# Department of Defense Human Resources Management and Labor Relations Systems > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A05-21494 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** November 1, 2005 - **Citation:** 70 FR 66116 ## Text DEPARTMENT OF DEFENSE OFFICE OF PERSONNEL MANAGEMENT 5 CFR Chapter XCIX and Part 9901 RIN 3206-AK76/0790-AH82 Department of Defense Human Resources Management and Labor Relations Systems AGENCY: Department of Defense; Office of Personnel Management. ACTION: Final rule. SUMMARY: The Department of Defense (DoD or the Department) and the Office of Personnel Management (OPM) are issuing final regulations to establish the National Security Personnel System (NSPS), a human resources management system, within DoD, as authorized by the National Defense Authorization Act (Pub. L. 108-136, November 24, 2003). These regulations govern basic pay, staffing, classification, performance management, labor relations, adverse actions, and employee appeals. These changes are designed to ensure that the Department's human resources management and labor relations systems align with its critical mission requirements and protects the civil service rights of its employees. DATES: Effective November 28, 2005. FOR FURTHER INFORMATION CONTACT: At OPM: Nancy Kichak at 202-606-6500; at DoD: Brad Bunn at 703-696-4664. SUPPLEMENTARY INFORMATION: Table of Abbreviations AJ—Administrative Judge COLA—Cost of Living Adjustment CONUS—Continental United States DARPA—Defense Advanced Research Projects Agency DoD—Department of Defense ECI—Employment Cost Index EEO—Equal Employment Opportunity EEOC—Equal Employment Opportunity Commission EPI—Extraordinary Pay Increase FLRA—Federal Labor Relations Authority FLSA—Fair Labor Standards Act FMCS—Federal Mediation and Conciliation Service FSIP—Federal Service Impasses Panel FWS—Federal Wage System GAO—Government Accountability Office (former General Accounting Office) GS—General Schedule HR—Human Resources KPP—Key Performance Parameter LWOP—Leave Without Pay MRO—Mandatory Removal Offense MSPB—Merit Systems Protection Board NAF—Nonappropriated Fund NAPA—National Academy of Public Administration NSLRB—National Security Labor Relations Board NSPS—National Security Personnel System OMB—Office of Management and Budget OPM—Office of Personnel Management PEO—Program Executive Office PFR—Petition for Review RFR—Request for Review SES—Senior Executive Service SL—Senior Level ST—Scientific or Professional Positions WGI—Within-Grade Increase Table of Contents This supplementary information section is organized as follows: Introduction The Case for Action Pay and Classification Performance Management Staffing, Employment and Workforce Shaping Adverse Action and Appeals Labor-Management Relations Development of the National Security Personnel System Strategic Engagement and Establishment of the Program Executive Office Development of Design Options Guiding Principles and Key Performance Parameters Communications During the Design Process Outreach to Employee Representatives Outreach to Employees Outreach to Other Stakeholders Development of Design Options—Working Groups Publication of Proposed Regulations Public Comments Meet-and-Confer Process Major Issues Specificity of the Regulations Pay for Performance and Pay Pool Funding Adverse Actions and Appeals Mandatory Removal Offenses Labor Relations Management Rights/Scope and Duty to Bargain Independence of the National Security Labor Relations Board Response to Specific Comments and Detailed Explanation of Regulations Subpart A—General Provisions Section 9901.101—Purpose Section 9901.102—Eligibility and Coverage Summary of Coverage Eligibility Chart Section 9901.103—Definitions Section 9901.104—Scope of Authority Section 9901.105—Coordination with OPM Section 9901.106—Continuing Collaboration Section 9901.107—Relationship to Other Provisions Section 9901.108—Program Evaluation Subpart B—Classification Section 9901.201—Purpose Section 9901.202—Coverage Section 9901.203—Waivers Section 9901.204—Definitions Section 9901.211—Career Groups Section 9901.212—Pay Schedules and Pay Bands Section 9901.221—Classification Requirements Section 9901.222—Reconsideration of Classification Decisions Section 9901.231—Conversion of Positions and Employees to the NSPS Classification System Subpart C—Pay and Pay Administration General Comments Section 9901.301—Purpose Section 9901.302—Coverage Section 9901.303—Waivers Section 9901.304—Definitions Section 9901.311—Major Features Section 9901.312—Maximum Rates Section 9901.313—National Security Compensation Comparability Section 9901.321—Structure Section 9901.322—Setting and Adjusting Rate Ranges Section 9901.323—Eligibility for Pay Increase Associated with a Rate Range Adjustment Section 9901.331—General Section 9901.332—Local Market Supplements Section 9901.333—Setting and Adjusting Local Market Supplements Section 9901.334—Eligibility for Pay Increase Associated with a Supplement Adjustment Section 9901.341—General Section 9901.342—Performance Payouts Section 9901.343—Pay Reduction Based on Unacceptable Performance and/or Conduct Section 9901.344—Other Performance Payments Section 9901.345—Treatment of Developmental Positions Section 9901.351—Setting an Employee's Starting Pay Section 9901.352—Setting Pay Upon Reassignment Section 9901.353—Setting Pay Upon Promotion Section 9901.354—Setting Pay Upon Reduction in Band Section 9901.355—Pay Retention Section 9901.356—Miscellaneous Section 9901.361—General Section 9901.371—General Section 9901.372—Creating Initial Pay Ranges Section 9901.373—Conversion of Employees to the NSPS Pay System Subpart D—Performance Management General Comments Section 9901.401—Purpose Section 9901.402—Coverage Section 9901.403—Waivers Section 9901.404—Definitions Section 9901.405—Performance Management System Requirements Section 9901.406—Setting and Communicating Performance Expectations Section 9901.407—Monitoring Performance and Providing Feedback Section 9901.408—Developing Performance and Addressing Poor Performance Section 9901.409—Rating and Rewarding Performance Subpart E—Staffing and Employment General Comments Section 9901.501—Purpose Section 9901.502—Scope of Authority Section 9901.503—Coverage Section 9901.504—Definitions Section 9901.511—Appointing Authorities Section 9901.512—Probationary Periods Section 9901.513—Qualification Standards Section 9901.514—Non-Citizen Hiring Section 9901.515—Competitive Examining Procedures Section 9901.516—Internal Placement Subpart F—Workforce Shaping General Comments Section 9901.601—Purpose and Applicability Section 9901.602—Scope of Authority Section 9901.603—Definitions Section 9901.604—Coverage Section 9901.605—Competitive Area Section 9901.606—Competitive Group Section 9901.607—Retention Standing Section 9901.608—Displacement, Release, and Position offers Section 9901.609—Reduction in force Notices Section 9901.610—Voluntary Separation Section 9901.611—Reduction in force Appeals Subpart G—Adverse Actions General Comments Section 9901.701—Purpose Section 9901.702—Waivers Section 9901.703—Definitions Section 9901.704—Coverage Section 9901.711—Standard for Action Section 9901.712—Mandatory Removal Offenses Section 9901.714—Proposal Notice Section 9901.715—Opportunity to Reply Section 9901.716—Decision Notice Section 9901.717—Departmental Record Subpart H—Appeals General Comments Section 9901.802—Applicable Legal Standards and Precedents Section 9901.803—Waivers Section 9901.804—Definitions Section 9901.805—Coverage Section 9901.806—Alternative Dispute Resolution Section 9901.807—Appellate Procedures Section 9901.808—Appeals of Mandatory Removal Actions Section 9901.809—Actions Involving Discrimination Subpart I—Labor-Management Relations General Comments Section 9901.901—Purpose Section 9901.902—Scope of Authority Section 9901.903—Definitions Section 9901.904—Coverage Section 9901.905—Impact on Existing Agreements Section 9901.906—Employee Rights Section 9901.907—National Security Labor Relations Board Section 9901.908—Powers and Duties of the Board Section 9901.909—Powers and Duties of the Federal Labor Relations Authority Section 9901.910—Management Rights Section 9901.911—Exclusive Recognition of Labor Organizations Section 9901.912—Determination of Appropriate Units for Labor Organization Representation Section 9901.913—National Consultation Section 9901.914—Representation Rights and Duties Section 9901.916—Unfair Labor Practices Section 9901.917—Duty to Bargain and Consult Section 9901.918—Multi-Unit Bargaining Section 9901.919—Collective Bargaining Above the Level of Recognition Section 9901.920—Negotiation Impasses Section 9901.921—Standards of Conduct for Labor Organizations Section 9901.922—Grievance Procedures Section 9901.923—Exceptions to Arbitration Awards Section 9901.924—Official Time Section 9901.925—Compilation and Publication of Data Section 9901.926—Regulations of the Board Section 9901.927—Continuation of Existing Laws, Recognitions, Agreements, and Procedures Section 9901.928—Savings Provisions Next Steps NSPS Implementation Employee Transition Plan (Spiral Strategy) HR and Labor Relations Transition Development of Implementing Issuances and Continuing Collaboration Training Regulatory Requirements E.O. 12866—Regulatory Review Regulatory Flexibility Act E.O. 12988—Civil Justice Reform E.O. 13132—Federalism Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) Unfunded Mandates Introduction The Secretary of Defense, Donald Rumsfeld, and the Director of the Office of Personnel Management, Linda M. Springer, jointly prescribe this final regulation to establish a flexible and contemporary system, consistent with statutory merit system principles and prohibitions against prohibited personnel practices (in 5 U.S.C. 2301 and 2302, respectively), for managing the Department's human capital. This system has been developed pursuant to a process based on extensive outreach to employees and employee representatives. In addition, DoD and OPM have engaged in outreach to the public as well as to the Congress and other key stakeholders. As enacted by section 1101 of the National Defense Authorization Act (Pub. L. 108-136, November 24, 2003, hereinafter referred to as “enabling legislation” or “enabling statute”) and codified at 5 U.S.C. 9902, the system preserves all core civil service protections, including merit system principles, veterans' preference, and due process. It also protects against discrimination, retaliation against whistleblowers, and other prohibited personnel practices, and ensures that employees may organize and bargain collectively (when not otherwise prohibited by law, including these regulations, applicable Executive orders, and any other legal authority). This Supplementary Information addresses the following areas: • The Case for Action • Summary of the Design Process ○ Strategic Engagement and Establishment of the Program Executive Office ○ Development of Design Options ○ Meet-and-Confer Process • Major Issues • Response to Specific Comments and Detailed Explanation of Regulations • Next Steps The Case for Action “* * * a future force that is defined less by size and more by mobility and swiftness, one that is easier to deploy and sustain, one that relies more heavily on stealth, precision weaponry, and information technologies.” With that statement on May 25, 2001, President Bush set a new direction for defense strategy and defense management—one toward transformation. On January 31, 2002, Secretary of Defense Donald Rumsfeld echoed the sentiments expressed by President Bush, stating that “[a]ll the high-tech weapons in the world will not transform the U.S. armed forces unless we also transform the way we think, the way we train, the way we exercise, and the way we fight.” Transformation is more than acquiring new equipment and embracing new technology—it is the process of working and managing creatively to achieve real results. To transform the way DoD achieves its mission, it must transform the way it leads and manages the people who develop, acquire, and maintain our Nation's defense capability. Those responsible for defense transformation—including DoD civilian employees—must anticipate the future and wherever possible help create it. The Department must seek to develop new capabilities to meet tomorrow's threats as well as those of today. NSPS is a key pillar in the Department of Defense's transformation—a new way to manage its civilian workforce. NSPS is essential to the Department's efforts to create an environment in which the Total Force (military personnel, civilian employees, and contractors) thinks and operates as one cohesive unit. DoD civilians are unique in government: They are an integral part of an organization that has a military function. DoD civilians must complement and support the military around the world in every time zone, every day. Just as new threats, new missions, new technology, and new tactics are changing the work of the military, they are changing the work of our 700,000 civilians. To support the interests of the United States in today's national security environment—where unpredictability is the norm and greater agility the imperative—civilians must be an integrated, flexible, and responsive part of the team. At best, the current personnel system is based on 20th century assumptions about the nature of public service