations. Under the current system, GS
occupations are placed in occupational groups according to general
subject matter. Each group includes both two-grade and one-grade
interval occupations, with each type receiving different treatment for
classification and other purposes. By contrast, career paths group
occupations that have parallel career patterns and can be similarly
treated for staffing, classification, pay, and other personnel
purposes.
(3) Pay Bands: Pay bands are designed to parallel the typical
career patterns for occupations in a career path. For example, in the
Scientific and Engineering (ZP) Career Path, professional technical
employees begin their careers as trainees (Band I), move through a
developmental stage that builds on professional knowledge gained
through undergraduate work (Band II), proceed to independent, full
performance research or operational work (Band III), acquire program
responsibility (Band IV), and achieve broad recognition as an authority
in the field (Band V).
(4) Potential for Pay Increases: Within each pay band, the maximum
potential for a performance pay increase is highest for employees in
interval one and lowest for employees in interval

[[Page 67437]]

three. This arrangement is intended to slow salary increases as
employees move through a band, duplicating the effect of the longer
waiting periods for GS within-grade increases as GS employees move
through the steps of a grade.
Comments. Some employees questioned whether their occupations were
assigned to the appropriate career paths.
Response. The four career paths used in the Department of Commerce
Demonstration Project as well as placement of occupations in those
paths replicate the NIST system. Career path determinations for
occupations not covered by the NIST project are based on the
definitions of career paths. However, after the first year of
operation, questions concerning changes in career path may be
considered.
(b) Employee Input
Comment. A few employees felt that the project plan had not
received any input from employees and that this could adversely impact
relationships between management and employees.
Response. Numerous briefings were provided to employees and union
representatives prior to the public hearings. Employees were given an
opportunity to provide oral comments at five public hearings held
between June 9 and June 26, 1997. These hearings were held in locations
across the country that were accessible to most employees. In addition,
the first Federal Register Notice, published on May 2, 1997, informed
employees that written comments would be accepted through July 10,
1997. As a result of comments received from employees during the public
comment period, several changes have been made to the project plan.
(c) Project Evaluation
Comments. Several employees commented on the design of the Project
Evaluation Model. Specifically, it was suggested that employee morale
be measured since a direct link exists between morale and
organizational performance, that employee opinions be one of the data
sources for evaluation of the project, and that EEO complaints and
grievance patterns be incorporated into the evaluations.
Response. The Project Evaluation Model will include employee
surveys as a source of data. The surveys will include criteria to
measure organizational climate and general concerns. In addition, as
part of the evaluation process, data on EEO complaints and grievances
will be monitored.
(d) Communication
Comment. One employee commented that the level of communication to
employees about the project had been inadequate.
Response. All employees were invited to attend general briefings on
the proposed demonstration project in March, April, and early May of
this year. At these briefings, employees received handouts describing
the key features of the project. The publication of the first Federal
Register Notice was announced in a general bulletin issued to all
employees during the week of May 5, 1997. In that announcement,
employees were informed that the Federal Register Notice was
immediately available on the Office of Personnel Management Internet
Home Page. Shortly thereafter, the publication of the Federal Register
Notice was announced on the Department of Commerce Internet Home Page,
and numerous copies were distributed to all servicing human resources
offices for dissemination to employees. An article on the demonstration
project appeared in the May/June 1997 issue of the Department's
Commerce People magazine. In addition, a video which provides an
overview of the project was developed and made available to employees,
and several follow-up briefings were conducted. To ensure that
employees are kept informed on the project, the Department will issue a
Demonstration Project Newsletter periodically.

4. Demonstration Project System Changes

The following directs readers to the substantive changes and
clarifications to the project plan. The page numbers below refer to the
pages of the proposed plan, published in the Federal Register on May 2,
1997.
(1) Page 24256, 24258, and 24260: The Office of the Chief Financial
Officer/Assistant Secretary for Administration and the Office of the
General Counsel have been deleted, as those organizations will not
participate in the project.
(2) Page 24259: Two laboratories of the Office of Oceanic and
Atmospheric Research (OAR) that were inadvertently listed have been
deleted since they will not participate in the demonstration project.
These are the Geophysical Fluid Dynamics Laboratory, in Princeton, New
Jersey, and the Pacific Marine Environmental Laboratory, in Seattle,
Washington. In addition, all of the locations for each of the
participating laboratories have been listed.
(3) Page 24262: Table 3 has been changed to correct an error
introduced by the printing process. Specifically the table has been
corrected to show no GS-15 positions in the GS-1340 Meteorology Series
and a total of 235 positions in this occupation.
(4) Page 24262: Mountain Administrative Support Center (MASC) has
been deleted from Table 4, since MASC will not participate in the
demonstration project.
(5) Page 24263: The definitions of the four career paths have been
expanded for clarification.
(6) Page 24265: Paragraph B2(a) has been revised to restrict direct
examination and the associated requirement for Applicant Supply Files
to occupations for which there is documented evidence that skills are
in short supply.
(7) The requirement for all employees in the Scientific and
Engineering (ZP) Career Path to serve a three-year probationary period
has been modified. The three-year probationary period will be
applicable to only those ZP employees who are assigned to research and
development positions as identified by the functional code assigned in
conjunction with the classification process. All other ZP employees
will serve a one-year probationary period. (For further explanation,
see Section III(B)(10) Probationary Period.)
(8) Page 24266: The provisions for awarding performance-based RIF
retention credit have been changed. An employee with an overall
performance score in the top 20 percent (as opposed to the top 10
percent) of scores within a career path in a pay pool will be credited
with 10 additional years of service for retention purposes.
(9) Page 24267: The demonstration project definition of
``supervisor'' has been clarified and expanded. Minimum criteria for
classification of a position as ``supervisory'' have been included.
(10) Page 24267: The section ``Locality Pay'' has been clarified.
Specifically, the sentence dealing with special rates and locality
rates has been rewritten to indicate that for bands affected by special
rates, the maximum rate will be the higher of the special rate or the
locality rate, rather than the special rate and the locality rate.
(11) Page 24267: The policy on supervisory pay has been revised.
Supervisors in the Scientific and Engineering (ZP) Career Path will not
be eligible for immediate salary increases upon conversion to the
demonstration project. Supervisors in all career paths will be eligible
for salaries up to 6 percent higher than the maximum rates of their pay
bands, and there will be no differentiation in the amount of the
increase based on supervisory level.

[[Page 67438]]

Any employee who meets the demonstration project definition of
``supervisor'' will be eligible for the maximum increase of 6 percent,
which may be reached through performance pay increases granted through
the regular performance appraisal process.
(12) Page 24268: In the section entitled ``Pay Setting Upon
Movement of an Employee to a Different Pay Area,'' the formula for
determining the pay rate in the new area was printed incorrectly and
has been corrected.
(13) Page 24274: The Project Evaluation Model has been revised to
include the objective of ``Support for EEO and Diversity goals.''
(14) Page 24276: In the ``Project Management'' section, the role of
the DoC Acting Chief Financial Officer/Assistant Secretary for
Administration (now the Director of the National Institute of Standards
and Technology) as chairman has been clarified to show that the role is
specific to the individual, who will serve as Chair of the DPMB through
the first cycle of the project's operation. After the first cycle,
chairmanship of the Board will be assumed by one of the members of the
Board.
Janice R. Lachance,
Director.

Table of Contents

I. Executive Summary
II. Introduction
A. Purpose
B. Problems with the Present System
C. Changes Required/Expected Benefits
D. Participating Organizations
E. Participating Employees
F. Labor Participation
G. Project Design/Methodology
III. Personnel System Changes
A. Position Classification
B. Staffing
C. Reduction-in-Force
D. Pay Administration
E. Performance Evaluation and Rewards
IV. Conversion or Movement from a Project Position to a General
Schedule Position
A. Grade-Setting Provisions
B. Pay-Setting Provisions
V. Budget Discipline
A. Reprogramming Costs
B. Base Cost Assessment
C. Funding Pools for Performance Pay Increases and Bonuses
D. Budget Monitoring
VI. Project Evaluation
VII. Project Management
VIII. Training
A. Manager and Supervisor Training
B. Employee Training
C. Support Staff Training
IX. Experimentation and Revision
X. Authorities and Waiver of Laws and Regulations Required

I. Executive Summary

This project was designed by the Department of Commerce with
participation and review by the Office of Personnel Management (OPM).
The demonstration project will pursue several key objectives of the
National Performance Review: to simplify the current classification
system for greater flexibility in classifying work and paying
employees; to establish a performance management and rewards system for
improving individual and organizational performance; and to improve
recruiting and examining to attract highly qualified candidates and get
new hires aboard faster. The duration of the project will be 5 years,
except that the project may be extended by OPM if further testing and
evaluation are warranted.
The proposed project will test whether the interventions of the
NIST project can be successful in other environments. Other reasons for
testing the NIST interventions in the Department are: (1) all of the
diverse operating units in the proposed coverage are within the same
Department, the U.S. Department of Commerce, which is also the parent
agency of NIST; (2) several of the operating units in the proposed
coverage have served for eight years as comparison sites for the NIST
project; and (3) during the implementation and operation of the NIST
project, DoC and NIST staff worked closely with the U.S. Department of
Agriculture's National Finance Center, which provides personnel and
payroll computing and database services to all of DoC, including NIST
and the units proposed for the new project.

II. Introduction

A. Purpose

The purpose of the proposed project is to strengthen the
contribution of human resources management in helping to achieve the
missions of specific operating units of the Department of Commerce. The
project conducted by NIST successfully demonstrated that certain
innovative changes could improve human resources management in the NIST
environment. The proposed project will test whether these same
innovations will produce similarly successful results in other DoC
environments.

B. Problems With the Present System

C. Changes Required/Expected Benefits

The innovations of the project and their objectives are:
1. Classification
Career paths will replace occupational groups, broad bands will
replace grades, and Departmental broad-band standards will replace OPM
classification standards. The classification system will be automated
and classification authority will be delegated to line managers.
These changes are intended to simplify and speed up the
classification process, make the process more serviceable and
understandable, improve the effectiveness of classification decision-
making and accountability, and facilitate pay for performance. Broad
bands provide larger classification targets that can be defined by
shorter, simpler, and more understandable classification standards.
This simpler system will be easier to automate, will require fewer
resources to operate, and will facilitate delegation to line managers.
By providing broader and more flexible pay ranges for setting entry
pay, broad banding will provide hiring officials with an important tool
for attracting high-quality candidates and thus contribute to the
objective of increasing the quality of new hires.
By providing more flexible pay setting based on performance, broad
banding will give managers the ability to increase the pay of good
performers to higher and more competitive levels, thus improving the
retention of good performers. At the same time, the potential for
higher pay increases for good performance, supported by the broader pay
ranges of broad banding, will contribute to the objective of improving
organizational and individual performance.
2. Staffing
Staffing methods will include two that were implemented in the NIST

[[Page 67439]]