and cannot adequately address the 21st century national security environment. Although the current Federal personnel management system is based on important core principles, those principles are operationalized in an inflexible, one-size-fits-all system of defining work, hiring staff, managing people, assessing and rewarding performance, and advancing personnel. These inherent weaknesses make support of DoD's mission complex, costly, and ultimately risky. Currently, pay and the movement of personnel are pegged to outdated, narrowly defined work definitions; hiring processes are cumbersome; high performers and low performers are paid alike; and the labor system encourages a dispute-oriented, adversarial relationship between management and labor. These systemic inefficiencies detract from the potential effectiveness of the Total Force. A more flexible, mission-driven system of human resources management that retains those core principles will provide a more cohesive Total Force. The Department's 20 years of experience with transformational personnel demonstration projects, covering nearly 30,000 DoD employees, has shown that fundamental change in personnel management has positive results on individual career growth and opportunities, workforce responsiveness, and innovation; all these things multiply mission effectiveness. The immense challenges facing DoD today require a civilian workforce transformation: Civilians are being asked to assume new and different responsibilities, take more risk, and be more innovative, agile, and accountable than ever before. It is critical that DoD supports the entire civilian workforce with modern systems—particularly a human resources management system and a labor relations system that support and protect their critical role in DoD's Total Force effectiveness. The enabling legislation provides the Department of Defense with the authority to meet this transformation challenge. More specifically, the law provides the Department and OPM—in collaboration with employee representatives—authority to establish a flexible and contemporary system of civilian human resources management for DoD civilians. The attacks of September 11 and the continuing war on terrorism make clear that flexibility is not a policy preference. It is nothing less than an absolute requirement, and it must become the foundation of DoD civilian human resources management. NSPS is designed to promote a performance culture in which the performance and contributions of the DoD civilian workforce are more fully recognized and rewarded. The system offers the civilian workforce a contemporary pay-banding construct, which will include performance-based pay. As the Department moves away from the General Schedule system, it will become more competitive in setting salaries and it will be able to adjust salaries based on various factors, including labor market conditions, performance, and changes in duties. The HR management system is a foundation for a leaner, more flexible support structure and will help attract skilled, talented, and motivated people, while also retaining and improving the skills of the existing workforce. Despite the professionalism and dedication of DoD civilian employees, the limitations imposed by the current personnel system often prevent managers from using civilian employees effectively. The Department sometimes uses military personnel or contractors when civilian employees could have and should have been the right answer. The current system limits opportunities for civilians at a time when the role of DoD's civilian workforce is expanding to include more significant participation in Total Force effectiveness. NSPS will generate more opportunities for DoD civilians by easing the administrative burden routinely required by the current system and providing an incentive for managers to turn to them first when certain vital tasks need doing. This will free uniformed men and women to focus on matters unique to the military. The law requires the Department to establish a contemporary and flexible system of human resources management. DoD and OPM crafted NSPS through a collaborative process involving management, employees, and employee representatives. DoD leadership will ensure that supervisors and employees understand the new system and can function effectively within it. The system retains the core values of the civil service and allows employees to be paid and rewarded based on performance, innovation, and results. In addition, the system provides employees with greater opportunities for career growth and mobility within the Department. A key to the success of NSPS is ensuring employees perceive the system as fair. In a human resources management system, fairness is the basis for trust between employees and supervisors. The Department's mission cannot be accomplished without the workforce. It is a tenet of the Department that employees will exercise personal responsibility and sustain a high level of individual performance and teamwork when they perceive that the human resources system and their supervisors are fair. The Department and the Office of Personnel Management are addressing fairness in the National Security Personnel System in several dimensions: System design; the right to seek review of important categories of management decisions; workforce access to information about system provisions, processes, and decision criteria; and accountability mechanisms. NSPS regulations and implementing issuances will include rules to guard against arbitrary actions. Examples include written performance expectations, the guarantee that employees rated higher than “unacceptable” will receive the full minimum by which their pay rate range is adjusted, the requirement to prescribe the conditions for probationary periods established by the Secretary, public notice of vacancies when the Department is recruiting externally, and prohibition against establishing reduction in force competitive areas that target an individual employee on the basis of non-merit factors. NSPS continues employees' and labor organizations' rights to challenge or seek review of key decisions. For example, all employees will be able to request reconsideration of their performance ratings through an administrative grievance procedure. Bargaining unit employees will also have the option of using a negotiated grievance procedure. Employees must be notified in advance of a proposed adverse action, be given time and opportunity for reply, and be given a decision notice that includes the reasons for the decision. Labor organization officials may file unfair labor practice claims or grievances. The Department and its Components will make information about NSPS rules, policies, and practices readily available to the workforce in the form of published regulations, published implementing issuances, local level instructions, training, and other sources. The last dimension of accountability for fair decisions and practices under NSPS will call on two major streams of information. First, human resources management accountability reviews within the Department will be used to identify and address issues regarding the observance of merit system principles and regulatory and policy requirements, including those established under NSPS. In addition, the Department will monitor the outcomes of administrative and negotiated grievances, performance rating reconsiderations, equal employment opportunity complaints, and whistleblower complaints to correct chronic problems and particular failings. The second stream will be NSPS program evaluation findings. These will enable the Secretary and the Director to determine whether the design of NSPS and the pattern of its results meet statutory requirements like fairness and equity and the specific performance expectations of the NSPS Requirements Document for a credible and trusted system. Section 9901.108 of these final regulations codifies the requirement for NSPS program evaluation. It opens to designated employee representatives the design and results of evaluations of particular NSPS aspects so that they can provide comments and recommendations to help ensure balanced and fair methods and conclusions. A robust and long-term NSPS program evaluation plan of studies and reviews, transactional data analyses, opinion surveys, and other evaluative methods will be fielded with NSPS implementation. Fairness in NSPS is not a specific thing, but rather an intrinsic quality being built into the design of a flexible human resources management system—one to be accounted for during reviews and evaluations of NSPS operations and decisions. A. Pay and Classification The NSPS pay and classification system will provide a more flexible support structure that will help attract skilled, talented, workers; retain and appropriately reward current employees; and create opportunities for civilians to participate more fully in the total integrated workforce. A pay banding structure will replace the artificial limitations created by the current pay and classification systems. With broad pay bands, the Department will be able to move employees more freely across a range of work opportunities without being bound by narrowly described work definitions. The pay structure will be much more responsive to market conditions. The Department will be able to adjust rate ranges and local market supplements based on variations relating to specific occupations, rather than the current one-size-fits all approach. Labor market conditions will also be considered when making pay-setting decisions. As prescribed in the enabling legislation, the new compensation system will better link individual pay to performance using performance rather than time on the job to determine pay increases. B. Performance Management In recognition of the increased importance of performance in making pay and retention decisions, the Department has created a much more robust performance management system. The Department will use a multi-level system that makes distinctions in levels of employee performance. The system will link employee achievements, contributions, knowledge, and skills to organizational results. It will also allow the Department to better recognize and support team contributions and accomplishments. Performance expectations will be clearly communicated to employees and will be linked to the organization's strategic goals and objectives. The ability to recognize valid distinctions in performance and reward employees based on those distinctions will foster a high performance culture within the Department. C. Staffing, Employment and Workforce Shaping NSPS will retain the merit system principles and veterans' preference while giving the Department the flexibility necessary to streamline the hiring process and adapt quickly to critical mission needs. The Department will be able to use direct-hire authority for severe shortage or critical needs. NSPS will also provide for a more efficient process for creating appointing authorities, in conjunction with the Office of Personnel Management, as new requirements emerge. As part of this process, the system provides for transparency and public awareness through notice in the Federal Register . The new pay-setting flexibilities will also enhance the Department's ability to attract and retain the talented workforce necessary to accomplish its mission. Through workforce shaping flexibilities, the Department will create a reduction in force system that places more emphasis on performance while continuing to protect veterans' preference rights. The downsizing process will be less disruptive to employees and the mission. The Department will continue to fully utilize tools such as separation incentives and the Priority Placement Program to avoid and mitigate the impact of any reductions it faces. D. Adverse Actions and Appeals Consistent with the enabling legislation, the final regulations streamline and simplify adverse actions and appeals procedures, but without compromising due process for DoD employees. Employees will still receive notice of a proposed adverse action, the right to reply, and the right to appeal to the Merit Systems Protection Board (MSPB). In the proposed regulations, we proposed to replace the two existing authorities and adopt a single process and standard for all actions whether based on unacceptable performance or misconduct. In doing so, we proposed to adopt the higher of the two current burdens of proof—“preponderance of the evidence”—rather than the lower standard—“substantial evidence.” We have retained this higher burden of proof. In addition, the final regulations clarify that the full MSPB's standard for review is as specified in the enabling legislation. The final regulations retain authority for the Secretary to establish a number of mandatory removal offenses (MROs) that have a direct and substantial adverse effect on the Department's national security mission. The final regulations also retain authority for the Department to review decisions of MSPB Administrative Judges who are the first step in the NSPS appeals process. E. Labor Management Relations To ensure that the Department has the flexibility to carry out its vital mission, as authorized by the enabling legislation, the regulations, among other things, revise management's rights and its duty to bargain to ensure that the Department can act as and when necessary. Collective bargaining is prohibited on such critical matters as procedures observed in making work assignments and deployments unless the Secretary, in his or her sole, exclusive, and unreviewable discretion, elects to bargain. The Secretary may authorize bargaining on these matters to advance the Department's mission accomplishment or promote organizational effectiveness. If the Secretary does not elect to bargain procedures on these matters, consultation is required. Management and exclusive representatives will negotiate over changes that have foreseeable, significant, and substantial impact, as well as appropriate arrangements for employees affected by those changes, under certain specified conditions. Additionally, the regulations create the National Security Labor Relations Board (NSLRB) to address those issues that are most important to accomplishing the DoD mission, with other matters retained by the Federal Labor Relations Authority (FLRA). The regulations provide the Secretary discretion as to when the NSLRB will be in place. The regulations also provide the Secretary discretion, in consultation with the Director, to designate another third party to exercise the authority of the Board in the interim. The revisions to the regulations strike the right balance between the mission needs of DoD and the meaningful involvement of employees and their representatives. Development of the National Security Personnel System A. Strategic Engagement and Establishment of Program Executive Office While dialogue with employee representatives began in January 2004, in April senior DoD leadership initiated a collaborative process to design and implement NSPS. This process was crafted by a group of 25 to 30 senior experts representing DoD, OPM, and the Office of Management and Budget. The Defense Acquisition Management model was used to establish the requirements for the design and implementation of NSPS, including Guiding Principles and Key Performance Parameters (KPPs), which defined the minimum requirements for NSPS. The Honorable Gordon R. England was appointed by the Secretary of Defense as the NSPS Senior Executive. As the NSPS Senior Executive, Secretary England established the NSPS Program Executive Office (PEO) as the central DoD policy and program office to conduct the design, planning and development, deployment, assessment, and full implementation of NSPS. The entire process was accomplished jointly with OPM. An integrated executive management team composed of senior DoD and OPM leaders provided overall policy and strategic advice to the PEO and served as staff to the Senior Executive. B. Development of Design Options Guiding Principles and Key Performance Parameters In setting up the process for the design of the system, senior leadership adopted a set of Guiding Principles as a compass to direct efforts throughout all phases of NSPS development. They translate and communicate the broad requirements and priorities outlined in the enabling legislation into concise, understandable requirements that underscore the Department's purpose and intent in creating NSPS. The Guiding Principles are: • Put mission first—support National Security goals and strategic objectives; • Respect the individual—protect rights guaranteed by law; • Value talent, performance, leadership and commitment to public service; • Be flexible, understandable, credible, responsive, and executable; • Ensure accountability at all levels; • Balance HR interoperability with unique mission requirements; and • Be competitive and cost effective. In addition, senior leadership approved a set of Key Performance Parameters (KPPs), which define the minimum requirements and/or attributes of the system. Those KPPs are summarized below: • High Performing: Employees/supervisors are compensated/retained based on performance/contribution to mission; • Agile and Responsive: Workforce can be easily sized, shaped, and deployed to meet changing mission requirements; • Credible and Trusted: System assures openness, clarity, accountability and merit principles; • Fiscally Sound: Aggregate increases in civilian payroll, at the appropriations level, will conform to OMB fiscal guidance, and managers will have flexibility to manage to budget; • Supporting Infrastructure: Information technology support and training and change management plans are available and funded; and • Schedule: NSPS will be operational and demonstrate success prior to November 2009. Communications During the Design Process In undertaking a project of this magnitude, impacting over 700,000 civilians of the Department, it was essential to ensure the availability of information on the new HR and labor relations systems. It was also critical to solicit the views and ideas of employees, employee representatives and other stakeholders. In April 2004, the PEO developed and implemented a communications strategy. The objectives of DoD's communications strategy are to (1) demonstrate the rationale for and benefits of NSPS; (2) demonstrate openness and transparency in the design and process of converting to NSPS; (3) express DoD's commitment to ensuring NSPS is applied fairly and equitably; and (4) address potential criticism of NSPS. The PEO identified numerous channels for disseminating relevant, timely, and consistent information. These include: Print and electronic media; e-mail; town hall meetings; focus groups; speeches; and briefings. A website was developed to serve as a primary, two-way communications tool for the workforce, other stakeholders, and the general public. The website includes the capability for visitors to submit questions and comments. The PEO has responded to thousands of questions and comments. The website will remain available during implementation and will provide current information for managers, supervisors and employees. Outreach to Employee Representatives In January and February 2004, we met with union leaders for the purpose of exchanging ideas and interests on a new labor relations system. All unions holding DoD national consultation rights (NCR) at the time were invited to the January 22, 2004, meeting. Seven of these eight NCR unions elected to attend. In addition, one additional union without DoD national consultation rights was invited to attend and participated in the January 22, 2004, meeting. Union leadership from all of the 43 unions representing DoD employees were invited to attend and participate in the February 26-27, 2004, meeting. Twenty-six unions attended and participated in the February 2004 meeting. In the spring of 2004 and continuing over the course of several months, we sponsored a series of additional meetings with union leadership to discuss design elements of NSPS. Officials from DoD and OPM met throughout the summer and fall with union officials representing many of the DoD civilians who are bargaining unit employees. These sessions provided the opportunity to discuss the design elements, options, and proposals under consideration for NSPS and solicit union feedback. During this time, 10 meetings (in addition to the 2 meetings held in January and February 2004) were held with officials of the 43 unions that represent DoD employees, including the 9 unions that currently have national consultation rights. These union officials represent over 1,500 separate bargaining units covering about 450,000 employees. These meetings involved as many as 80 union leaders from the national and local level at any one time, and addressed a variety of topics, including: The reasons change is needed and the Department's interests; employee communications; and proposed design options in the areas of labor relations and collective bargaining, adverse actions and appeals, and pay and performance management. Outreach to Employees In keeping with DoD's commitment to provide employees and managers an opportunity to participate in the development of NSPS, the PEO sponsored a number of Focus Group sessions and town hall meetings at various sites across DoD. In mid-July 2004, a total of 106 focus groups were held throughout DoD, including overseas locations. Separate focus groups were held for employees, civilian and military supervisors, and managers and practitioners from HR, legal and EEO communities. Bargaining unit employees and union leaders were invited to participate. For the major system design elements, focus group participants were asked what they thought worked well in the current HR systems and what they thought should be changed. Over 10,000 comments, ideas and suggestions received during the focus group sessions were summarized and provided to NSPS Working Groups for use in developing options for the labor relations, appeals, adverse actions, and human resources design elements of NSPS. In addition, town hall meetings were held in DoD facilities around the world during the summer of 2004, providing an opportunity to communicate with the workforce, provide the status of the design and development of NSPS, and solicit thoughts and ideas. The NSPS Senior Executive, Secretary England, conducted the first town hall meeting at the Pentagon on July 7, 2004. Some of the town hall meetings were broadcast live, as well as videotaped and rebroadcast on military television channels and websites to facilitate the widest possible dissemination. Outreach to Other Stakeholders In addition to reaching out to DoD employees and labor organizations, DoD and OPM met with other groups who were thought to be interested in the design of a new HR system for DoD. DoD and OPM invited selected stakeholders to participate in briefings held at OPM in August and September 2004. Those invited to the briefings included: Public interest groups, such as the National Academy of Public Administration (NAPA), Coalition for Effective Change, and Partnership for Public Service; veterans' service organizations; and non-union employee advocacy groups. Both before and after these briefings, DoD and OPM responded to dozens of requests for special briefings. DoD and OPM also met with the Government Accountability Office, Office of Management and Budget, and Department of Homeland Security to keep them up to date on the team's activities; and consulted with the Merit Systems Protection Board on the appeals process to ensure that it provides employees the protections of due process. Development of Design Options—Working Groups In order to incorporate all the information and develop options, the PEO established functionally aligned Working Groups. Over 120 employees representing the Military Departments (Army, Navy, Air Force), other DoD Components, and OPM participated in the process. The Working Groups reviewed all available information, including: Pertinent laws, rules, regulations; input from NSPS focus groups and town hall; union consultation meetings; data review and analysis from alternative personnel systems and laboratory and acquisition demonstration projects; the enabling legislation; and Guiding Principles and Key Performance Parameters. In addition, subject matter experts briefed the Working Groups on a variety of topics, such as pay-for-performance systems, alternative personnel systems, pay pool management, and market sensitive compensation systems. In developing options for the NSPS, the Working Groups benefited from the Government's experience under demonstration project authorities ( e.g. the China Lake Demonstration Project originally authorized by section 6 of the Civil Service Miscellaneous Amendments Act of 1983; the Defense reinvention laboratory demonstration projects authorized by section 342 of the National Defense Authorization act for fiscal year 1995, as amended; and the Acquisition Workforce Demonstration Project, authorized be section 4308 of the National Defense Authorization Act for fiscal year 1996, as amended) and alternative personnel systems ( e.g. the Defense Intelligence Personnel System, the Government Accountability Office, and the Federal Aviation Administration), the DoD “Best Practices” initiative (68 FR 16120, April 2, 2003), and the compilation of research materials from the Department of Homeland Security HR Systems Design process. At the conclusion of the process, the Working Groups provided a set of options covering a broad range of variations on the six areas of focus: (1) Compensation (classification and pay banding); (2) performance management; (3) hiring, assignment, pay setting, and workforce shaping; (4) employee engagement; (5) adverse action and appeals; and (6) labor relations. Each option was evaluated against the Guiding Principles and KPPs. Potential options presented a wide range of views and concerns. The PEO and senior leaders representing organizations within DoD reviewed all the options. After extensive discussion, the selected options were presented to the Overarching Integrated Product Team (OIPT) for review and the Senior Executive for approval. Publication of Proposed Regulations These extensive and collaborative design efforts all preceded the formal process for developing the new HR and labor relations systems. The enabling legislation established a formal process in this regard, officially beginning when the Secretary and the Director published proposed regulations to establish the new DoD HR and labor relations systems in the Federal Register on February 14, 2005. The process was designed to ensure collaboration with employee representatives in the design and implementation of the new HR and labor relations systems. The first formal step provided a 30-day period for the public, employees, and employee representatives to review and submit formal comments on the proposed system. The second step provided for a minimum of 30 days to “meet and confer” with employee representatives in order to attempt to reach agreement on the design of the new system. The third step required notification to Congress on the decision to implement the new system. The new system becomes effective 30 days after congressional notification. C. Public Comments In response to the proposed rule, the Department received 58,538 comments during 30-day public comment period. The Department received comments from a wide variety of individuals including DoD civilian and military personnel, DoD organizations, labor organizations, other Federal agencies, Members of Congress and the general public. At the conclusion of the public comment period, and continuing over the next several months, DoD and OPM staff reviewed and analyzed the comments. In general, the comments ranged from overall rejection of the proposed regulations to enthusiastic acceptance. Many comments focused on the need for fairness in the system and the need for training of employees and managers. Concerns were expressed about maintaining due process and the scope of bargaining. Many of the comments were from national labor organizations and their members. 