Demonstration Project and which are now available to all agencies
through examining authority delegated by OPM. For the sake of
simplification and to parallel the NIST Demonstration Project, they are
retained with the same titles under the Department of Commerce
Demonstration Project: Direct Examination and Agency-Based Staffing. In
addition, there will be placements under Merit Assignment and various
noncompetitive appointing authorities. OPM registers will not be used,
but positions in occupations covered by the Luevano Consent Decree
(Administrative Careers with America or successor programs) will be
filled using OPM guidance. Other supplemental staffing tools will
include such elements as paid advertising, flexible entry salaries,
probation, local authority for recruiting and retention payments, and
more flexible pay increases associated with promotion.
These changes are intended to attract high-quality candidates,
speed up the recruiting and examining process, increase the
effectiveness of the probationary review process, and increase the
retention of good performers.
Agency-based staffing, supported by paid advertising, will allow
hiring officials to focus on more relevant recruiting sources. Direct
examination will allow managers to hire individuals with shortage
skills as they find them, get them on board faster, and avoid the loss
of good candidates who may grow impatient with a long hiring process,
thus contributing to the objectives of increased quality of new hires
and better fit between position requirements and candidate skills.
The three-year probationary period will help ensure that scientists
and engineers who are retained beyond probation are capable of carrying
out the full cycle of research and development (R&D) work, thus
contributing to the objectives of high-quality hires and a high-
performing workforce. (See Section III(B)(10) Probationary Period.)
Local authority for recruiting and retention payments will provide
extra incentives for hiring and retaining individuals with shortage
skills, thus contributing to the objectives of increasing the quality
of new hires, improving the fit between position requirements and
individual qualifications, and improving the retention of good
performers.
3. Pay
The most important change in pay administration is the introduction
of pay for performance, which will govern individual pay progression
within bands. Funds currently applied to within-grade increases,
quality step increases, and promotions from one grade to a higher grade
when both grades are now in the same band, will be used instead to
grant performance-based pay increases within bands. The amount of the
basic pay and locality pay increases approved by Congress and the
President, however, will continue to be applied to pay schedules and to
the salaries of employees with a performance rating of Eligible. Other
pay tools are supervisory performance pay, flexible pay setting for new
hires, and more flexible pay setting upon promotion.
Pay for performance promotes fairness through the peer ranking
process and provides a motivational tool and a retention tool. As a
motivational tool, the promise of higher pay increases for good
performance encourages high achievement. As a retention tool, pay for
performance allows the organization to quickly move the salaries of
good performers to levels that are more competitive in the labor
market.
Supervisory performance pay provides an incentive for supervisors,
addressing the objective of improved individual and organizational
performance. Supervisory performance pay also addresses the objective
of improving retention by raising the pay of high-performing
supervisors to more competitive levels.
Flexible pay setting for new hires is a recruiting tool that gives
hiring officials greater flexibility to offer more competitive salaries
to high-quality candidates, addressing the objective of improving the
quality of new hires. The greater flexibility in setting pay upon
promotion gives managers another retention tool to help retain top
performers.
4. Performance Appraisal
The new system replaces the current five-level rating system with a
two-level rating system, using Unsatisfactory and Eligible labels.
(Unsatisfactory is equivalent to Unacceptable, as used in Part 430 of
Title 5, Code of Federal Regulations.) The most important feature of
the proposed performance appraisal system is that it is based on the
application of a weighted 100-point scoring system linked to pay for
performance. As in the current system, each employee has an individual
performance plan composed of several performance elements (all of which
are critical elements) that are measured with the 100-point scoring
system in conjunction with the application of benchmark performance
standards. Based on the resulting total scores, supervisors rank
employees by performance within peer groups and grant performance pay
increases according to the ranking. Highly ranked employees within a
peer group receive relatively high pay increases and lower ranked
employees receive relatively lower pay increases. Bonuses are granted
at the discretion of the supervisor following the performance appraisal
process.
The performance appraisal process is intended to (1) promote good
performance; (2) encourage a continuing dialogue between supervisors
and employees on organizational objectives, supervisory expectations,
employee performance, employee needs for assistance and guidance, and
employee development; and (3) provide a basis for performance-related
decisions in employee development, pay, rewards, assignment, promotion,
and retention. The system will more effectively communicate to
employees how they are performing in relation to their peers, the
rewards of good performance, and the consequences of poor performance.
Performance-based pay increases give an operating unit the ability
to raise the pay of good performers more rapidly, thus improving
retention of good performers. The potential for higher pay increases
for good performance will encourage achievement and promote the
objective of improved individual and organizational performance.
5. Performance Bonuses
In accordance with 5 CFR 451, at the end of the annual performance
period, Rating Officials, with the approval of Pay Pool Managers, will
have the opportunity to reward employee performance with bonuses up to
$10,000. Bonuses address two objectives. First, rewarding achievement
will make high achievers more likely to remain, thus improving
retention of the best performers. Second, the potential for bonuses for
achievement will encourage improved individual performance.
6. More Efficient Systems
The Department will improve the efficiency of human resource
systems by streamlining procedures, reducing paperwork, and automating
processes wherever possible.
7. Line Management Authority
Under the demonstration project, greater authority and
accountability will be delegated to line managers. This delegation is
intended to improve the effectiveness of human resources management by
strengthening the role of line managers as the human resources managers
of their units. The project will

[[Page 67440]]

be managed by the Departmental Personnel Management Board (DPMB).
Through the first cycle, the Board will be chaired by the Director of
the National Institute of Standards and Technology. Following that, one
of the Board members will assume the role of Chairman. Each major
operating unit will have its own Operating Personnel Management Board
(OPMB) to manage and oversee local operations. (See the section on
Project Management.)

D. Participating Organizations

The Department of Commerce encourages, serves, and promotes the
Nation's international trade, economic growth, and technological
advancement. Within this framework, and in the interest of promoting
the national interest through the encouragement of the competitive free
enterprise system, the Department provides a wide variety of programs,
some of which are included in the proposed coverage. The following
organizations will participate in the project:
Technology Administration (TA)
The Technology Administration, which oversees NIST and the National
Technical Information Service (NTIS), was established by Congress in
1988 as the premier technology agency working with U.S. industry in
improving competitiveness and increasing the impact of technology on
economic growth. The TA coverage would include only the Office of the
Under Secretary for Technology Administration and the Office of
Technology Policy. This coverage would be an opportunity to apply broad
banding principles to a policy, planning, and development environment
dealing with issues vital to the future of the U.S. economy as it is
affected by technology. TA offices in the proposed coverage are located
at the DoC headquarters building in Washington, D.C.
The key occupations are: General Administration, Management
Analyst, and General Business Specialist.
Bureau of Economic Analysis (BEA), Economics and Statistics
Administration
BEA is responsible for providing a current picture of the U.S.
economy through the preparation, development, and interpretation of the
national income and product accounts showing the gross domestic
product, business and other components of the national wealth accounts,
industrial market interrelationships traced by the input-output
accounts, and other accounts showing such economic indicators as
personal income, foreign investment, and balance of payments. The
bureau also develops surveys and other tools for analyzing and
forecasting economic developments. This coverage provides a test of the
NIST system in an environment that uses economists and accountants as
analysts, reporters, and forecasters. BEA is located at 1441 L Street,
N.W., Washington, D.C.
The economic analysis work of the organization is reflected in the
following key occupations: Economist, Accountant, Financial
Administrator, Computer Specialist, Statistician, and Statistical
Assistant.
Institute for Telecommunication Sciences (ITS), National
Telecommunications and Information Administration
ITS is a major component of the National Telecommunications and
Information Administration (NTIA). ITS is the principal Federal
telecommunications research and engineering laboratory. The Institute
conducts telecommunications research in support of NTIA's
responsibilities in advising the President on telecommunications and
information policy; developing U.S. plans and policies in international
forums; and developing policy for Federal use of the radio frequency
spectrum. This application will test how well the NIST interventions
work in a research and development (R&D) environment quite different
from the NIST environment. ITS is located in Boulder, Colorado.
The ITS R&D work is carried out primarily by Electronics Engineers,
with help from Mathematicians.
The remaining units are subunits of the National Oceanic and
Atmospheric Administration (NOAA):
Office of Oceanic and Atmospheric Research (OAR)
OAR is the primary research and development unit of NOAA. OAR
provides the science and technology to support improvements in NOAA
services and address current and future problems. OAR conducts research
programs in coastal, marine, atmospheric, and space sciences through
its own laboratories and offices, as well as through networks of
university-based programs. The work consists of research, modeling, and
environmental observations relating to weather, climate, and
environmental resources. The laboratory component of OAR is the
Environmental Research Laboratories (ERL). ERL includes research
laboratories in space environment, aeronomy, environmental technology,
weather forecast systems, climate monitoring and diagnostics, severe
storms, air resources, oceanography, and geophysical fluid dynamics.
This diversity provides a rich new R&D environment for the testing of
broad banding principles. OAR and ERL headquarters are located in
Silver Spring, Maryland. All ERL laboratories will be included in the
project, except the Great Lakes Environmental Research Laboratory (Ann
Arbor, MI), the Geophysical Fluid Dynamics Laboratory (Princeton, NJ),
and the Pacific Marine Environmental Laboratory (Seattle, WA). The
project laboratories are:

Aeronomy Laboratory--Boulder, CO
Atlantic Oceanographic and Meteorology Laboratory--Miami, FL; Silver
Spring, MD; San Diego, CA; Norfolk, VA; and Seattle, WA.
Air Resources Laboratory--Silver Spring, MD; Boulder, CO; Research
Triangle Park, NC; Oak Ridge, TN; Las Vegas, NV; and Idaho Falls, ID
Climate Diagnostic Center--Boulder, CO
Climate Monitoring and Diagnostics Laboratory--Boulder, CO; Hilo, HI;
Barrow, AK; Pago Pago, American Samoa; South Pole, Antarctica
Environmental Technology Laboratory--Boulder, CO Forecast Systems
Laboratory--Boulder, CO National Severe Storms Laboratory--Norman, OK
Space Environmental Laboratory--Boulder, CO

The dominant occupation within OAR is Meteorologist. Other key
occupations are Physical Scientist, Physicist, Electronics Engineer,
Computer Specialist, Electronics Technician, Physical Science
Technician, and Mathematician.
National Environmental Satellite, Data, and Information Service
(NESDIS)
NESDIS operates NOAA's satellites and ground facilities; collects,
processes, and distributes remotely sensed data; conducts studies,
plans new systems, and carries out the engineering required to develop
and implement new or modified satellite systems; carries out research
and development on satellite products and services; provides ocean data
management and services to researchers and other users; and acquires,
stores, and disseminates worldwide data related to solid earth
geophysics, solar-terrestrial physics, and marine geology and
geophysics. NESDIS provides both a technical operations environment and
a new R&D environment for testing the NIST interventions. NESDIS
headquarters and most of its offices are located in Suitland, Maryland.
Ground stations are located at Wallops Island, Virginia, and Fairbanks,
Alaska. The National Climatic Data Center is located

[[Page 67441]]

in Asheville, North Carolina. All of NESDIS will be included in the
project, except for the Wallops Island ground station.
The key occupations within NESDIS are Physical Scientist,
Meteorologist, Computer Specialist, Oceanographer, Physical Science
Technician, Meteorological Technician, Electronics Engineer,
Engineering Technician, Geophysicist, and Mathematician.
National Marine Fisheries Service (NMFS)
The mission of the National Marine Fisheries Service is the
stewardship of living marine resources for the benefit of the Nation
through their science-based conservation and management and promotion
of the health of their environment. NMFS supports domestic and
international conservation and management of living marine resources.
The goals of NMFS are to rebuild and maintain sustainable fisheries, to
promote the recovery of protected species, and to protect and maintain
the health of coastal marine habitats. NMFS brings in a variety of work
in the biological sciences never before addressed by broad banding
principles.
In addition to the headquarters office in Silver Spring, Maryland,
there are five regions, each of which consists of a Regional Office and
a Fisheries Science Center. The regional offices are located in the
following areas: Northeast (Gloucester, Massachusetts); Southeast (St.
Petersburg, Florida); Northwest (Seattle, Washington); Southwest (Long
Beach, California); and Alaska (Juneau). All the above units of NMFS
will be included in the project except for the following: in
Headquarters, the Office of Enforcement and the Inspection Services
Division; and in the regions, the Fisheries Science Centers located in
Woods Hole, Massachusetts; Miami, Florida; Seattle, Washington; La
Jolla, California; and the Alaska Center located in Seattle,
Washington.
NMFS is supported mainly by occupations in the biological sciences:
Fish Biologist, Biologist, Microbiologist, and Biology Technician.
Other important occupations are Chemist, Oceanographer, Wildlife
Biologist, Computer Specialist, and General Business Specialist.

E. Participating Employees

The project covers all positions that would otherwise be in the
General Schedule (GS) system. Wage Grade positions are not included.
Table 1 shows the total number of employees in each operating unit
to be covered by the project. Table 2 lists the occupational series in
which current positions are classified and shows the number of
employees in each series. The OPM occupational series will be retained.
The series are listed under the career path in which they will be
placed. (See Position Classification for definitions of the four career
paths.) Table 3 shows the number of covered employees in each series,
by General Schedule grade.