1 Almost 80 percent of the comments were form letters submitted by email or letter. 2 The form letters expressed general opposition to the proposed regulations. These submissions expressed concerns that the proposed regulations lacked sufficient specificity. The comments also expressed a desire to remain with the current system, citing too much power being given to managers and supervisors, with no corresponding accountability. Specific concerns included: Adequate funding of pay pools; deployment of civilians to war zones; and the lack of third-party review for performance appraisals, adverse actions and labor disputes. There was also concern that the regulations did not adhere to congressional intent to maintain the requirements of the applicable labor relations statutes. Approximately 415 of the commenters included substantive analysis of the proposed regulations. Virtually all of these comments favor some changes, along with a wide variety of views on the merits of the proposed regulations. 1 DoD has 43 different unions representing over 1,500 separate bargaining units covering about 450,000 employees. In the spring of 2004, thirty-six unions joined together to form the United Department of Defense Workers Coalition (“the Coalition”). 2 There were 41 different form letters totaling 43,714 comments. An additional 1,850 form letters were received with additional comments added by the commenter. Acknowledging that there are strong views on the proposals presented, DoD and OPM reviewed and carefully considered all the comments and the arguments made for and against the proposed changes. The major comments received on the proposed regulatory changes are summarized below, together with a discussion of the changes made as a result of the comments. Also summarized are the suggestions for changes considered where no change is being made. In addition to the more substantive comments discussed below, a number of editorial suggestions were made, some of which have been adopted and others which have not. A number of other changes have been made to better organize or structure the regulatory text. Finally, we received a number of comments on issues that go beyond the scope of these regulations, which are not addressed in the discussion that follows. D. The Meet-and-Confer Process The public comment period was followed by the second step in the formal development process—an additional 30-day period during which DoD and OPM representatives were to meet and confer with employee representatives to resolve differences over the proposed regulations wherever possible. The meet-and-confer process began officially in April 2005. On April 8, 2005, a meeting with labor organizations was held to discuss procedures to be followed during the meet-and-confer process. The following principals participated in the meet-and-confer process: • Forty-three labor organizations were invited to participate. Thirty-six of those labor organizations were represented by a “coalition” led by the AFL-CIO, and were authorized to send an unlimited number of representatives. Eighteen of the labor organizations chose to send representatives. The actual number of representatives present in the room typically ranged from 25 to 50. • The coalition includes: American Federation of State, County and Municipal Employees (AFSCME); American Nurses Assn. (ANA); Antilles Consolidated Education Assn. (ACEA); Assn. of Civilian Technicians (ACT); American Federation of Government Employees (AFGE); American Federation of Teachers (AFT); Communications Workers of America (CWA); Fairchild Federal Employees Union (FFEU); Federal Education Assn. (FEA); Int'l. Assn. of Machinists and Aerospace Workers (IAMAW); Graphic Communications International Union (GCIU); Hawaii Council of Commissary Dept. of Defense Unions (HCCDU); Int'l. Brotherhood of Boilermakers; Int'l. Assn. of Fire Fighters (IAFF); Int'l. Assn. of Tool Craftsman (IATC); Int'l. Brotherhood of Electrical Workers (IBEW); Int'l. Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (IBT); Int'l. Guard Union of America (IGUA); Int'l. Union of Operating Engineers (IUOE); Int'l. Union of Painters and Allied Trades (IUPAT); Int'l. Federation of Professional and Technical Engineers (IFPTE); Int l. Organization of Masters, Mates and Pilots (IOMMP); Laborers International Unions (LIUNA); National Marine Engineers Beneficial Assn. (MEBA); Metal Trades Dept./AFL-CIO (MTD); National Assn. of Aeronautical Examiners (NAAE); National Air Traffic Controller Assn. (NATC); National Federation of Federal Employees (NFFE); National Assn. of Gov. Employees (NAGE); Professional Airways Systems Specialists (PASS); Retail Wholesale, and Department Store Union (RWDSU); Seafarers Int'l. Union of North America (SIUNA); Service Employees International Union (SEIU); Sheet Metal Workers Int'l. Assn. (SMWIA); Sport Air Traffic Controllers (SPORT); United Assn. of Journeymen and Apprentices of the plumbing, sprinkler fitting industry of the U.S. and Canada (UA); United Nurses Assn. of California (UNAC); and United Power Trades Org. (UPTO) • Other unions also participated in the meet-and-confer process. These include: Fraternal Order of Police (FOP) and the National Assn. of Independent Labor (NAIL). • Five representatives from DoD, including the Principal Deputy Under Secretary of Defense (Personnel and Readiness), the Program Executive Officer, the Deputy PEO, and two senior program managers. • Two senior executives from the Office of Personnel Management (OPM) and various senior program managers as necessary. The Secretary, in consultation with the Acting Director, 3 also requested the services of the Federal Mediation and Conciliation Service for the entire meet-and-confer process. Face-to-face meet-and-confer sessions occurred from April 18, 2005, through June 2, 2005. During that period, the parties met for 19 days, with other days spent preparing for meetings and exchanging recommendations for amendments to the regulations. The Department provided 36 written recommendations to revise the regulations as well as 14 recommended clarifications of intent. The unions presented revised regulations for each subpart of the proposed regulations in addition to other revisions covering such topics as—exigencies and post-implementation bargaining, implementing issuances, and third-party review of performance appraisals and adverse actions. At the conclusion of the meet-and-confer process, the NSPS Senior Executive and the Acting Director of OPM met with representatives from the labor organizations in mid-June 2005, to provide them with an opportunity to present their issues and concerns directly to the principals. 3 During this period of time, the Honorable Dan Blair was Acting Director of the Office of Personnel Management. On June 28, 2005, the Honorable Linda M. Springer was sworn in as OPM's Director. The review of the public comments and the proposals during the meet-and-confer process has led to significant revisions of the proposed regulations. Some of the revisions are substantial, such as extending employees the right to grieve performance ratings of record, restricting authority to issue implementing issuances 4 that supersede inconsistent provisions of collective bargaining agreements, changing the standard for mitigating penalties, providing an opportunity for labor organizations to submit names of potential members of the NSLRB, and retaining the current interest of justice standard for payment of attorney fees. Other revisions are purely technical. 4 Implementing issuances are defined in § 9901.103 of the regulations. Issuances are defined in § 9901.903. Significant differences with many of the labor organizations remain over such issues as the scope of bargaining, implementing issuances that supersede conflicting provisions of collective bargaining agreements, the specificity of the regulations, the ability to grieve pay decisions, the use of behavior as part of performance evaluation and the use of performance in a reduction in force. These differences cannot be reconciled with the need for a contemporary and flexible system of human resources management as DoD seeks to transform the civilian part of the Total Force of military personnel, civilian employees, and DoD contractors. The current system limits opportunities for civilians at a time when the role of DoD's civilian workforce is expanding to include more significant participation in Total Force effectiveness. NSPS will generate more opportunities for DoD civilians by easing the administrative burden routinely required by the current system. It will provide an incentive for managers to (1) identify military positions that can be converted to civilian and (2) to turn to civilians first when certain vital tasks need doing. This will free military men and women to focus on matters unique to the military, while greatly increasing the role of the Department's civilian employees. The need for a flexible and contemporary system to support the Department's national security mission is nothing less than an absolute requirement and it must become the foundation of DoD civilian human resources management. Where we indicate agreement in this Supplementary Information, we are referring to agreements reached between DoD and OPM, after consideration of public comments and proposals made during the meet-and-confer process, rather than to agreements reached between management and labor organization representatives during the meet-and-confer process. Major Issues The 58,538 public comments, in addition to the face-to-face discussions during the meet-and-confer process, clearly defined the issues that were of most concern to DoD civilians potentially covered by all or parts of NSPS. Major issues identified were as follows: (a) Specificity of the Regulations; (b) Pay for Performance and Pay Pool Funding; (c) Adverse Actions and Appeals; (d) Mandatory Removal Offenses; (e) Labor Relations; (f) Management Rights/Scope and Duty to Bargain; and (g) Independence of the NSLRB. Because these issues are critical to understanding the objectives of the Department's new HR and labor relations systems, as well as the implementation of NSPS, we have given them particular attention in the following sections of this SUPPLEMENTARY INFORMATION . a. Specificity of the Regulations A significant issue raised in the public comments and during the meet-and-confer process concerns the lack of specificity in the proposed regulations. Many of the commenters recommended that the regulations include far greater specificity, while others referred to the inability to provide substantive comments on the proposed rule without more information. These comments and concerns focused almost exclusively on the subparts establishing the HR system—those dealing with Subpart B—Classification, Subpart C—Pay and Pay Administration, Subpart D—Performance Management, Subpart E—Staffing and Employment, and Subpart F—Workforce Shaping. Those subparts remain relatively general in nature and expressly provide for the Department to develop implementing issuances to carry out the policies established in accordance with NSPS. In contrast, the subparts dealing with adverse actions, appeals, and labor relations (subparts G, H, and I, respectively) are more detailed, requiring fewer implementing issuances. The law requires the Department to establish a contemporary and flexible system of human resources management (see 5 U.S.C. 9902(b) (1) and (2)). Of all of the various objectives set by Congress for this system in the enabling legislation, flexibility was the very first enumerated. Unnecessary and excessive detail in subparts B, C, D, E, and F would undermine that objective. The regulations provide the overall framework for the new HR system without the inflexible