Table 1.--Number of Covered Employees by Unit
------------------------------------------------------------------------
Operating unit Number
------------------------------------------------------------------------
TA............................................ ........... 35
BEA, ESA...................................... ........... 414
ITS, NTIA..................................... ........... 82
NOAA.......................................... ........... 2114
OAR....................................... (640)
NESDIS.................................... (736)
NMFS...................................... (738)
-------------------------
Total................................. ........... 2645
------------------------------------------------------------------------

Table 2.--Occupational Series, by Career Path
------------------------------------------------------------------------
Series Title Number
------------------------------------------------------------------------
Scientific and Engineering (ZP) Career Path
------------------------------------------------------------------------
101............................. Social Scientist......... 2
110............................. Economist................ 247
184............................. Sociologist *............ 1
190............................. Anthropologist *......... 1
334............................. Computer Specialist...... 267
401............................. Biologist................ 51
403............................. Microbiologist........... 4
408............................. Ecologist *.............. 4
480............................. Fish Administrator *..... 43
482............................. Fish Biologist *......... 182
486............................. Wildlife Biologist *..... 2
499............................. Biological Science 1
Student.
701............................. Veterinary Medical 1
Officer *.
801............................. General Engineer......... 3
810............................. Civil Engineer........... 8
830............................. Mechanical Engineer...... 3
850............................. Electrical Engineer...... 1
854............................. Computer Engineer........ 2
855............................. Electronics Engineer..... 96
861............................. Aerospace Engineer *..... 1
899............................. Engineering Trainee...... 1
1301............................ Physical Scientist....... 198
1310............................ Physicist................ 71
1313............................ Geophysicist *........... 12
1315............................ Hydrologist *............ 1

[[Page 67442]]

1320............................ Chemist.................. 23
1330............................ Astronomer............... 8
1340............................ Meteorologist *.......... 226
1350............................ Geologist................ 2
1360............................ Oceanographer............ 77
1372............................ Geodesist................ 3
1382............................ Food Technologist *...... 2
1399............................ Physical Science Student. 1
1515............................ Operations Research 1
Analyst.
1520............................ Mathematician............ 24
1529............................ Mathematical Statistician 1
1530............................ Statistician............. 13
1550............................ Computer Scientist....... 7
------------
ZP.......................... Total.................... 1591
------------------------------------------------------------------------
Scientific and Engineering Technician (ZT) Career Path
------------------------------------------------------------------------
332............................. Computer Operator........ 3
392............................. Radio Frequency 2
Technician.
404............................. Biology Technician....... 9
802............................. Engineering Technician... 28
856............................. Electronics Technician... 22
1311............................ Physical Science 79
Technician.
1341............................ Meteorological Technician 41
*.
1531............................ Statistical Clerk/ 21
Assistant *.
------------
ZT.......................... Total.................... 205
------------------------------------------------------------------------
Administrative (ZA) Career Path
------------------------------------------------------------------------
130............................. Foreign Affairs 11
Specialist *.
131............................. International Relations 7
Specialist *.
260............................. Equal Employment 4
Specialist.
301............................. Miscellaneous 77
Administration.
340............................. Program Manager.......... 2
341............................. Administrative Officer... 22
342............................. Support Services 3
Specialist *.
343............................. Management Analyst....... 76
346............................. Logistics Management 2
Specialist *.
391............................. Telecommunications 1
Specialist.
501............................. Financial Administrator.. 10
510............................. Accountant............... 46
560............................. Budget Analyst........... 28
610............................. Nurse *.................. 1
696............................. Consumer Safety 1
Specialist *.
930............................. Appeals Officer *........ 2
1001............................ General Arts and 3
Information.
1035............................ Public Affairs Specialist 6
1082............................ Writer/Editor............ 14
1083............................ Technical Writer/Editor.. 4
1084............................ Visual Information 7
Specialist.
1101............................ General Business 72
Specialist.
1140............................ Trade Specialist......... 8
1165............................ Loan Specialist *........ 16
1410............................ Librarian................ 13
1412............................ Technical Information 5
Specialist.
1654............................ Printing Manager......... 1
1670............................ Equipment Specialist..... 1
1712............................ Training Instructor *.... 1
1750............................ Instructional Systems 1
Specialist *.
ZA.......................... Total.................... 445
Support (ZS) Career Path
------------------------------------------------------------------------
29.............................. Environmental Protection 1
Assistant *.
303............................. Miscellaneous Clerk/ 72
Assistant.
305............................. Mail and File Clerk...... 3
309............................. Correspondence Clerk/ 1
Assistant.
318............................. Secretary................ 190
322............................. Clerk-Typist............. 2
326............................. Office Automation Clerk/ 40
Assistant.
335............................. Computer Clerk/Assistant. 43

[[Page 67443]]

344............................. Management Clerk/ 5
Assistant.
399............................. Student Trainee.......... 8
525............................. Accounting Technician.... 8
561............................. Budget Clerk/Assistant... 3
963............................. Legal Instruments 9
Examiner *.
1087............................ Editorial Clerk/Assistant 1
1101............................ Trade Information/ 7
Financial Assistant *.
1105............................ Purchasing Agent......... 4
1411............................ Library Technician....... 4
2005............................ Supply Clerk/Assistant... 2
2102............................ Transportation Clerk/ 1
Assistant.
------------
ZS.......................... Total.................... 404
------------------------------------------------------------------------
* These occupations were not tested by the NIST project.

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BILLING CODE 6325-01-C
Senior Executive Service and ST-3104 Positions
The personnel systems for SES positions (see 5 U.S.C. 3131-3136 and
5 U.S.C. 5381-5385) will not change for the project. SES
classification, staffing, compensation, performance appraisal, awards,
and reduction-in-force will be based on standard SES methods. The
personnel systems for ST-3104 positions (see 5 U.S.C. 3104 and 5376)
will change only to the extent that ST-3104 positions are in the same
performance appraisal, awards, and reduction-in-force systems as
General Schedule positions. Classification, staffing, and compensation,
however, will not change. Neither SES nor ST-3104 employees will be
subject to the pro rata share payouts upon conversion to the
demonstration project. Pay adjustments for their positions under the
project will be carried out in accordance with existing Federal rules
pertaining to SES and ST-3104 pay adjustments.
General Schedule Positions
All General Schedule (GS and GM) positions are incorporated in the
new career path/pay band system. The within-grade increases of the
General Schedule will be replaced by the annual performance pay
increases. Except as otherwise provided in the project plan, laws and
regulations pertaining to GS employees (e.g., overtime pay and cost-of
living allowance provisions) continue in force for all project
employees in the same way as they do for GS employees.

F. Labor Participation

All unions affected by the project are local units of the American
Federation of Government Employees (AFGE). All of the AFGE
representation is within the National Oceanic and Atmospheric
Administration (NOAA). The following table shows the number of project
employees represented by each union local.

Table 4.--Bargaining Unit Coverage
----------------------------------------------------------------------------------------------------------------
Employees
Operating unit Location Union local covered
----------------------------------------------------------------------------------------------------------------
NESDIS............................. Camp Springs, MD........... AFGE 3680........................ 118
Asheville, NC.............. AFGE 146......................... 146
NMFS............................... Silver Spring, MD.......... AFGE 2703........................ 169
OAR................................ Research Triangle Park, NC. AFGE 3347........................ 39
----------------------------------------------------------------------------------------------------------------

The project operating units provided numerous briefings on the
project to employees and union representatives. Human resources
representatives traveled to the various organizational locations to
conduct three-hour information briefings. In addition, each bargaining
unit covered was invited to send a representative to Boulder, Colorado,
at management's cost to receive further information on the project and
to interact with a panel of NIST managers and employees currently in
the NIST project. The project operating units offered Impact and
Implementation Bargaining to each of these unions on the conditions and
provisions of the proposed project. All of the unions on the list have
agreed to the project.

G. Project Design/Methodology

The project methodology is to introduce into selected DoC operating
units certain innovations in human resources management, and to
evaluate over time the effects of those innovations on the ability of
the operating units to manage their human resources. The methodology
includes the following steps:
1. Selection of Innovations: After review of the innovations tested
at NIST, the Department has determined that all would have potential
benefit in other DoC units and therefore should be included in the
proposed project. These innovations, and the procedures associated with
them, are described below under Position Classification, Staffing,
Reduction-in-Force, Pay Administration, and Performance Evaluation and
Rewards.
2. Selection of Operating Units: The Department has selected
several operating units (See Participating

[[Page 67448]]

Organizations.) that will provide a useful test of whether the
innovations successfully tested at NIST will produce similarly
successful results in other environments.
3. Establishment of Goals and Objectives: The following section on
Goals and Objectives describes the overall goals of the project and the
objectives associated with each of the innovations.
4. Partnership: The Department has sought input on the proposal
from each affected local union. (See Labor Participation.) The
Department will also ensure that partnership in accordance with
Executive Order 12871 continues to be an integral part of planning and
implementation.
5. Baseline Evaluation: To provide a basis of comparison between
employee opinions of the current system and their future opinions of
the project system, each employee in the covered operating units will
be asked to complete an opinion questionnaire on the current system
prior to implementation of the project. To establish a baseline cost
analysis, each operating unit will be required to analyze its personnel
costs during fiscal years 1994, 1995, and 1996.
6. Training: The Department and the operating units will provide
training to human resources staff, managers, and employees prior to
implementation of the project and will provide additional training to
managers on the pay-for-performance system prior to the end of the
first performance cycle. (See Training.)
7. Implementation: To ensure a smooth implementation, the
Department and the operating units will emphasize top management
support; the development of detailed operating procedures prior to
implementation; thorough training of managers and human resources
office staff; step-by-step implementation planning; adequate backup
systems, particularly in automated personnel and payroll systems; and
sufficient operating resources.
8. Operation: The Department will exercise continual oversight,
under the direction of the Departmental Personnel Management Board (See
Project Management.) to ensure that project authorities and procedures
are administered correctly.
9. Evaluation: The Department will arrange for an annual evaluation
of the project under an OPM-approved evaluation plan. (See Project
Evaluation.) The evaluation will be designed to determine whether the
innovations are achieving the goals and objectives described in the
following sections and are operating within acceptable cost limits.
(See Budget Discipline.)

III. Personnel System Changes

A. Position Classification

1. Introduction
Career paths will replace occupational groups, broad bands will
replace grades, and Departmental broad-band standards will replace OPM
classification standards. The classification system will be automated,
and classification authority will be delegated to line managers.
These changes are intended to simplify and speed up the
classification process, make the process more serviceable and
understandable, improve the effectiveness of classification decision-
making and accountability, and facilitate pay for performance. Broad
bands provide larger classification targets that can be defined by
shorter, simpler, and more understandable classification standards.
This simpler system will be easier to automate, will require fewer
resources to operate, and will facilitate delegation to line managers.
By providing broader and more flexible pay ranges for setting entry
pay, broad banding will provide hiring officials with an important tool
for attracting high-quality candidates and thus will contribute to the
objectives of increasing the quality of new hires and improving
workforce performance.
By providing more flexible pay setting based on performance, broad
banding will give managers the ability to increase the pay of good
performers to higher and more competitive levels, thus improving the
retention of good performers. At the same time, the promise of higher
pay increases for good performance, supported by the broader pay ranges
of broad banding, will contribute to the objective of improving
organizational and individual performance.
2. Career Paths
A career path aggregates comparable occupations that have parallel
career patterns and are suitable for similar treatment in staffing,
classification, pay, and other personnel functions.
There are four career paths: (a) Scientific and Engineering (ZP):
two-grade interval professional technical positions in the physical,
engineering, biological, mathematical, computer and social science
occupations; and student trainee positions in these disciplines.
(b) Scientific and Engineering Technician (ZT): one-grade interval
positions support scientific and engineering activities through the
application of various skills and techniques in the electrical,
mechanical, physical science, biological, mathematical, and computer
fields; and student trainee fields.
(c) Administrative (ZA): two-grade interval positions in such
administrative and managerial fields as finance, procurement,
personnel, librarianship, public information and program and management
analysis; and student trainee positions in these fields.
(d) Support (ZS): one-grade interval positions that provide
administrative support through the application of typing, clerical,
secretarial, assistant, and similar knowledge and skills; positions
that provide specialized facilities support, such as guards and
firefighters; and student trainee positions in these areas.
3. Bands
Each career path is divided into five bands, which replace GS
grades. The maximum rate of a band is step 10 of the highest GS grade
in the band including locality rates in the 48 contiguous States and
the District of Columbia. When a special rate for an occupation in the
band is higher than the applicable locality rate, the Departmental
Personnel Management Board will have to use the maximum applicable
special rate to set the maximum rate of the band for specific
occupations in certain geographical areas. (See Pay Administration.)
For each regular band, there is a corresponding supervisory band for
employees who receive supervisory performance pay. The supervisory band
has the same minimum rate as the nonsupervisory band, but has a maximum
rate 6 percent higher than the maximum rate of the nonsupervisory band.
Positions in the supervisory band include positions that meet the DoC
Demonstration Project definition of ``supervisor''. (See Pay
Administration.) The following chart shows the four project career
paths, the bands in each career path, and the relationship between
bands and General Schedule grades.