requirements present in today's system. In response to these comments, and as a result of the meet-and-confer process, we have added greater detail to certain sections of the subparts at issue. These additions are documented at length in our responses to the detailed comments that follow. However, even with added detail, all five of the subparts at issue retain their original structure in the final regulations, establishing a general policy framework to be supplemented by detailed Departmental implementing issuances. We believe this is the appropriate approach, providing the Department the flexibility it requires in implementing an HR system of this scope. Labor organization comments focus primarily on process, asserting that by including greater detail in the proposed regulations, they would have been given an opportunity to participate and provide input to the final regulations via the statutory meet-and-confer process set forth in 5 U.S.C. 9902(f)(1)(A)-(C). Among other things, that statutory process requires the Department and OPM to provide employee representatives with an opportunity to comment on the proposed regulations and, thereafter, meet with DoD and OPM officials (under the auspices of the Federal Mediation and Conciliation Service, if necessary) in an attempt to resolve any concerns and disagreements. As the labor organizations and other commenters have correctly pointed out, the proposed regulations did not provide for an analogous opportunity with respect to the development of implementing issuances. This became a major topic of discussion during the meet-and-confer process, with labor organizations insisting that DoD and OPM either include all implementing details in these final regulations or subject the Department's implementing issuances to collective bargaining. We did not adopt either alternative. Including such detail in these regulations would not provide the Department the flexibility its mission requires. In addition, collective bargaining over the content of implementing issuances is prohibited by the enabling legislation. In summary, the inflexibility of the current system required new ways to meet the rapidly changing requirements for DoD civilians to provide support to the military members. A standardized, yet flexible DoD environment that promotes the growth of all employees and improves the manager's ability to manage the workforce is essential. The regulations were developed to provide the Department the ability to maintain flexibility, while at the same time involving employee representatives in the details of new processes established through implementing issuances. Five of the subparts in these final regulations remain relatively general in nature, providing broad policy parameters but leaving much of the details to implementing issuances. We believe this structure, patterned after the chapters in title 5 that they replace, is appropriate. By providing for detailed implementing issuances, the subparts dealing with Classification, Pay and Pay Administration, Performance Management, Staffing and Employment, and Workforce Shaping provide the Department with the flexibility mandated by Congress, and they do so without compromising the Department's commitment to substantive employee representative involvement in the development of those implementing issuances. b. Pay for Performance and Pay Pool Funding The pay system we described in the proposed regulations was designed to fundamentally change the way we pay employees in the Department of Defense. Instead of a pay system based primarily on tenure and time-in-grade, we proposed a system that bases individual pay increases on performance. This proposal honors major points that were debated by the Congress and agreed upon with the passage of the enabling legislation. In addition, the proposed pay system would be far more market-sensitive than the current pay system. The proposed changes relating to classification, pay, and performance management were designed to achieve these two primary goals. A number of commenters agreed with the proposal to create a more occupation-specific and market- and performance-based classification and pay system. However, most commenters strongly recommended that we maintain the status quo; that is, that DoD continue to rely on the General Schedule (GS) and Federal Wage System (FWS) classification and pay systems. Many commenters thought the proposed pay-for-performance system would lower employee morale, increase competition among employees, and undermine teamwork and cooperation. Some also questioned the ability of the Department to successfully implement the proposed system, or of DoD managers to establish and apply performance standards fairly and consistently to pay decisions. Other commenters thought a pay-for-performance system would have a chilling effect on the expression of dissenting opinions, especially those concerning fraud, waste, and abuse. Some commenters recommended that current employees be allowed to remain in the existing system or have the option to stay in the current system or convert to NSPS. Still others wanted a more gradual implementation with testing of the effectiveness of the new system on various populations first. We have retained the system described in the proposed regulations. We believe Congress and the American people expect their public employees to be paid according to how well they perform, rather than how long they have been on the job. They also expect the Department to do everything it can to recruit and retain the most talented individuals it can find to carry out its critical mission. The GS and FWS pay systems do not provide the opportunity to appropriately reward top performers or pay them according to their true value in the labor market. Under the GS and FWS pay systems, performance is rewarded as an exception rather than the rule, and market is defined as “one size fits all,” with no distinction for differences in market pay based on occupation. The GS and FWS pay systems are primarily longevity-based systems—that is, pay increases are linked primarily to the passage of time. While time in grade determines eligibility for a GS or FWS step increase, it is true that a finding that the employee is performing at an acceptable level of competence is also required. However, this minimal requirement is met by roughly 99 percent of all GS employees. Thus, at any given grade level, the vast majority of employees can expect to automatically receive base pay increases of up to 30 percent over time—in addition to the annual across-the-board pay increases—so long as their performance is “acceptable.” Even employees whose performance is unacceptable receive annual across-the-board pay increases that range from 3 to 5 percent, and special rates that are even higher. Over time, even less productive employees will progress steadily to the top of the GS and FWS pay ranges and may end up being paid significantly more than higher-performing employees with less time in grade. Such a system cannot be fairly characterized as providing performance-based pay. The NSPS pay-for-performance system, by contrast, is designed to recognize and reward performance in two key ways. First, it establishes the fundamental principle that no employee may receive a base pay or local market supplement increase if his or her performance does not meet or exceed expectations. In contrast to the present pay systems, employees rated unacceptable will not get an annual adjustment. Second, the NSPS system provides for individual base pay increases based on an employee's performance, whether by demonstrating requisite competencies at the entry/developmental level or by meeting or exceeding performance expectations at the full performance level. In contrast to the present pay systems, under NSPS, an employee will progress through the pay range based on how well he or she performs. This concept may be simply summarized: The higher the performance, the higher the pay. This, too, is a fundamental principle of the new system, and we choose the order of these words deliberately. This system does not assume that individuals are motivated by pay, but rather that we have an obligation as an employer to reward the highest performers with additional compensation—however they may be motivated to achieve excellence. The Department has a special responsibility in this regard. Thus, the system we have designed is not a “performance-for-pay” system, but a “pay-for-performance” system. Nevertheless, we believe it will inspire DoD employees to perform at their best. This is in contrast to the GS and FWS pay systems, where it is possible for a high-performing employee to be paid the same, or even less, than a lower performing co-worker. As it designs and implements NSPS, the Department is taking the following steps to ensure that the performance management system functions properly: • Training managers to provide candid and constructive feedback to help employees maximize their contribution and potential; • Emphasizing the need for ongoing and meaningful dialogue between managers and employees; • Use of a pay pool process to ensure that performance decisions are made in a careful, deliberative environment that uses a consistent approach to decisions regarding performance ratings and shares; • Implementing a new competency-based performance management system that is intended to create a clear linkage between employee performance and the Department's strategic plan and core values; • Increasing employee understanding and ownership of organizational goals and objectives; • Adopting automation tools that facilitate “best practices” in the pay-for-performance environment; • Reinforcing the use of team and organizational rewards; and • Preserving non-cash rewards as tools to recognize performance. The 50-plus-year-old GS pay system also is not sufficiently market-sensitive, potentially under-valuing the talents of the Department's most critical employees. Under the GS and FWS pay systems, all employees in a given geographic location receive the same annual pay adjustment without regard to their occupation or the level of duties and responsibilities they are expected to perform. This one-size-fits-all approach treats all occupations alike, across the board as well as in particular locations, regardless of market value. Thus, we inevitably end up underpaying employees in some occupations and overpaying others. Even within an occupation, the rigidities of the current pay systems sometimes force us to underpay employees at the entry/developmental grades, with recruiting difficulties and high attrition the result. The new NSPS pay system is designed to be much more market-sensitive. First, it allows NSPS, after coordination with OPM, to define occupational career groups and levels of work within each career group that are tailored to the Department's missions and components. Second, it gives DoD considerable discretion, after coordination with OPM, to set and adjust the minimum and maximum rates of pay for each of those career groups or bands, based on national and local labor market factors and other conditions. Instead of “one size fits all” pay rates and adjustments, the system allows DoD to customize those adjustments and optimize valuable but limited resources. This kind of flexibility, which is lacking under the GS and FWS pay systems, will enable DoD to allocate payroll dollars to the occupations and locations where they are most needed to carry out the Department's mission. The goals and principles of the new system are sound, and we have confidence that the Department has the capability to execute them effectively. Pay-for-performance systems like that proposed for DoD are not new. Pay banding has been around in the Federal Government since 1980, and the Federal Government has substantial experience in implementing performance-based pay systems ( e.g. , in demonstration projects). DoD alone has tested and implemented 11 performance-based pay systems since 1980. Research shows that employee attitudes toward such systems change over time, as they gain experience with them. For example, employee support for the “China Lake” broadbanding/pay-for-performance demonstration project was only 29 percent before the project began, reached 51 percent by 1985, and was 69 percent by 1988. Employee support was 70 percent when Congress made the project permanent in 1994. Today, thousands of Federal employees already are covered by successful performance-based pay systems. The system we have devised is also consistent with the findings and recommendations of NAPA in its May 2004 Report, “Recommending Performance-Based Federal Pay.” The basis for managing individual salary increases should be pay for performance. This recommendation has been a constant theme in discussions for more than two decades and the principle in every demonstration project that tested new pay policies. The evidence from the projects confirms that pay for performance can be successful in DoD. Nonetheless, the switch to a pay-for-performance system will be implemented via a spiral (multi-phase) approach resulting in application of the NSPS HR system, including the pay-for-performance system, to new segments of the DoD population at approximately 6-month intervals over a 2-year period. The phased intervals of implementation will provide