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BILLING CODE 6325-01-C
4. Occupational Series
The General Schedule occupational series will be retained. Existing
OPM occupational series may be added or deleted in response to
programmatic needs.
5. Classification Standards
Each classification standard will describe each band in two
factors: (1) general duties and responsibilities and (2) knowledge,
skills, and abilities. These two factors complement each other at each
band in a career path and may not be separated in classifying a
position. OPM classification standards will not be used.
6. Position Descriptions
Line managers will follow an automated menu-driven process to
classify positions and produce position descriptions.
7. Delegation of Classification Authority
The Operating Personnel Management Boards (OPMBs) will oversee the
delegation of classification authority to line managers. Under
authority delegated by the DPMB, the Department's human resources staff
will monitor and review classification decisions made by managers to
ensure consistent and uniform application of classification policies
and guidelines. Under this authority, the Department's Director for
Human Resources Management will establish a plan to review the accuracy
of classification decisions made by line managers and make periodic
reports to the DPMB. A variety of approaches will be used to conduct
classification reviews, such as regularly scheduled Departmental
oversight reviews as well as ad hoc reviews conducted to address
specific classification issues identified through data analysis, random
sampling of classification actions, project evaluation reports, etc.
The Governmentwide system of approval of SES and ST-3104 positions will
be maintained.
8. Classification Appeals
An employee covered by the DoC Demonstration Project may appeal the
career path (when the position is in a series that may be assigned to
more than one career path, e.g., GS-1101), occupational series, or pay
band of his or her position at any time. An employee wishing to
formally appeal must first appeal to the Operating Unit (OU). If the
employee is dissatisfied with the OU decision, he or she may appeal
further to the Department level (DPMB or designee). The decision of the
Department will be final.
Details pertaining to the classification appeals process are found
in the project operating procedures.

B. Staffing

1. Introduction
The project operating units will use a variety of staffing methods
to fill positions, including Direct Examination, Agency-Based Staffing,
Merit Assignment, and various noncompetitive placements. Recruiting and
examining will be carried out directly by the operating units except
for positions covered by the Luevano Consent Decree. OPM registers will
not be used. These methods will be supplemented by other staffing
tools, such as paid advertising, flexible entry salaries, probation,
recruitment and retention payments, and flexible pay increases
associated with promotion. The Department will make necessary
adjustments in response to future revisions in staffing statutes. These
changes are intended to attract higher quality candidates, speed up the
recruiting and examining process, increase the effectiveness of the
probationary review process, and improve the retention of good
performers.

[[Page 67450]]

Agency-based staffing, supported by paid advertising, will allow
hiring officials to focus on more relevant recruiting sources. Direct
examination will allow managers to hire individuals with shortage
skills as they find them, get them on board faster, and avoid the loss
of good candidates who may grow impatient with a long hiring process,
thus contributing to the objectives of increasing the quality of new
hires and improving the fit between position requirements and candidate
skills. The three-year probationary period will help ensure that
scientists and engineers who are retained beyond probation are capable
of carrying out a full cycle of R&D work, thus contributing to the
objectives of high-quality hires and a high-performing workforce (see
Section III(B)(10)). Local authority for recruiting and retention
payments will provide extra incentives for hiring and retaining
individuals with shortage skills, thus contributing to the objectives
of increasing the quality of new hires, improving the fit between
position requirements and individual qualifications, and improving the
retention of good performers.
2. Direct Examination
The project will apply two direct examination authorities: (a)
Direct Examination: Critical Shortage Occupations and (b) Direct
Examination: Critical Shortage Highly Qualified Candidates. These
vacancies will normally be filled through direct recruiting by
selecting officials, supplemented by a required search of the operating
unit Applicant Supply File. Direct examination procedures are not
exempt from the application of veteran preference rules.
(a) Direct Examination: Critical Shortage Occupations
Direct examination procedures will be used for categories of
occupations that require skills that are in short supply. Included in
this group are specific occupations in two categories listed in the
Project Operating Procedures: (1) some occupations for which there is a
special rate under the General Schedule pay system, and (2) some
occupations at Pay Band III and above in the ZP Career Path. Any
position in these shortage categories may be filled through direct
examination procedures.
(b) Direct Examination: Critical Shortage Highly Qualified Candidates
Direct examination procedures will be used for additional positions
for which there is a shortage of highly qualified candidates.
Candidates for positions at Band I or II of the ZP Career Path who have
a bachelor's degree with at least a 2.9 GPA (on a 4.0 scale) in a job-
related major or a master's degree in a job-related field constitute a
shortage category; candidates for positions at Band I of the ZT Career
Path who have at least a 2.9 GPA in a job-related field during a
minimum of at least 2 years in an accredited college, junior college,
or technical institute constitute a shortage category; and candidates
for positions at Band II of the ZT Career Path who have at least a 2.9
GPA in a job-related field in 4 years of college study constitute a
shortage category.
3. Agency-Based Staffing
Agency-based staffing procedures will be used to fill vacancies not
covered by direct examination or the project operating unit Merit
Assignment Plan (MAP). Vacancies filled by agency-based procedures will
be advertised at a minimum through the Governmentwide automated
employment information system operated by OPM.
4. Merit Assignment Plan (MAP)
MAP procedures will be used to fill positions restricted to current
or former Federal employees with competitive status. These plans will
be amended to include any demonstration project flexibilities.
5. Applicant Supply Files
The operating units will advertise the availability of job
opportunities in direct-examination occupations by continuous posting
of an Applicant Supply Bulletin (that conforms with the requirements of
5 U.S.C. 3327) on the Governmentwide automated employment information
system operated by OPM. The operating units will accept applications
for this file on an open-continuous basis for all direct-hire
authorities. Selecting officials will be able to recruit directly for
applicants, but any applicants they find must compete with applicants
who apply through the Applicant Supply Bulletin and other applicants
whose applications are stored in the operating unit Applicant Supply
File.
6. Referral Procedures for Direct Examination and Agency-Based Staffing
Authorities
Either direct referral or rating and ranking will be used to refer
applicants for vacancies under direct examination and agency-based
staffing authorities.
(a) Direct referral
A qualified candidate may be referred directly without rating and
ranking:
(1) When there are no more than three qualified candidates and no
preference eligibles; or
(2) If the candidate is a preference eligible with a compensable
Service-connected disability of 10 percent or more. (These preference
eligibles are given absolute preference except when the position is at
Band III or above in the Scientific and Engineering Career Path.)
Selecting officials may choose any of these preference eligibles when
more than one are referred.
(b) Rating and ranking
Rating and ranking (including veteran preference and ``rule-of-
three'' procedures) will be used when the list of qualified candidates
contains:
(1) More than three candidates; or
(2) Two or more candidates including at least one preference
eligible (except when direct referral of a 10-point veteran is made
under (a)(2) above).
7. Priority Placement
All Department of Commerce and OPM priority placement programs will
be followed.
8. Paid Advertising
Paid advertising may be used as one of the first steps in
recruitment without having to first try unpaid methods.
9. Private Sector Temporaries
Private sector temporary help services may be used as appropriate.
10. Probationary Period
Probation under the project will follow current law and
regulations, except for employees in the Scientific and Engineering
(ZP) Career Path performing research and development (R&D) work. ZP
employees performing R&D work will be required to serve a probationary
period of three years, except that a supervisor may end the
probationary period of a subordinate R&D employee at any time after one
year. Near the end of the first year of the R&D employee's probationary
period, the supervisor will be required to decide whether to: (1)
change the employee from probationary status to non-probationary
status; (2) remove the employee; or (3) continue the employee on
probation. If the employee is continued on probation, the supervisor
must select from the same options near the end of the second year of
probation. If probation is continued into the third year, the
supervisor must make a final decision on whether to retain or remove
the employee near the end of the third and final year of probation.
The purpose of the three-year probationary period for scientists
and engineers performing R&D work is to allow a hiring official to view
the full cycle of a research assignment before

[[Page 67451]]

making a final decision on retaining the employee. The one-year
probationary period is insufficient to cover the full cycle of research
and development from assignment of a research project to publication of
results. For other positions, the one-year probationary period is
adequate.
11. Qualification Standards
The qualifications required for placement within a band and within
a career path will be based on the OPM Qualification Standards for
General Schedule Positions, except that testing requirements will not
be used and the Superior Academic Criterion will be defined as a 2.9
GPA (on a 4.0 scale). The minimum qualifications for the occupation and
for the GS grade corresponding to the lowest grade in the band will
apply. The DPMB may authorize new or modified qualification standards
based on current practices in the scientific, engineering, and computer
science fields and to reflect modern curricula in recognized degree
programs.
12. Recruitment and Retention Payments
The project operating units may grant recruiting and retention
payments in appropriate circumstances, not to exceed $10,000 or 25
percent of basic pay, whichever is greater. Decisions on allowances
will be based on market factors such as salary comparability and salary
offer issues, relocation and dislocation issues, programmatic urgency,
emerging technologies, turnover rates, special qualifications, and
shortage categories or scarcity of positions unique to the operating
unit. All scientific, engineering, and other hard-to-fill positions
will be eligible. Recruitment and retention payments will not be
considered part of basic pay.
13. Travel Expenses
Travel and transportation expenses, advancement of funds, per diem
expenses incident to travel, and/or relocation expenses may be provided
to new hires in the same manner as is authorized in sections 5723,
5724, 5724a, 5724b, and 5724c of title 5, U.S. Code. Recipients must
sign service agreements indicating commitment to at least 12 months of
continued service.
14. Promotion
A promotion is a change of an employee to (1) a higher band in the
same career path, or (2) a band in another career path in combination
with an increase in pay. To be eligible for promotion, an employee must
have a current performance rating of Eligible. The time-in-band
requirement for promotion eligibility is 52 weeks, with two exceptions:
(1) an employee may be promoted from Band I to Band II in the Support
Career Path without time restriction; and (2) an employee may be
promoted from Band II to Band III in the Support Career Path without
time restriction if the employee was not promoted from a Band I to a
Band II position during the previous 52 weeks. (For pay provisions
related to promotion, see Pay Administration.)

C. Reduction-in-force

1. Introduction
The project operating units will follow reduction-in-force
procedures contained in law and regulation, except that career path
will be added to the definition of competitive areas, retention credit
for performance will be based on performance ranking, and grades will
be converted to bands for the purpose of interpreting reduction-in-
force regulations.
The objective of the link between career paths and competitive
areas is to improve the fit between the skills of displaced employees
and the positions they are offered through reduction-in-force
procedures. The objective of the link between performance and retention
standing is to continue to make performance a factor in retention
during reduction-in-force.
2. Competitive Areas
Each of the four career paths in each project operating unit local
commuting area will be a separate competitive area--separate from the
other career paths and separate from the competitive areas of other
operating unit employees.
3. Link Between Performance and Retention
An employee with an overall performance score in the top 20 percent
of scores within a career path in a pay pool (See Performance
Evaluation and Rewards below.) will be credited with 10 additional
years of service for retention purposes. The total credit will be based
on the employee's three most recent annual performance scores received
during the 4-year period prior to an established cutoff date, for a
potential total credit of 30 years. Career status and veteran
preference will continue to have the same effect on retention standing
as they now have under current regulations. No performance-related
retention credit will convert to this system from any other performance
appraisal system.
4. Link Between Bands and Grades
OPM reduction-in-force regulations on assignment rights (5 CFR
351.701) will be applied to the project by substituting ``one band''
for ``three grades'' and ``two bands'' for ``five grades.''