opportunities to assess and adjust the system as each new group of employees is covered by the new system. For the most part, populations phased into NSPS will be grouped by organization in order to facilitate the change in organizational culture that will be essential to the success of NSPS and the improved organizational performance resulting from its implementation. In summary, we believe the Department's pay-for-performance system is an imperative, essential to DoD's ability to attract, retain, and reward a workforce that is able to meet the high expectations set for it by the Department's senior leaders for the purpose of accomplishing the Department's mission—the defense of our nation. Many commenters expressed concern that there will not be sufficient resources made available to fund pay pools at adequate levels. There were also many comments suggesting that pay pool money will be diverted from pay to mission requirements or to reward supervisors and managers, thereby leaving less for lower-graded employees. Proper funding of pay pools is fundamental to the success of NSPS. DoD senior leadership recognized its importance in setting two Key Performance Parameters—“Credible and Trusted” and “Fiscally Sound.” In addition, this issue was the subject of testimony by the NSPS Senior Executive to the Senate Armed Services Committee in April 2005. Secretary England was asked what assurances he could give that limited appropriations or other budget pressures would not result in pay pools too small to truly reward performance. He declared that the Department viewed this as a basic covenant with its employees and confirmed that action is being taken to protect pay pool funding. The Department is implementing financial policies for NSPS. Protection of pay pool funding is being addressed in several different ways. First, the Department will mandate the minimum composition and expenditure of pay pool funds. Second, appropriate senior-level officials are required to certify that funds allocated to the performance-based pay pools have been used only for the purpose for which they were intended. Third, any exception to the minimum funding of the pay pool will be based on stringent criteria, along with higher-level approval. Fourth, mechanisms will be in place to monitor compliance. In accordance with the enabling legislation, for fiscal years 2004 through 2008, the aggregate amount allocated for compensation of DoD civilian employees under NSPS, to the maximum extent practicable, will not be less than if they had not been converted to the NSPS. This takes into account potential step increases and promotions employees would have received if not converted to NSPS. In addition, § 9901.313(b) provides that for fiscal years 2009 and beyond, DoD will develop a formula that ensures, to the maximum extent possible, that employees are not disadvantaged in the overall amount of pay available, in the aggregate, as a result of conversion to NSPS, while providing flexibility to accommodate changes in the function of the organization, changes in the mix of employees performing those functions, and other changed circumstances that may affect pay levels. c. Adverse Actions and Appeals In authorizing the creation of a new human resources system for the Department, Congress specifically required that employees be afforded the protections of due process. Recognizing the critical nature of the Department's mission, Congress also stated in 5 U.S.C. 9902(h)(2) that the new appeals process may “establish legal standards and procedures for personnel actions, including standards for applicable relief, to be taken on the basis of employee misconduct, or performance that fails to meet expectations.” The proposed regulations included a number of changes to adverse actions and appeals procedures. Consistent with the enabling legislation, these changes were intended to simplify and streamline those procedures and provide for greater individual accountability, all without compromising guaranteed due process or protections against whistleblower reprisal or discrimination. Greater accountability is particularly critical to the Department. By its very nature, the Department's national security mission requires an exceptionally high level of workplace order and discipline. The fact that DoD employees provide critical support to the military mission of defending the country means that they, and the Department have a special responsibility to the public. With that in mind, the proposed regulations provided for shorter notice for adverse actions, an accelerated appeals adjudication process using MSPB AJs, a preponderance of the evidence burden of proof to sustain the Department's adverse actions, whether based on conduct or performance, or both, and specifically limited the mitigation of agency selected penalties by MSPB AJs and private arbitrators. The proposed regulations also required that arbitration decisions on adverse actions be reviewable by the Department and the full MSPB prior to review by the Federal Circuit Court of Appeals. The proposed regulations also gave the Secretary authority to establish a number of mandatory removal offenses (MRO)—that is, offenses that have such a direct and substantial impact on national security that they must carry a mandatory removal penalty. While the enabling legislation provides authority to establish an internal appeals process using adjudicators other than MSPB AJs, the Secretary and the Director decided that with the changes outlined above, DoD could achieve the objectives of the enabling legislation using MSPB AJs for initial review of employee adverse action appeals. Ultimately, the enabling legislation provides for full MSPB review of any DoD final appeals decision as well as for judicial review. Commenters, including labor organizations participating in the meet-and-confer process, generally expressed concern that these changes, separately and together, would vitiate the due process rights of DoD employees. They argued that the changes would substantially diminish the authority of third parties such as MSPB and arbitrators to fully and fairly review and adjudicate adverse actions. Commenters, as well as some members of Congress, expressed particular concern, about the proposal to permit the Department to review arbitrator and MSPB AJ decisions on adverse actions. Commenters expressed skepticism that the stringent standards established for this review would adequately protect due process of employees. Commenters also expressed concern about the proposal to limit the ability to mitigate penalties unless the penalty was “wholly without justification.” Commenters generally supported the proposal to adopt a “preponderance of evidence” standard of proof, although a few commenters were opposed to this proposal. These comments express a fundamental misconception of the requirements of due process as established by the United States Supreme Court. For example, in accordance with Supreme Court decisions, due process requires that before an employee who has a property interest in a job is removed, he or she is entitled to notice, an opportunity to reply, a decision, and a post-decision review. The final regulations preserve these due process rights for covered employees and afford even greater protection than the U.S. Constitution requires. Recognizing that many of these comments were erroneously characterized as due process issues, we nevertheless considered their merits. DoD and OPM have decided that the final regulations will continue to provide for a shorter, 15-day minimum advance notice to an employee of a proposed adverse action (compared to a 30-day notice under current law). We have also retained the provision giving employees a minimum of 10 days to respond to the charges specified in the notice of adverse actions. Some commenters suggested that the 10-day period was not long enough, but this notice is actually longer than the 7-day minimum reply period that is provided under current law. This reply period runs concurrently with the notice period, which is also consistent with current law. Employees continue to have a right to be heard before a proposed adverse action is taken against them. This change protects that right while still providing for a more streamlined process. Since these are minimum time periods, local management may extend these time limits on a case-by-case basis if necessary. We are persuaded by the concerns expressed by commenters, as well as labor organizations during the meet-and-confer process, that the enabling legislation establishes the standard by which the full MSPB may mitigate penalties. Specifically, the proposed regulations precluded mitigation except where a determination is made that the penalty is so disproportionate to the basis for the action as to be wholly without justification. Since the enabling legislation specifically provides the criteria for full MSPB review of NSPS appeals decisions, the Secretary and Director agree that it is unnecessary to require the full Board to apply the “wholly without justification” standard. The criteria for full MSPB review as provided in the enabling legislation have been added to these regulations. Furthermore, the Secretary and Director agree to revise the “wholly without justification” standard for MSPB AJs that are used as part of the Department's appeals process as well as arbitrators. The standard has been revised to preclude mitigation except when the action is “totally unwarranted in light of all pertinent circumstances.” This standard is similar to that recognized by the Federal courts and is intended to limit mitigation of penalties by providing deference to an agency's penalty determination. The Department has statutory authority to establish new legal standards. In this case, the Department is electing to adopt a legal standard that meets the need of the Department by ensuring deference is provided to the Department's penalty determinations along with the requirement that AJs give consideration to the Department's national security mission. Under the final regulations, MSPB AJs (as well as arbitrators) will also be able to mitigate penalties in adverse action cases, but only under limited circumstances. We continue to believe that, because the Department bears full accountability for national security, it is in the best position to determine the penalty for poor performance and/or misconduct, subject to a more limited review than exists now under chapter 75 of title 5, U.S. Code. Thus, its judgment in regard to penalty should be given deference. This limited standard for mitigation of penalties selected by DoD is intended to explicitly restrict the authority of MSPB AJs and arbitrators to modify penalties to those situations where the penalty is simply not warranted. MSPB AJs and arbitrators may not modify the penalty imposed by the Department unless such penalty is totally unwarranted in light of all pertinent circumstances. Consistent with the intent that deference be given to agency selected penalties, the regulations also provide that when a penalty is mitigated, the maximum justifiable penalty must be applied. In determining the maximum justifiable penalty, MSPB AJs and arbitrators will use the applicable agency table of penalties or other internal guidance. Commenters and labor organizations expressed strong concerns over DoD reviewing MSPB AJ decisions. These concerns ranged from whether the Department had legal authority to conduct this review to whether this assists in achieving the Department's goal of streamlining the appeals process. Some expressed concerns that this would not be a truly independent appeals process as a result. We recognize these concerns, but believe that the process provides for appropriate review and safeguards. The enabling legislation authorizes an appeals process resulting in a final Department decision that is subject to full MSPB review. Consistent with this authority, we have established an independent appeals process using existing and familiar resources, MSPB AJs, to adjudicate employee appeals of DoD adverse actions. These AJs would issue initial decisions that would lead to a final Department decision subject to full MSPB review. The decision to utilize the MSPB AJ corps, rather than establishing a new corps of AJs, is purposeful. We are mindful of the need to conserve resources and recognize the value these AJs' independence brings to the process. Nevertheless, to ensure that the Department receives proper deference to its critical mission requirements, the Department will retain the opportunity to review and modify, under criteria prescribed in these regulations, those initial AJ decisions before they become final Department decisions. In response to concerns raised by the unions during the meet-and-confer process, this review will occur at the DoD level. This highlights that the highest levels of the Department wish to ensure that this process is applied fairly and consistently across the Department. Also, in order to ensure timely decisions by the Department when taking action on an AJ or arbitrator decision, time limits for taking action will be established in implementing issuances. Ultimately, any decision of the Department is subject to review by the full MSPB and the Court of Appeals for the Federal Circuit. We believe this process