D. Pay Administration

1. Introduction
The most important change in pay administration is the introduction
of pay for performance, which will govern individual pay progression
within bands. The amount of the basic pay and locality pay increases
approved by Congress and the President will continue to be applied to
pay schedules and employee salaries, with the variations described
below. Other pay tools are supervisory performance pay, flexible pay
setting for new hires, and more flexible pay setting upon promotion.
Pay for performance promotes fairness and provides a motivational
tool and a retention tool. It is fair that higher achievement should
produce higher rewards. In particular, the quality work that arises
from a commitment to the goals and objectives of the organization
should be rewarded by higher pay increases. As a motivational tool, the
promise of higher pay increases for good performance encourages high
achievement. As a retention tool, pay for performance allows the
organization to more quickly move the salaries of good performers to
levels that are more competitive in the labor market.
Supervisory performance pay provides an extra performance incentive
for supervisors, addressing the objective of improved individual and
organizational performance. Supervisory performance pay also addresses
the objective of improving retention by raising the pay of high-
performing supervisors to more competitive levels. Flexible pay setting
for new hires is a recruiting tool that gives hiring officials greater
flexibility to offer more competitive salaries to high-quality
candidates, addressing the objective of improving the quality of new
hires. The greater flexibility in setting pay upon promotion gives
managers another retention tool to help retain top performers.
2. Pay for Performance
Pay for performance has three components: (a) the annual adjustment
to basic pay, which includes the annual general increase and the
locality pay increase; (b) annual performance pay increases; and (c)
bonuses. The first component, the annual adjustment to

[[Page 67452]]

basic pay, is set according to the subsections referring to general and
locality increases. The second component, performance pay increases, is
set according to the procedures under Performance Evaluation and
Rewards. The third component, bonuses, is managed in accordance with
the subsection on Performance Bonuses under Performance Evaluation and
Rewards.
3. Placement in a Lower Band
An employee whose performance rating is Unsatisfactory does not
receive the annual adjustment to basic pay. Because the minimum pay
rate for each band is increased each year by the amount of the annual
adjustment to basic pay, it is possible that the new minimum rate of a
band will exceed the basic pay of an employee in that band who does not
receive the annual adjustment to basic pay due to unsatisfactory
performance. When this happens, the employee is placed in the next
lower band. This placement shall not be considered an adverse action
under 5 U.S.C. 7512, nor shall grade (i.e., band) retention under 5
U.S.C. 5362 be applicable.
4. Supervisory Performance Pay
Employees who meet the demonstration project definition of
``supervisor'' will be eligible for supervisory performance pay.
Positions that require incumbents to spend 25 percent or more of their
time performing all of the following duties will be titled
``supervisory'' for classification and other official purposes and will
be eligible for supervisory performance pay.
1. Assign and review work daily, weekly, or monthly;
2. Assure that production and accuracy requirements are met;
3. Approve leave;
4. Evaluate work performance of subordinates; and
5. Exercise at least four of the following authorities and
responsibilities: (a) plan work to be accomplished by subordinates, set
and adjust short-term priorities, and prepare schedules for completion
of work; (b) assign work to subordinates based on priorities, selective
consideration of the difficulty and requirements of assignments, and
the capabilities of employees; (c) give advice, counsel, or instruction
to employees on both work and administrative matters; (d) interview
candidates for positions in the unit and recommend appointment,
promotion, or reassignment to such positions; (e) hear and resolve
complaints from employees, referring group grievances and more serious
unresolved complaints to a higher level supervisor or manager; (f)
effect minor disciplinary measures, such as warnings and reprimands,
recommending other action in more serious cases; (g) identify
developmental and training needs of employees, providing or arranging
for needed development and training; (h) find ways to improve
production or increase the quality of the work developed; and (i)
develop performance standards.
Supervisory performance pay will be considered a part of basic pay.
Upon conversion to the project, all eligible supervisory positions will
be placed in the supervisory bands. The incumbents of these positions
will be converted at their basic pay (including special rates or
locality pay) at the time of conversion. New hires into supervisory
positions after the date of conversion will have their pay set at the
supervisor's discretion within the pay range of the applicable
supervisory band.
Supervisors in all career paths will be eligible for salaries up to
6 percent higher than the maximum rate of their pay bands. The amount
by which a supervisor's pay exceeds the maximum rate of the band
constitutes supervisory performance pay. The higher salaries shall be
reached through performance pay increases granted through the regular
performance appraisal cycle.
The payment of supervisory performance pay is not considered a
promotion or a competitive action. Supervisory performance pay will be
canceled when an employee's supervisory responsibilities are
discontinued. The cancellation of supervisory pay does not constitute
an adverse action, and there is no right of appeal under 5 U.S.C.
Chapter 75. Pay retention under 5 U.S.C. 5363 is not applicable. Before
entering a supervisory position, an employee will be required to sign a
statement certifying that the employee understands that the supervisory
pay will be canceled when the employee ceases to be a supervisor.
5. Pay and Compensation Ceilings
The maximum rate for a band (excluding special bands established to
allow for supervisory performance pay) will be equal to the maximum
rate-- GS rate, locality rate, or special rate, as applicable--payable
to GS employees for the grades corresponding to the band. An employee's
basic pay may not exceed the maximum rate of the employee's band
(including a supervisory band), except for employees receiving retained
rates of pay.
An employee's rate of basic pay payable under any pay band may not
exceed the rate of basic pay payable for Level IV of the Executive
Schedule. An employee's aggregate monetary compensation for a calendar
year may not exceed the basic rate of pay for Level I of the Executive
Schedule, as required by 5 U.S.C. 5307 and OPM regulations in Subpart B
of 5 CFR 530.
6. Locality Pay
Locality pay is implemented as basic pay for all purposes except as
otherwise provided in this plan. The locality adjustment will be
applied to the minimum and maximum rates of each band, as applicable.
For bands affected by special rates, the maximum rate will be the
higher of the special rate or the locality rate. A locality adjustment
may be applied to an eligible employee's basic pay only to the extent
that it does not cause the employee's basic pay to exceed the maximum
rate of the band.
7. Special Salary Rates
When appropriate, special salary rates will be used to determine
employees' maximum pay rates in lieu of the normal pay band ceilings.
The provisions of current regulations (5 CFR 530.303) will be followed
to determine the appropriateness of special salary rates. As provided
for under these regulations, special salary rates will be restricted to
occupations and/or geographic locations for which there is an existing
or likely difficulty in the recruitment or retention of well-qualified
personnel.
8. Effect of General and Locality Pay Increases on Bands
The minimum and maximum rates of each band will be increased at the
time of a general pay increase under 5 U.S.C. 5303 and/or a locality
pay increase under 5 U.S.C. 5304 or 5304a so that they equal the new
locality-adjusted minimum and maximum rates of the grades corresponding
to the band. The maximum rates of bands set according to special rates,
however, may exceed this amount to the extent necessary to equal the
10th step of the appropriate special rate scale if that rate is higher.
9. Effect of General and Locality Pay Increases on Individual Pay
Only employees with a current annual performance rating of record
of Eligible may receive an increase in their basic pay at the time of
band adjustments. This increase in basic pay will reflect any
applicable general and/or locality pay increase for General Schedule
employees. The increase in basic pay for eligible employees whose basic
pay is at

[[Page 67453]]

the ceiling of their band will equal the increase in the ceiling.
The basic pay increase for eligible employees whose basic pay is
below the ceiling of their band will be calculated by applying two
factors to the employee's rate of pay. One factor is the general
increase factor representing the increase in General Schedule rates
under 5 U.S.C. 5303 (e.g., 1.02 if the general increase is 2 percent).
The second factor is the locality pay increase factor, which is derived
by dividing the newly applicable locality pay percentage factor by the
formerly applicable locality pay percentage factor. (For example, if
the locality payment percentage for an area increased from 4.23 percent
to 5.48 percent, the locality pay increase factor would be 1.0548
divided by 1.0423, or approximately 1.012.) Thus, the new rate of basic
pay would be calculated using the following formula:
[GRAPHIC] [TIFF OMITTED] TN24DE97.005

However, a basic pay increase will be applied only to the extent that
it does not cause an employee's basic pay to exceed the ceiling of the
applicable band.
10. Basic Pay
Employees covered by the project will not have separate basic pay
rates and locality pay rates, as do General Schedule employees. Project
basic pay rates will be basic pay for all purposes, except as
specifically provided in the demonstration project plan.
11. Pay Setting Upon Promotion
The new basic pay rate upon promotion may be set at any level in
the new band (If the move is to a different career path, any band in
the new career path would be considered a ``new band.''), except that
the minimum pay increase upon promotion is 6 percent. OPMBs will
establish operating unit guidelines and delegate approval authority for
setting pay levels for promotions.
12. Pay Setting for New Hires
The setting of initial salaries within bands for new appointees
will be flexible, particularly for hard-to-fill positions in the
Scientific and Engineering Career Path. OPMBs will establish operating
unit guidelines and delegate approval authority for setting pay levels
for new hires.
13. Conversion of Employees From the General Schedule to the
Demonstration Project
For employees being converted from the GS pay system to the
demonstration project, GS grades will translate directly to the
project's career path and band structure. Employees will be converted
at their current highest rate under the GS pay system (i.e., highest of
locality rate or special rate or similar rate) at the time of
conversion. No one's salary will be reduced as a result of the
conversion. When conversion of an employee into the project is
accompanied by a geographic move, the employee's GS pay entitlements
(including any locality rate or special rate) in the new area will be
determined before converting the employee's pay to the demonstration
project pay system.
At the time of conversion, each converted employee will be given a
lump-sum cash payment for the time credited to the employee toward what
would have been the employee's next within-grade increase. The payment
for a General Schedule employee will be computed by (1) calculating the
ratio of (a) the number of days the employee will have spent in the
employee's current rate through the day prior to the day of conversion,
to (b) the total number of days in the employee's current waiting
period for a regular within-grade increase (364, 728, or 1092 days),
and (2) multiplying that ratio by the dollar value of the employee's
next within-grade increase, as in effect at the time of conversion.
14. Movement of GS Employees From Other Organizations to the
Demonstration Project
GS employees can move into the project from other organizations
through transfer, reassignment, promotion, or new appointment. When the
movement is by lateral transfer or lateral reassignment, the employee's
GS grade will translate directly to the project's career path/band
structure, and the employee's rate of basic pay under the demonstration
project will equal his or her current highest rate under the GS pay
system (i.e., highest of locality rate or special rate or similar
rate). When a lateral transfer or lateral reassignment is accompanied
by a geographic move, the employee's GS pay entitlements (including any
locality rate or special rate) in the new area will be determined
before converting the employee's pay to the demonstration project pay
system. When the movement is by new appointment, promotion,
reassignment with pay adjustment (through merit assignment plan
competition), or transfer to ``higher grade'' (i.e., to a band higher
than the band that corresponds to the employee's current GS grade), the
new pay rate is set according to project pay setting flexibilities for
new hires and promotions.
15. Pay Setting Upon Movement of an Employee to a Different Pay Area
Employees who move (voluntarily or involuntarily) from one
geographic area to another within their operating unit will have their
pay adjusted to account for any change in the band maximum rates
between the two areas. This adjustment ensures that the employee's
relative position in the band (measured as a percentage of the band
maximum rate) will be maintained upon movement. The pay rate in the new
area will be derived using the following formula:
[GRAPHIC] [TIFF OMITTED] TN24DE97.006

The new pay rate is calculated before any other simultaneous pay
action (e.g., general pay adjustment or promotion effective on the same
date). Any reduction in pay solely attributable to a movement from one
pay area to a lower-paying area shall not be considered a reduction in
basic pay under the adverse action provisions of 5 U.S.C. 7512(4) or
under the pay retention provisions of 5 U.S.C. 5363. (The employee
retains the right to grieve or file a complaint regarding a geographic
reassignment if there is an allegation of

[[Page 67454]]

a violation of nondiscrimination statutes or a prohibited personnel
practice.)
16. Severance Pay
OPM severance pay regulations (5 CFR 550.703) will be applied to
the project by substituting ``one band'' for ``two grades'' and ``two
grades or pay levels.''
17. Grade and Pay Retention
Grade and pay retention will follow current law and regulations,
except as allowed by specific waiver (e.g., ``career path and band''
for ``grade''). Specific waivers are listed in the section entitled,
Authorities and Waiver of Laws and Regulations Required.

E. Performance Evaluation and Rewards

1. Introduction
The most important feature of the performance evaluation system is
that it is based on the application of a weighted 100-point scoring
system in support of pay for performance. As in the current system,
each employee has an individual performance plan composed of several
performance elements. Through application of benchmark performance
standards and a 100-point scoring system, supervisors rank employees by
performance within peer groups and grant performance pay increases
according to the ranking. Highly ranked employees within a peer group
receive relatively high pay increases and lower ranked employees
receive relatively lower pay increases.
The performance appraisal process is intended to (1) promote good
performance; (2) encourage a continuing dialogue between supervisors
and employees on organizational objectives, supervisory expectations,
employee performance, employee needs for assistance and guidance, and
employee development; and (3) provide a basis for performance-related
decisions in employee development, pay, rewards, assignment, promotion,
and retention. The system will more effectively communicate to
employees how they are performing in relation to their peers, the
rewards for good performance, and the consequences of poor performance.
Performance-based pay increases give an operating unit the ability
to raise the pay of good performers more rapidly, thus improving
retention of good performers. The promise of higher pay increases for
good performance will encourage achievement and promote the objective
of improved individual and organizational performance.
2. Coverage
All employees covered by the project will be covered by the project
performance evaluation and rewards system, except that the Departmental
Personnel Management Board may remove from the system any position not
filled by career or career conditional appointment. ST-3104 employees
will have their performance evaluated under the structure of the
performance evaluation system and may receive bonuses, but do not
receive performance pay increases. Members of the Senior Executive
Service will remain under the non-demonstration DoC SES performance
appraisal, pay, and bonus system.
Upon conversion to the demonstration project, any administrative
action already initiated under a previous appraisal program will
continue to be processed in accordance with the requirements and
procedures of the program in effect when the action was initiated.
3. Performance Cycle
The performance year begins October 1 and ends September 30. The
stages of the performance cycle are performance planning, performance
review, performance appraisal, and performance-related decisions.
4. Performance Plans
Performance plans will be developed each year by supervisors with
input from employees. Critical performance elements will be established
for each position. (All elements are critical.) The supervisor weights
each element so that the total weight of all elements is 100 points.
Benchmark performance standards define the range of performance. A
supervisor may add supplemental standards to a performance plan to
further elaborate on the benchmark performance standards.
5. Mid-Year Review
A required mid-year review addresses mid-year accomplishments,
performance successes and deficiencies, and any need for performance
plan modifications. Additional reviews may be held as needed.
6. Performance Appraisal
Performance appraisals bring supervisors and employees together to
discuss performance and accomplishments during the performance year.
The appraisals lead to decisions by supervisors and Pay Pool Managers
on performance scores, performance ratings, performance pay increases,
and bonuses. Performance appraisal is scheduled for the final weeks of
the performance year. However, at any time of the year, a supervisor
may determine that an employee's performance is not satisfactory on one
or more critical elements and place the employee on a Performance
Improvement Plan.
7. Performance Ratings
The demonstration project performance ratings of record are
Eligible (for performance pay increase, bonus, and annual adjustment to
basic pay) and Unsatisfactory. The Eligible rating of record covers the
same performance range as the former ratings of Marginal, Fully
Successful, Commendable, and Outstanding. Unsatisfactory covers the
same performance range as the former ratings of Unsatisfactory and
Unacceptable. An employee whose performance is not satisfactory is
placed on a performance improvement plan and given an opportunity to
improve before a final rating of record is assigned.
8. Performance Scores
Each element is evaluated individually against the benchmark
performance standards and any supplemental standards. If a single
element in an employee's plan is rated Unsatisfactory, the rating of
record is Unsatisfactory and there is no performance score. If all
elements meet at least the minimally acceptable benchmark, the rating
of record is Eligible. Rating Officials score the performance of
employees rated Eligible on a 100-point scale, which corresponds to the
100-point element weighted scale. An individual element score may be as
high as the weight of that element. The total performance score is the
sum of the element scores. A perfect score on each element would
produce a total score of 100 points.
9. Performance Ranking
Employees are ranked, by performance score, within a peer group. A
peer group may involve no more than one career path, but may be
otherwise organized by any combination of organization, occupation,
band, or appointment type. Rating Officials rank their own employees,
then Pay Pool Managers interleave the rankings of subordinate Rating
Officials to produce peer group rankings at the pay pool level. A Pay
Pool Manager is a line manager who manages his or her organization's
pay increase and bonus funds and has final decision authority over the
performance scores, performance pay increases, and bonuses of
subordinate employees.
10. Performance Pay Decisions
The Performance Pay Table divides each band into three segments or

[[Page 67455]]

intervals. Each interval is linked to a range of potential percentage
pay increases beginning at zero and progressing to a maximum percentage
pay increase. The maximum performance pay increase an employee may
receive, therefore, depends on the interval into which the employee's
salary falls. The Pay Pool Manager makes a performance pay decision for
each employee in a peer group, based on the Pay Pool Manager's ranking
and the pay increase ranges in the Performance Pay Table. Within a peer
group, an employee may not receive a higher proportion-of-range than a
higher-ranking employee or a lower proportion-of-range than a lower-
ranking employee. Proportion-of-range is the percentage of the maximum
pay increase allowed for a particular interval of a pay band, i.e., a
percent of a percent. For example, if the pay increase range for the
pay interval is 0-12 percent, and the employee receives a 9 percent
increase, that employee receives a proportion-of-range that equals 75
percent of the maximum 12 percent.
11. Performance Bonuses
Bonuses are the only cash awards directly linked to the project
performance appraisal system, and are awarded at the end of the
performance year in conjunction with decisions on performance pay
increases. A Pay Pool Manager may award a bonus to any employee with an
Eligible rating. The OPMBs will determine the bonus authority to be
delegated to their pay pool managers.
Bonuses address two objectives. First, the ability to reward the
accomplishments of good performers will make them more likely to
remain, thus improving the retention of high achievers. Second, the
promise of bonuses for achievement will encourage improved individual
performance.
12. Action Based on Unsatisfactory Performance
If, after an opportunity to improve, an employee's performance is
still not satisfactory, the operating unit will give a rating of
Unsatisfactory and must take action to reassign or remove the employee,
or place the employee in a lower band, in accordance with performance
action provisions in law and regulation.

IV. Conversion or Movement From a Project Position to a General
Schedule Position

If a DoC Demonstration Project employee moves to a General Schedule
position, the following procedures will be used to convert the
employee's project pay band to an equivalent GS grade and the
employee's project rate of pay to an equivalent GS rate of pay. The
converted GS grade and rates of pay must be determined before movement
out of the project and any accompanying geographic movement, promotion,
or other simultaneous action. For lateral reassignments and lateral
transfers, the converted GS grade and rates of pay will become the
employee's actual GS grade and rates of pay, unless immediately
affected by a simultaneous geographic movement or another pay action.
For non-lateral transfers, promotions, and other actions, the converted
GS grade and rates of pay will be deemed to be the employee's grade and
rates of pay at the time of movement out of the project and will be
used in applying applicable pay setting rules (e.g., promotion rules.)

A. Grade-Setting Provisions

An employee in a band corresponding to a single GS grade is
converted to that grade. An employee in a band corresponding to two or
more grades is converted to one of those grades according to the
following rules:
1. The employee's project basic rate of pay is compared with step 4
rates in the highest applicable GS rate range (including a rate range
in the GS base schedule, a rate range in the applicable locality rate
schedule, or a rate range in a special rate schedule for the employee's
occupation). If the series is a two-grade interval series, only odd-
numbered grades are considered below GS-11.
2. If the employee's pay rate equals or exceeds the applicable step
4 rate of the highest GS grade in the band, the employee is converted
to that grade.
3. If the employee's pay rate is lower than the applicable step 4
rate of the highest grade, the pay rate is compared with the step 4
rate of the second highest grade in the employee's band. If the
employee's pay rate equals or exceeds step 4 of the second highest
grade, the employee is converted to that grade.
4. This process is repeated for each successively lower grade in
the band until a grade is found in which the employee's rate of basic
pay equals or exceeds the applicable step 4 rate of the grade. The
employee is then converted at that grade. If the employee's rate of pay
is below the step 4 rate of the lowest grade in the band, the employee
is converted to the lowest grade.
5. Exceptions: (1) If the employee's pay rate exceeds the maximum
rate of the grade assigned under the above-described ``step 4'' rule
but fits in the rate range for the next higher applicable grade in the
band (i.e., between step 1 and step 4), then the employee shall be
converted to that next higher applicable grade; (2) An employee will
not be converted to a lower grade than the grade held by the employee
immediately preceding a conversion, lateral reassignment, or lateral
transfer in the project unless since that time the employee has
undergone a reduction in band; (3) In Band I of the ZP and ZA Career
Paths, students without a bachelor's degree or comparable experience
are converted no higher than GS-4.

B. Pay-Setting Provisions

An employee's pay within the converted GS grade is set by
converting the project rate to GS pay rates in accordance with the
following rules:
1. The pay conversion is done before any geographic movement or
other pay-related action that coincides with the employee's movement
out of the demonstration project.
2. An employee's project rate is converted to a rate on the highest
applicable rate range for the converted GS grade (including a rate
range in the GS base schedule, a rate range in the applicable locality
rate schedule, or a rate range in a special rate schedule for the
employee's occupation).
3. If the highest applicable rate range is a locality pay rate
range, the project rate is converted to a GS locality rate of pay. If
this rate falls between two steps in the locality-adjusted schedule,
the rate must be set at the higher step. The converted GS rate of basic
pay is the GS base rate corresponding to the converted GS locality rate
(i.e., same step position). (If this employee is also covered by a
special rate schedule as a GS employee, the converted special rate will
be determined based on the GS step position. This underlying special
rate will be basic pay for certain purposes for which the employee's
higher locality rate is not basic pay.)
4. If the highest applicable rate range is a special rate range,
the project rate is converted to a special rate. If this rate falls
between two steps in the special rate schedule, the rate must be set at
the higher step. The converted GS rate of basic pay will be the GS rate
corresponding to the converted special rate (i.e., same step position).
5. Exception: If an employee's project rate exceeds the maximum
rate of the highest applicable rate range upon conversion to the
General Schedule, the affected employee's project rate will be
converted to a retained rate under 5 U.S.C. 5363. If an employee is
entitled to a special rate under the General Schedule, the project rate
is converted

[[Page 67456]]

directly to a retained rate. If an employee is only entitled to
locality pay under the General Schedule, the retained rate is derived
by dividing the project rate by the applicable locality pay factor
(i.e., 1 plus the locality payment percentage). Thus, the locality-
adjusted retained rate will equal the project rate the employee had
been receiving before conversion. Since the employee's total rate of
pay is not reduced upon conversion, this change to converted rates
under the General Schedule will not be considered a reduction in basic
pay under 5 U.S.C. 5363 or 7512.
6. After conversion or movement out of the demonstration project,
an employee's converted GS rates will be used in applying GS pay
administration rules, as necessary, in lieu of using his or her
demonstration project rate. Thus, for example, the converted GS rate of
basic pay (or converted special rate, if applicable) will be used in
applying GS rules for promotions, maximum payable rate determinations,
and pay retention, as appropriate. For conversions upon termination of
the project and for lateral reassignments, the converted GS rates will
become the employee's GS rates immediately after movement out of the
demonstration project (before processing any accompanying geographic
move).

C. Equivalent Increase Determination

Service under the demonstration project is creditable for within-
grade increase purposes upon conversion back to the GS pay system.
Performance pay increases (including a zero increase) under the
demonstration project are equivalent increases for the purpose of
determining the commencement of a within-grade increase waiting period
under 5 CFR 531.405(b).

V. Budget Discipline

Each project operating unit will maintain compensation during the
project at the level it would have reached under the current system.
Current costs will be reallocated to cover project costs. To ensure
appropriate carryover of costs from pre-project to project years, a
base assessment will be made using three base years: Fiscal Years 1994,
1995, and 1996. Budget discipline will be required and achieved by
imposing specific funding principles (described in detail in the
section on Funding Pools for Performance Pay Increases and Bonuses).
Finally, both longitudinal and site comparisons will be used to ensure
that spending remains within acceptable limits.

A. Reprogramming Costs

The following actions and their costs will be eliminated by the new
system:
1. Promotions from one grade to a higher grade where both grades
are now in the same broad band. For example, because Band III of both
the ZP and ZA career paths will cover the same pay range as current
grades GS-11 and GS-12, there will be no more promotions from GS-11 to
GS-12.
2. Regularly scheduled Within-Grade Increases and Quality Step
Increases. There are no steps in the broad band system. These actions
will be eliminated.
3. Cash awards related to the performance appraisal cycle. (These
funds will be applied to bonus pools only--not to pay pools).
The cost savings from eliminating these actions will be used to
finance the following new actions:

--Performance-based pay increases within bands, including the ability
to increase the pay of supervisors, through performance-based pay
increases, to a higher level than under the current system. There is no
guaranteed performance pay increase in the proposed system, however,
for Eligible performance; and
--Performance bonuses.

B. Base Cost Assessment

In order to determine whether project costs are being maintained at
acceptable levels, a base assessment of pre-project costs will be
needed. Costs will be computed as annual averages over three pre-
project years: Fiscal Years 1994, 1995, and 1996. The costs of all
personnel actions of types that are being replaced by project systems
will be totaled and averaged.