affords employees full and fair opportunity for redress, as well as adjudicative independence, and deference to DoD's critical mission needs, consistent with the NSPS statutory authority. Finally, many commenters and labor organizations participating in the meet-and-confer process expressed concerns about the organization of the appellate procedures, finding them difficult to follow. We are persuaded by their concerns and have reorganized the appellate procedures in a user-friendly format. With the changes outlined above, we believe we have addressed and resolved the concerns raised by commenters regarding adverse actions and appeals. Due process is preserved under the final regulations. Thus, the adverse actions and appeals procedures set forth in these regulations are “fair, efficient, and expeditious,” consistent with congressional direction. d. Mandatory Removal Offenses The proposed regulations authorized the Secretary to identify offenses that, because they have a direct and substantial adverse impact on the Department's national security mission, warrant a mandatory penalty of removal from the Federal service. Only the Secretary could mitigate the removal of an employee determined to have committed such a mandatory removal offense (MRO). Employees alleged to have committed these offenses would have the right to advance notice, an opportunity to respond, and a written decision. They would also be entitled to appeal that decision to the independent MSPB AJs, who could reverse the action but could not mitigate the removal penalty. Decisions of the MSPB AJs are subject to review by DoD as well as the full MSPB. Commenters and unions expressed a number of objections to the concept of MROs. Since no examples of potential MROs were provided in the proposed regulations, they feared that removal could be too harsh a penalty as for yet unspecified offenses. They also were concerned that employees would not be given full and complete notice of such offenses prior to their application. As proposed, an MRO should have a direct and substantial adverse impact on the Department's national security mission. Accordingly, we have decided to retain MROs. However, in response to comments, the Secretary and the Director understand the concern over the lack of specificity with regard to MROs. During the meet-and-confer process, participating labor organizations expressed a similar concern, but we believe we were able to satisfactorily address most of their objections about lack of specificity by sharing with them potential mandatory removal offenses. In addition to those MROs discussed during the meet-and-confer process, an illustrative list of potential MROs follows: • Purchasing, using, or transporting weapons or materials for the purpose of committing, attempting to commit, or aiding and abetting terrorism. • Committing, attempting to commit, or aiding and abetting an act of sabotage against the Department of Defense that resulted or could have resulted in loss of life, significant financial loss or adverse impact on military readiness. • Soliciting or intentionally accepting a bribe or other unauthorized personal benefit in return for an act that compromises or could compromise national security. • Employees involved in the Personnel Reliability Program failing to safeguard the assets for which they are directly responsible and such failure results in loss, theft, sabotage, unauthorized use, destruction, detonation, or damage. • Intentionally engaging in activities that compromise or could compromise the information or financial infrastructure, including major procurement fraud, of the Department of Defense, when the employee knew or reasonably should have known of the compromise or potential compromise. There is no question that employees must be made aware of the final list of MROs approved by the Secretary. Both the Secretary and the Director believe that this is a basic issue of fairness and a tenet of an organizational culture that establishes clear accountability. That is why the proposed regulations provided that MROs will be identified to employees in advance, as part of implementing issuances, and made known to all employees upon identification. During the meet-and-confer process, participating labor organizations were especially concerned about this issue. We agree that these offenses should not be a surprise to anyone, and have retained these provisions in the final regulations but have also added a requirement that they be publicized via notice in the Federal Register . The Secretary also intends to consult with the Department of Justice in preparing the list of offenses for publication. With these changes, the final regulations provide for the independence demanded by commenters while assuring DoD's ability to remove employees who engage in offenses that have direct and substantial impact on the Department's national security mission. The Secretary is accountable to the President and the American people for safeguarding national security. No other agency or department bears this burden. These regulations ensure that the Secretary's authority aligns with that responsibility. e. Labor Relations Without exception, employee representatives objected to the proposed labor relations regulations, both in their comments and during the meet-and-confer process. Employee representatives argued that Congress expressly specified only two modifications to chapter 71—bargaining above the level of recognition and independent third party review of decisions. We disagree. In enacting chapter 99, Congress expressly recognized the need for the Department to design a labor relations system that both addresses the unique role that the Department's civilian workforce plays in supporting the Department's national security mission and allows for a collaborative issue-based approach to labor management relations. Moreover, Congress specifically authorized the Secretary, together with the Director, to establish and adjust this labor relations system in support of the overall HR management system notwithstanding the provisions of the current system as set forth in chapter 71. Thus, the Secretary and the Director have modified chapter 71 “to address the unique role that the Department's civilian workforce plays in supporting the Department's national security mission.” (5 U.S.C. 9902(m)) In taking the steps necessary to establish and adjust this labor relations system, Congress further recognized that the provisions of this system will supersede existing collective bargaining agreements covering Department employees and negotiated pursuant to the provisions of chapter 71. Finally, Congress indicated that the authority of the Secretary and Director to devise and adjust the Department's labor relations system would expire in 2009 absent further action by Congress (5 U.S.C. 9902(d)(2) and 5 U.S.C. 9902(m)(1), (2), (8), and (9)). f. Management Rights/Scope and Duty To Bargain The ability to act quickly is central to the Department's national security mission—not just during emergencies but, more importantly, in order to prepare for or prevent emergencies. The ability to act quickly is necessary even in meeting day-to-day operational demands. The Department must be able to assign employees and to introduce the latest security technologies without delay. This principle was crucial in the formulation of the enabling legislation and in the congressional debate that followed its introduction. Congress clearly recognized the Department's need to operate under a new labor relations system that would provide the flexibility necessary to respond to a variety of vital operational challenges and carry out its national security mission. To achieve this objective, the proposed regulations revised, among other things, the management rights and duty to bargain provisions found in 5 U.S.C. chapter 71. We expanded the list of management rights that are excluded from bargaining, including the numbers, types, and grades of employees or positions assigned to any organizational subdivision, work project, or tour of duty; and the technology, methods, and means of performing work—rights that deal directly with the Department's national security operations. In addition, we excluded from bargaining the procedures that the Department would follow in exercising these expanded operational management rights. We also proposed to allow the Department to take action in any of these areas without advance notice to labor organizations and without pre-implementation bargaining. Without exception, labor organizations objected to the proposed regulations, both in their comments and during the meet-and-confer process, arguing that altering the scope of bargaining in any way is contrary to the enabling legislation. They also claimed that these changes were unnecessary because current law already provided the Department with sufficient flexibility to deal with emergencies. They also took strong exception to the provisions in the proposed regulations that would allow issuances to supersede conflicting provisions of any collective bargaining agreements and limit bargaining to only those matters that are not inconsistent with the issuances. Labor organizations did acknowledge the Department's need to take certain actions without pre-implementation bargaining, and during the meet-and-confer process they proposed a process for accelerated bargaining within established time limits and the use of binding arbitration to resolve all bargaining disputes. Additionally, they suggested that the term “emergency” be interpreted as including “exigencies requiring action reasonably necessary to carry out the Department's national security mission before collective bargaining concerning the action can be completed,” and that in such exigencies the Department will afford the opportunity to bargain when circumstances reasonably allow. Their proposals would have allowed the Department to temporarily suspend provisions of collective bargaining agreements in situations where there is a direct connection between the exigency and the Department's national security mission. Even under such mission critical and exigent conditions, they insisted that post implementation agreements would have prospective effect only if the emergency was unforeseen. If the national security exigency were foreseen, then any remedy for Department action that was contrary to a contractual provision would have retroactive effect unless the retroactive effect would “unduly disrupt Department operations reasonably necessary to carry out the Department's national security mission.” We recognize the good faith effort made by these labor organizations to meet the Department's operational needs. However, their proposals were lacking in several respects. We have, therefore, retained the management rights/scope of bargaining provisions in the proposed regulations with some modifications. With respect to procedures, the proposals offered by the labor organizations do not go far enough. They would still require the Department to bargain, before acting, over the procedures it would follow in exercising its management rights, including those that deal directly with its operations. Once negotiated, those procedures can and do place significant constraints on critical actions such as the assignment of work, the deployment of personnel, and the staffing of tours of duty. These procedures are negotiable under 5 U.S.C. chapter 71. Labor organizations would have the Department continue that obligation, but under time limits and with an expanded interpretation of the chapter 71 provisions regarding emergencies that would allow management to bargain post implementation in certain limited circumstances. However, in today's operational environment, the exception has become the rule. Department managers, supervisors, and employees are critical to the Department's mission to defend our national security. The Department must be able to rely on the judgment and ability of managers and supervisors to make day-to-day decisions—even if this means deviating from established or negotiated procedures. Moreover, the Department's managers and supervisors must be able to make split-second decisions to deal with operational realities free of procedural constraints. With respect to post-implementation bargaining, the proposals offered by labor organizations are similarly lacking. Although they would allow management to implement without bargaining in advance when faced with an emergency, they would still require immediate post-implementation negotiations and third-party impasse resolution over such matters. However, the reality of DoD's operational environment today is that change is constant, and as a consequence, so too would be post-implementation bargaining, with the prospect of prolonged third-party impasse resolution. These negotiations would be required even in cases where the change was short-lived and/or where its impact was insignificant, insubstantial, or transient. The demand on DoD's frontline managers, supervisors and employees to engage in constant post-implementation negotiations would divert them from accomplishing the mission. This is unacceptable and inconsistent with the authority Congress granted to the Department in the enabling legislation. Further, under 5 U.S.C. chapter 71, interpretations of negotiated