C. Funding Pools for Performance Pay Increases and Bonuses

The results of the base cost assessment will provide a basis for:
(1) setting maximum spending limits; and (2) constructing performance
pay increase and bonus funding pools by organization, career path,
band, and salary. Performance pay pools for project employees will be
subject to the same budgetary constraints and reductions imposed on
other Department funding allocations. Neither allocations nor
authorizations convey funding. Therefore, managers will be required to
make payout decisions tied to their individual budgets, within
allocations. The following principles will be observed:
1. In terms of career paths and bands, costs will be kept for the
most part where they are found in the base assessment. That is, base
costs for promotions, within-grade increases, and cash awards in a
particular band and career path will form the basis for project
spending in the same band and career path.
2. Formulas will be devised to authorize pay increase and bonus
pools up to the limits calculated from base-year spending. For each
pool, the authorized spending ceiling will depend on the number of
employees in the pool by career path, band, and salary.
3. No allocation will be placed in performance pay increase pools
for employees who are not eligible for a performance pay increase, such
as those who have insufficient time in the position to be rated and
those whose salaries are at the ceilings of their bands. No money will
be placed in bonus pools for employees not eligible for a bonus, such
as those not eligible for a performance rating or who are not on the
payroll the last day of the performance cycle.
4. The potential size of performance pay increases will be
relatively high for employees whose salaries are near the minimum rate
of the band and relatively low for those whose salaries are near the
maximum rate of the band. This arrangement imposes a reduced rate of
salary increases as an individual advances in the band, similar to the
reduced rate of within-grade increases in a General Schedule grade
imposed by the one-year, two-year, and three-year waiting periods.
5. There will be no guaranteed performance pay increase in the
proposed system. An employee with an Eligible performance rating may,
if ranked at or near the bottom of a peer group, get no performance pay
increase.
6. Although Pay Pool Managers will not be allowed, under normal
circumstances, to exceed their allocated pay increase and bonus pools,
they will be allowed to spend less than the full amounts of their
pools.
7. Funds previously used to pay cash awards will be applied to
bonus pools only--not to performance pay pools.

D. Budget Monitoring

These procedures permit changes in operating unit expenditures
which result from legislatively mandated program changes and changes in
Federal pay and benefits. The operating units may offset selected
salary increases with savings by reducing turnover, eliminating
unnecessary overhead, and cutting other personnel costs.
The operating units will measure their adherence to cost control by
preparing budget estimates based on prescribed Federal budget processes
and

[[Page 67457]]

monitoring actual spending under the project against these budget
estimates. Two cost comparisons will be used:
1. Longitudinal Comparisons
a. Project costs will be calculated on an established schedule.
b. Costs will be compared against the spending limits calculated
from the base years to ensure that budget limitations are not being
exceeded.
c. Each year, the funding of the performance pay increase and bonus
pools will be used as an opportunity to ``balance the books.'' That is,
the funding of the pools will be limited to the amount that is judged
to maintain budget discipline.
2. Site Comparisons
a. A number of non-project units will be selected from within the
Department to serve as comparison sites. The comparison sites will be
selected to reflect, as nearly as possible, the missions and workforces
of the project units.
b. Periodically, the rate of increase in salaries in the project
units will be compared to the rate of increase in salaries in the
comparison units.
c. When it is found that salaries in project units are outpacing
salaries in comparison units, and the differences cannot be explained
by non-project variables, appropriate adjustments will be made in
project funding.

VI. Project Evaluation

The Department will arrange for annual evaluations of the project
under an OPM-approved evaluation plan. The evaluation will be designed
to determine whether the interventions are achieving the goals and
objectives of the project within acceptable cost limits. (See Costs.)
The following table lays out the project evaluation model,
beginning with and flowing from the objectives that the project is
designed to achieve. The Objectives column and the Interventions column
together serve as the project hypotheses; i.e., the hypotheses to be
tested are that the objectives will be achieved by the interventions
linked to them. Most objectives are linked to more than one
intervention. Each intervention is associated with at least one
expected result. The Measures column lists means by which actual
results will be measured. Other measures of results may be used in
order to fully evaluate the hypotheses. The Data Sources column shows
where data required for the measurements can be found.
A hypothesis will be supported--that is, the intervention will be
deemed to have achieved the objective--when actual results are found to
match expected results. Tests of hypotheses will be made by comparing
results to appropriately defined comparison groups.

Table 5.--Project Evaluation Model
----------------------------------------------------------------------------------------------------------------
Objectives Interventions Expected results Measures Data sources
----------------------------------------------------------------------------------------------------------------
Increased quality of new hires; Agency-Based Hiring officials Hiring Interview
improved fit between position Staffing. will be able to officials' s with hiring
requirements and individual focus on more judgments of the officials.
qualifications; greater relevant improvement in Focus
likelihood of getting a highly recruiting the quality of groups.
qualified candidate. sources and avoid new hires. HRM
losing candidates Hiring office records on
who grow officials' offers and
impatient with judgments of acceptances.
long hiring improvements in Periodic
processes. the fit of employee/
qualifications of supervisor
new hires. surveys.
Rate of Exit
acceptance of interviews.
offers.
Direct Examination For skill areas in Hiring Interview
which well officials' s with hiring
qualified judgments of the officials.
individuals are improvement in Focus
hard to find, the quality of groups.
managers will be new hires. HRM
able to hire good Hiring office records on
candidates as officials' offers and
they find them, judgments of acceptances.
thus avoiding the improvements in Periodic
loss of well the fit of employee/
qualified qualifications of supervisor
individuals new hires. surveys.
through delays. Rate of
acceptance of
offers.
Broad-band Broad bands and Hiring Interview
Classification flexible entry officials' s with hiring
System, in salaries within judgments of the officials.
conjunction with bands provide a improvement in Focus
Flexible Entry more competitive the quality of groups.
Salaries. range of entry new hires. HRM
salaries for Hiring office records on
managers to use officials' offers and
in negotiating judgments of acceptances.
with candidates, improvements in Periodic
thus increasing the fit of employee/
the ability to qualifications of supervisor
hire highly new hires. surveys.
qualified Rate of
candidates. acceptance of
offers.
More Flexible Paid Managers will be Number of HRM office
Advertising. able to make selections records.
greater use of resulting from
paid advertising, paid advertising.
thus expanding
the scope of
recruiting
efforts or
focusing the
recruitment
effort on
specialized
sources.

[[Page 67458]]

3-Year Greater likelihood Number of Automated
Probationary that scientists scientists and history file
Period for and engineers who engineers data.
Scientists and are retained released during HRM
Engineers. after probation probation after office records.
will be capable the first year.
of the full range
of R&D functions.
Local Authority The ability of Number of HRM
for Recruitment managers to grant selections made office records.
Payments. recruitment for which the Interview
payments during recruitment s with hiring
negotiations with payment was officials.
highly qualified instrumental in Focus
candidates will attracting the groups.
increase candidate.
competitiveness.
Increased retention of good Broad-Band Broad-banding Turnover rates Automated history
performers. Classification gives an among good file data.
System. operating unit performers.
the ability to Turnover rates of
raise the pay of low performers.
good performers
to higher and
more competitive
levels, thus
improving
retention of good
performers.
Performance-Based Performance-based Turnover rates Automated
Pay Increases. pay increases among good history file
give an operating performers. data.
unit the ability Interview
to raise the pay s with hiring
of good officials.
performers more Focus
rapidly, thus groups.
improving
retention of good
performers.
Bonuses........... The ability to Turnover rates Automated history
reward the compared to size file data.
accomplishments of bonus.
of good
performers will
make them more
likely to remain.
Local Authority The ability of A count of the HRM
for Retention managers to grant instances in office records.
Payments. retention which a retention Interview
payments will payment is s with hiring
improve their instrumental in officials.
ability to retain retaining an Focus
employees in employee who groups.
critical skill would otherwise
areas in a job- have left.
related course of
study.
Supervisory The ability to Turnover rates Automated history
Performance Pay. raise the pay of among supervisors file data.
high-performance in relation to
supervisors to pay and
higher levels performance.
will make their
salaries more
competitive,
improving
retention.
More Flexible Pay Flexible pay Turnover rates in Automated history
Increase Upon increases upon relation to pay file data.
Promotion. promotion gives and performance.
an operating unit
the ability to
raise the pay of
high-performing
employees and
employees in
critical skill
areas to higher
and more
competitive
levels, thus
improving their
retention.
Improved individual and Two-Level, 100- This system will Judgments of Pay Interview
organizational performance. Point, Peer Group more effectively Pool Managers, s with hiring
Performance communicate to Rating Officials, officials.
Appraisal System. employees how and Employees. Periodic
they are employee/
performing in supervisor
relation to their surveys.
peers, the Focus
consequences of groups.
poor performance,
and the rewards
for good
performance.
Pay Increases The promise of Judgments of Periodic
Linked to higher pay managers, employee/
Performance. increases for supervisors, and supervisor
high achievement employees. surveys.
will encourage Focus
improved groups.
performance.

[[Page 67459]]

Supervisory The promise of Judgments of Managemen
Performance Pay. higher pay levels higher-level t interviews.
for effective managers.
supervision will
encourage
improved
supervisory
performance.
Bonuses Linked to The promise of Judgments of Periodic
Performance. bonuses for good managers, employee/
performance will supervisors, and supervisor
encourage employees. surveys.
improved Focus
performance. groups.
Hiring By improving the Judgments of Interview
interventions quality of new managers and s with hiring
(listed above). hires, the hiring supervisors. officials.
interventions Focus
will gradually groups.
produce a higher-
performing
workforce.
Retention By improving the Judgments of Interview
Interventions retention of good managers and s with hiring
(listed above). performers, the supervisors. officials.
quality of the Focus
workforce will be groups.
higher than it
otherwise would
be.
More effective human resources Broad-Band The broad-band Judgments of Interview
management. Classification. classification managers, s with managers.
system will be supervisors, and Periodic
simpler to use, employees. employee/
more supervisor
understandable to surveys.
managers and
employees, and
more accurate.
More effective human resources Delegated Line managers Judgments of Interview
management (cont.) Classification understand the managers and s with hiring
Authority to organizational supervisors. officials.
Managers. mission and the Periodic
work related to employee/
the mission and supervisor
are therefore surveys.
better prepared Focus groups.
to classify the
work.
Delegated Pay Line managers are Judgments of Interview
Authority to in a better managers and s with hiring
Managers. position to supervisors. officials.
understand the Focus
labor market groups.
forces related to
the work they
manage and will
therefore be more
effective pay
mangers.
More efficient human resources Automated Broad- The broad-band Judgments Interview
management. Band classification of managers and s with hiring
Classification system will be supervisors. officials.
System. simpler, faster, Time Periodic
easier to required to employee/
automate, require produce position supervisor
fewer resources descriptions and surveys.
to operate, and classify Focus
involve fewer positions. groups.
classification Number of HRM
decisions. classification office records.
decisions. Automated
history file.
Support for EEO/Diversity goals Hiring Managers will be Increases HRM and
in recruiting, rewarding, Interventions able to hire good in the numbers of EEO records on
paying, and retaining (listed above). minority minorities hired. offers and
minorities; providing candidates as acceptances.
opportunities for a diverse they find them,
workforce; and in maximizing thus avoiding the
contributions of all employees. loss of well
qualified
minorities
through delays.
Performance-Based Performance-based Comparisons HRM
Pay Increases. pay increases between pay of records.
give an operating minorities and
unit the ability non-minorities.
to raise the pay
of good
performers.
Bonuses........... The ability to Comparisons HRM
reward good between the records.
performers will bonuses received
allow managers to by minorities and
more easily non-minorities.
recognize the
performance of
minorities.

[[Page 67460]]

Pay Interventions Supervisory pay Comparisons HRM
(listed above). bands, flexible between the records.
pay increases salaries of
upon promotion, minorities and
and flexible non-minorities.
entry salaries
will allow
managers greater
flexibilities in
paying minorities
at competitive
salaries.
Retention Broad-banding, Turnover rates of Automated
Interventions flexibilities in minorities in history file data/
(listed above). setting pay, relation to pay EEO records.
performance pay for performance.
increases, and
bonuses, will
make it easier
for supervisors
to retain good
performing
minorities.
----------------------------------------------------------------------------------------------------------------

VII. Project Management

The Office of Personnel Management will oversee the project under
its demonstration project authority in 5 U.S.C. 4703. The DoC
Departmental Personnel Management Board will manage the project at the
Department level. Each major operating unit will have its own Operating
Personnel Management Board to oversee local operations.
The Director of NIST will chair the Departmental Personnel
Management Board through the first cycle. After the first cycle,
chairmanship of the Board will be assumed by one of the members of the
Board. The DPMB members will be senior managers of the operating units
in the project. The DoC Director for Human Resources Management will
serve as Executive Secretary. Each OPMB will typically be chaired by
the senior manager designated to serve on the DPMB. The operating units
will appoint other key managers to their boards as they think
appropriate.
The following table lists the separate responsibilities of these
three bodies.

Table 6.--Project Authorities
----------------------------------------------------------------------------------------------------------------
Project authorities
Arena --------------------------------------------------------------------------
OPM DPMB OPMB
----------------------------------------------------------------------------------------------------------------
General.............................. Final approval Approval Establishing
authority for the authority within the operating unit project
Project Plan, Department for the guidelines within the
operating procedures, Project Plan and Project Plan,
and any future changes operating procedures. operating procedures,
to the plan or Approval and DPMB policies.
operating procedures. authority within the Management of
Department for authorities outlined
proposing changes in below and any
the Project Plan or additional athorities
operating procedures delegated by the DPMB.
to OPM.
Monitoring the Delegating
success of project authority to managers
interventions so as to within the operating
propose appropriate unit, including the
mid-course corrections withdrawal of
to OPM. authority when
Setting warranted.
project policies Assuring
within the parameters adequate resources for
of the Project Plan implementing and
and operating operating the project
procedures. within the operating
Delegating unit.
authority to OPMBs, Overseeing
including the training of operating
withdrawal of unit managers,
authority when employees, and support
warranted. staff in project
Exercising the policies and
authority to make procedures.
exceptions to normal
project procedures on
a case-by-case basis
when it believes an
exception is warranted
(the OPMBs will not
have this authority).
Assuring
adequate resources for
designing,
implementing, and
operating the project.
Establishing a
training plan to train
managers, employees,
and support staff in
project policies and
procedures.

[[Page 67461]]

Position Classification.............. Approval of Setting Establishing
the project project classification operating unit
Classification policy within the classification
Interventions. Project Plan and guidelines within the
operating procedures. Project Plan,
Approving operating procedures,
automated and DPMB policies.
classification systems Delegating
and classification classification
standards. authority to operating
unit managers.
Establishing
career ladders.
Ensuring
proper classification
of positions within
the operating unit.
Resolving
issues in operating
unit classifications.
Approving or
delegating the
approval of new
specialty descriptors.
Staffing............................. Approval of Approving Establishing
the project Staffing project staffing operating unit
Interventions. policies. staffing guidelines
Establishing within the Project
policy and criteria Plan, operating
for recruiting and procedures, and DPMB
retention payments. policies.
Approving or
delegating the
approval of individual
recruiting and
retention payments.
Establishing
career ladders.
Approving use
of recruiting
services.
Delegating and
overseeing use of paid
advertising.
Overseeing the
application of the
three-year
probationary period.
Establishing
operating unit
practices on vacancy
distribution, opening
timeframes, and
similar local issues.
Reduction in Force................... Approval of Approving Establishing
the project reduction- project reduction-in- operating unit
in-force Interventions. force policies. reduction-in-force
guidelines within the
Project Plan,
operating procedures,
and DPMB policies.
Establishing
procedures on
operating unit
competitive levels.
Establishing
guidelines for, and
overseeing, reductions
in force within the
operating unit.
Pay Administration................... Approval of Approving Establishing
the project Pay project pay operating unit pay
Administration administration and pay guidelines within the
Interventions. for performance Project Plan,
polices. operating procedures,
Approving and DPMB policies.
project pay tables. Establishing
Approving operating unit
performance pay performance pay
increase ranges. increase pools.
Approving Establishing
automated performance operating unit
pay increase systems. guidelines and
Approving delegating approval
formulas used to authorities for
develop performance setting pay levels for
pay increase pools. new hires and
promotions.
Performance Evaluation............... Approval of Approving Establishing
the project project performance operating unit
Performance Evaluation evaluation policies. performance evaluation
Interventions. Approving guidelines within the
project-wide forms for Project Plan,
performance plans and operating procedures,
appraisals and for and DPMB policies.
recording outcomes. Overseeing the
operating unit annual
performance appraisal
process, from
development of plans
to individual pay
increases and bonuses.
Establishing
operating unit
guidelines on
performance elements.
Delegating
rating, review, and
pay pool management
authorities.

[[Page 67462]]

Bonuses.............................. Approval of Approving Establishing
the project Bonus project bonus policies. operating unit bonus
Interventions. Delegating guidelines within the
bonus limits to OPMBs. Project Plan,
operating procedures,
and DPMB policies.
Delegating
bonus limits to pay
pool managers.
Establishing
operating unit bonus
pools.
Costs and Budget Discipline.......... Approval of Approving Establishing
the project cost plan. project budget and overseeing
policies. operating unit budget
procedures.
Assuring
operating unit budget
discipline.
Designating
pay pool managers.
Establishing
and overseeing the use
of operating unit
performance pay
increase and bonus
pools.
Project Evaluation................... Approval of Approving the Overseeing and
the project Evaluation approach for selecting assuring operating
Model. an evaluator to carry unit participation in
Approval of out the annual project project evaluations,
evaluation reports. evaluation. including data
Assuring collection, focus
adequate resources for group participation by
project evaluation. operating unit
Approving employees, and
project policies for availability of
internal Departmental managers for
assessments. interviews.
Approving
objectives and
procedures for
internal operating
unit assessments.
----------------------------------------------------------------------------------------------------------------

VIII. Training

The project operating units will schedule training for managers,
supervisors, employees, and support staff.

A. Manager and Supervisor Training

The operating units will give managers and supervisors general
training in the overall features of the project and specific hands-on
training in the new authorities they are to exercise. Computer training
facilities will be used to teach managers and supervisors how to use
the automated classification system to produce position descriptions.
The classification training will emphasize principles of project
classification, such as the classification logic embedded in the
automated classification system, career path coverage criteria,
occupational series definitions and coverage, proper classification by
bands in accordance with project classification standards, sound
titling practices, and economic and effective position management.
Managers and supervisors will also be given specific training in
performance appraisal and pay for performance. A key part of this
training will be a simulation of the performance evaluation and rewards
system prior to the actual end-of-year performance evaluation. Prior to
the simulation, each Rating Official and Pay Pool Manager will be
trained in the automated performance pay increase system. During the
simulation, Rating Officials and Pay Pool Managers will carry out the
appraisal, scoring, rating, and performance pay increase process just
as they would at the end of a performance year, but for training
purposes only. The results will not be official and will not be
communicated to employees. This training exercise was used in the first
year of the NIST project and was found to be an effective approach to
revealing and correcting problems and misunderstandings prior to the
real end-of-year process.

B. Employee Training

Through general presentations, handouts, and direct training from
supervisors, employees will be given an understanding of project
systems and how those systems affect them.
In the general presentations scheduled for everyone covered by the
project, employees will be led through all project systems, from
classification to pay administration to pay for performance. As each
system is presented, it will be contrasted with the General Schedule
system so employees can see how the system is changing and how the
changes affect them. The presentations will also cover employee rights
and grievance procedures. Employees will be given ample opportunity to
ask questions at the presentations and will be given the names and
numbers of individuals to call if they have questions later.
In addition to the general presentations that will be scheduled for
all employees, supervisors will be instructed to pass along more
individualized information about the system in conjunction with the
implementation of those systems. For example, at the time supervisors
give employees their new project position descriptions, the supervisors
will explain the position descriptions, the process that produced them,
and the process for keeping them current. Also, at the time of the
performance appraisal simulation, supervisors will explain to employees
how they fit into the performance scoring and peer-group ranking
process and how the process leads to decisions on performance pay
increases.

C. Support Staff Training

There are three categories of support staff: (1) Personnel
specialists in the various HRM offices serving project operating units;
(2) budget specialists in operating unit budget offices assigned to
monitor and advise on budget discipline issues and specifically to
assist in

[[Page 67463]]

establishing performance pay increase and bonus pools; and (3)
administrative officers in the operating units, who will assist in
processing personnel actions, distributing local performance pay
increase and bonus pools, and electronically transmitting Pay Pool
Manager decisions to the automated payroll system.
Two of the HRM offices that will serve project operating units have
served the NIST Demonstration Project since its implementation in 1988.
These two offices will help train personnel specialists in the other
HRM offices. Budget specialists in the operating units, besides
receiving the general employee training, will receive advice from a
NIST budget specialist and will receive further training on the
distribution of performance pay increase and bonus pools during the
simulation of the performance evaluation and rewards system.
Administrative officers will be invited to take part in the supervisory
training sessions and will also receive further training during the
simulation of the performance evaluation and rewards system.

IX. Experimentation and Revision

Many aspects of a demonstration project are experimental.
Modifications must be made from time to time as experience is gained,
results are analyzed, and conclusions are reached on how the system is
working. The DPMB, with OPM approval, will authorize minor
modifications, such as changes in the occupational series in a career
path, without further notice. Major changes, such as a change in the
number of career paths, will require OPM approval and will be published
in the Federal Register.

X. Authorities and Waiver of Laws and Regulations Required

The following waivers of law and regulation are necessary:

Title 5, U.S. Code

Section 3308 Competitive Service; examinations, educational
requirements prohibited; exceptions
Section 3502(a)(4) Order of retention

(Waiver is applicable to allow the use of ``performance scores'' in
lieu of ``efficiency or performance ratings.'')

Chapter 51 Classification
Section 5303 Annual adjustments to pay schedules
Section 5304 Locality-based comparability payments
Section 5305 Special Pay Authority
Subchapter III of chapter 53 General Schedule Pay Rates
Subchapter VI of chapter 53 Grade and Pay Retention

(Waiver is applicable only to allow the following modifications:
(1) Using bands in lieu of grades; (2) providing no band retention if
reduction in band is caused by employee's pay being exceeded by band
minimum rate; (3) providing no pay retention upon reduction in pay
caused solely by geographic movement; (4) providing no pay retention
upon conversion to the General Schedule as long as the employee's total
rate of pay is not reduced; and (5) providing no pay retention upon
cancellation of supervisory performance pay).

Section 5753-5754 Recruitment and relocation bonuses; Retention
allowances (except that relocation bonuses under Section 5753 continue
to apply)
Section 7512(3) Actions covered

(Waiver is applicable only to use bands in lieu of grades and to
exclude from section 7512(3) reductions in band not accompanied by a
reduction in pay, due to the employee's pay being exceeded by the band
minimum rate.)

Section 7512(4) Actions covered

(Waiver is applicable only to allow the following modifications:
(1) Exclude reductions in pay that are solely due to recomputation upon
geographic movement; (2) exclude conversions to GS pay that do not
result in a reduction in the employee's total rate of pay; and (3)
exclude reductions in pay due to the cancellation of supervisory
performance pay.)

Title 5, Code of Federal Regulations

Section 315.801 Probationary period; when required

(Waived only for research and development positions in the
Scientific and Engineering Career path).

Section 315.802 Length of probationary period

(Waived only for positions in the Scientific and Engineering Career
path).

Section 351.401 Determining retention standing
Section 351.402 Competitive area in RIF
Section 351.403 Competitive level in RIF
Section 351.504 Credit for performance
Section 351.701 Assignment involving displacement
Part 511 Classification under the General Schedule
Part 530 Subpart C, Special salary rate schedules
Part 531 Pay under the General Schedule
Part 536 Grade and Pay Retention

(Waived only to allow the following modifications: (1) Using bands
in lieu of grades; (2) providing no band retention if reduction in band
is caused by employee's pay being exceeded by band minimum rate; (3)
providing no pay retention upon reduction in pay caused solely by
geographic movement; (4) providing no pay retention upon conversion to
the General Schedule as long as the employee's total rate of pay is not
reduced; and (5) providing no pay retention upon cancellation of
supervisory performance pay.)

Section 550.703 Definition of reasonable offer

(Waiver is applicable only to allow substitution of (1) ``one
band'' for ``two grade or pay levels'' and ``two grades'' and (2)
``band'' for ``grade.'')

Part 575, Subpart A, Recruitment bonuses
Part 575, Subpart C, Retention allowances
Section 752.401(a)(3) Coverage, Reductions in grade

(Waiver is applicable only to use bands in lieu of grades and to
exclude reductions in band not accompanied by a reduction in pay due to
the employee's pay being exceeded by the band minimum rate.)

Section 752.401(a)(4) Coverage, Reductions in pay

(Waiver is applicable only to exclude reductions in pay that are
solely due to recomputation upon geographic movement; (2) exclude
conversions to GS pay that do not result in a reduction in the
employee's total rate of pay; and (3) exclude reductions in pay due to
the cancellation of supervisory performance pay.)

[FR Doc. 97-33458 Filed 12-23-97; 8:45 am]
BILLING CODE 6325-01-P

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Document Information

Published:: 12/24/1997
Department:: Personnel Management Office
Entry Type:: Notice
Action:: Notice of approval of a demonstration project final plan.
Document Number:: 97-33458
Dates:: This demonstration project will be implemented on March 24, 1998.
Pages:: 67434-67463 (30 pages)
PDF File:: 97-33458.pdf