appropriate arrangements tend to assume that those agreements have anticipated future changes, but today's operational environment belies that assumption. Changes necessitated by operational demands are recurring and variable. Our frontline managers and supervisors must not be bound by agreements presupposing circumstances that are assumed to be constant, when they must face current and future exigencies. Nevertheless, in recognition of the concerns articulated by commenters during the public comment period and during the meet-and-confer process by participating labor organizations and as a result of the June 16, 2005, meeting of the United DoD Workers Coalition, DoD's NSPS Senior Executive, and OPM's Acting Director, the Secretary and the Director decided that the proposed regulations would be revised in a number of ways. First, we have modified the definition of “issuances” to make clear the distinction between an “implementing issuance” and an “issuance”. An “implementing issuance” is a document issued to carry out a policy or procedure implementing NSPS (but does not include internal operating guides, manuals, or handbooks that do not change employees' conditions of employment), while an “issuance” is a document to carry out a non-NSPS policy or procedure of the Department. We have also clarified that while an implementing issuance immediately supersedes those provisions of collective bargaining agreements that are inconsistent with the implementing issuance, an issuance does not supersede a conflicting provision of a collective bargaining agreement during the term of that agreement. This ensures the viability of the collective bargaining process under NSPS. When a provision of a collective bargaining agreement conflicts with an issuance, the collective bargaining provision remains in effect until the expiration or renegotiation of the agreement, at which time the parties will have to bring the conflicting provision into conformance with the issuance. This is comparable to the process that has long been followed regarding Governmentwide regulations. Specifically, issuances will be subject to national consultation with those labor organizations holding national consultation rights. Moreover, following consideration of comments and recommendations received through the national consultation process, issuances are subject to collective bargaining to the extent proposals are not inconsistent with the issuance and are otherwise negotiable under § 9901.910 and § 9901.917. More importantly, and in response to concerns that managers may issue implementing issuances and issuances for the sole purpose of invalidating particular provisions of a collective bargaining agreement that they do not like, we have also modified the regulations to specify that implementing issuances, that is, those that implement NSPS and supersede conflicting provisions of existing collective bargaining agreements, may only be issued by the Secretary, Deputy Secretary, Principal Staff Assistants, or Secretaries of the Military Departments. We have limited “Principal Staff Assistants” to senior officials in the Office of the Secretary of Defense who report directly to the Secretary and Deputy Secretary of Defense. We also have added a new subparagraph, § 9901.905(c) to make clear that any provision of a collective bargaining agreement that is inconsistent with issuances that do not implement NSPS will remain in effect until the expiration, renewal, or extension of the agreement, whichever occurs first. Finally, we have modified the regulations to permit bargaining, in the sole, exclusive, unreviewable discretion of the Secretary, over the procedures that would be followed in exercising the expanded operational management rights. We have also modified the regulations to permit bargaining, at the election of the Secretary, over appropriate arrangements on the routine matters related to the expanded operational management rights. The Secretary may authorize such bargaining to advance the Department's mission accomplishment or promote organizational effectiveness. Mid-term agreements on appropriate arrangements and procedures for (a)(1) and (a)(2) management rights are not precedential or binding on subsequent acts, or retroactively applied, except at the Secretary's sole, exclusive, and unreviewable discretion. Procedures and appropriate arrangements in term agreements are binding, except that nothing will delay or prevent the Secretary from exercising his or her authority under subpart I. For example, the Secretary may authorize deviation from such agreements when it is necessary to carry out the Department's mission. This authority builds on the authority that exists today when an emergency occurs, as that term is applied under chapter 71, to address the unique nature of the Department's mission and the operational demands it must face. Taken together, we believe these revisions meet the Department's mission needs, are consistent with the enabling legislation's intent to preserve collective bargaining rights as provided for in 5 U.S.C. chapter 99, and assure employees that issuances will not be issued for the improper purpose of eliminating local bargaining. While commenters have argued that any alteration of the scope of bargaining violates the enabling legislation, this interpretation is inconsistent with the express authority Congress has given the Secretary and the Director to establish and from time to time adjust the labor relations system for the Department to address the unique role that the Department's civilian workforce plays in supporting the Department's national security mission. These regulations fulfill that statutory requirement while providing employees with the rights envisioned by Congress. g. Independence of the National Security Labor Relations Board The National Security Labor Relations Board (NSLRB) described in the NSPS regulations is intended to act as one element of independent third-party review of collective bargaining disputes as provided for in 5 U.S.C. 9902(m)(6). Commenters, including labor organizations participating in the meet-and-confer process, objected to the creation of the NSLRB because they believe that an internal DoD review board would not be independent from management influence, unlike the Federal Labor Relations Authority (FLRA). Commenters suggested that any board whose membership would be appointed and removed by the Secretary could not reasonably be expected to remain impartial. They also suggested that the primary reason for taking jurisdiction of these matters away from the independent and impartial FLRA is to guarantee that DoD management can influence the NSLRB's decisions, giving them an unfair advantage over employee representatives. We have decided to retain the NSLRB. Employing the NSLRB to adjudicate labor disputes in place of the FLRA ensures timely and efficient case management by a body cognizant of the important and unique nature of the Department's mission. We believe that the final regulations have adequately balanced the Department's interest in timeliness and mission recognition with employees' desire to have an impartial dispute adjudicator. The regulations establish NSLRB membership criteria that require candidates to exhibit integrity and impartiality in addition to extensive knowledge of labor laws, DoD's mission, or both. Although the Secretary has authority to remove NSLRB members before the expiration of their terms, that authority is limited to removal for inefficiency, neglect of duty or malfeasance in office, which is a standard similar to that for removing members of the FLRA. In addition, since the standard is established in these jointly prescribed regulations, it may not be changed unilaterally by the Secretary. Finally, we stress that the NSLRB decisions are subject to review by the FLRA, which acts as another element of independent third-party review. The FLRA decisions, including those reviewing decisions of the NSLRB, remain subject to judicial review as they are under chapter 71. These regulations establish that the NSLRB will operate independent of the chain of supervision as does any agency administrative judge or administrative review board whose decisions can be appealed to a higher authority. Multiple commenters, including labor organizations participating in the meet-and-confer process, recommended that the labor organizations be given the opportunity to participate in the NSLRB nomination process. We agree and have included in the final regulations an explicit requirement that the Secretary consider labor organization nominations. Whereas the proposed regulations did not provide a role for labor organizations in the nomination process, the final regulations provide that the Secretary will consider labor organization nominations in selecting the two non-chair members of the NSLRB. This assures labor organizations a voice in the NSLRB selection process. While we have not adopted all suggestions related to the NSLRB, we believe the final regulations ensure that NSLRB members will discharge their duties in a fair and impartial manner by (1) including employee representatives in the process for selecting such members; (2) requiring that individuals appointed as members have integrity, impartiality, and subject matter expertise; (3) limiting the grounds on which the Secretary can remove NSLRB members; and (4) providing for FLRA review of NSLRB decisions and, as prescribed in chapter 71, judicial review of FLRA decisions. Response to Specific Comments and Detailed Explanation of Regulations Subpart A—General Provisions Section 9901.101—Purpose Section 9901.101 explains the overall purpose of the regulations in 5 CFR part 9901, which is to implement a new human resources management system and a new labor relations system, as authorized by 5 U.S.C. 9902. The section states various guiding principles and key operational characteristics and requirements. We have added a reference in § 9901.101(a) to the labor relations system, which is established under 5 U.S.C. 9902(m), since this is a separate and distinct authority. (See additional discussion regarding this distinction in the analysis of comments regarding § 9901.102.) Commenters questioned the authority to waive or modify statutes through these regulations. We are modifying § 9901.101(a) to clarify that 5 U.S.C. 9902 provides authority for these regulations to waive or modify certain statutory provisions. A commenter recommended that the regulations restate the statutory merit principles instead of just referencing them as a guiding principle. We do not believe such a restatement is necessary; however, we have added a statutory citation—5 U.S.C. 2301—in § 9901.101(b)(1). Commenters expressed concern regarding the key operational characteristic “Agile and Responsive Workforce and Management,” which was further described as “workforce can be easily sized, shaped, and deployed to meet changing mission requirements.” In particular, some objected to viewing civilian employees as deployable in the same manner as military personnel. While DoD has always had and will continue to have the right to assign employees to serve in geographic locations based on mission requirements, the word “deploy” in this section is being used in a broader context and was intended to encompass the strategic organization of work based on employee skills and competencies and mission needs. In particular, we believe the authority in subpart B to classify work into broader career groups supports this objective. Section 9901.102—Eligibility and Coverage Section 9901.102 sets forth general rules regarding employee eligibility and coverage under the various subparts of part 9901. Categories of eligible employees become covered only when the Secretary affirmatively approves coverage as of a specific effective date. Commenters indicated that the Secretary's discretionary authority in coverage matters is too broad. We believe it is essential that the Secretary be given such discretion. The authority to establish systems would be meaningless unless there is corresponding authority to place eligible employees under the system. The Secretary needs flexibility to phase in coverage in an orderly way, while retaining authority to change effective dates as needed, based on changing conditions or mission requirements. Commenters stated that the authority in § 9901.102(b)(1) to establish an immediate effective date for subpart I (dealing with labor relations) conflicts with 5 U.S.C. 9902(l). Section 9902(l) provides that the Secretary may apply the “National Security Personnel System” only if (1) the affected organizational or functional unit has no more than 300,000 employees or (2) the Secretary determines “in accordance with subsection (a)” that the Department has in place a performance management system that meets the criteria in 5 U.S.C. 9902(b). The term “National Security Personnel System” is defined in 5 U.S.C. 9902(a) to be the “human resources management system,” which is established under the authority of subsection (a). Section 9902(b) provides requirements for a system established “under subsection (a).” Under 5 U.S.C. 9902(b)(3)(D) and (d), the human resources management system established under subsection (a) does not reach to the labor relations system established under 5 U.S.C. chapter 71. Instead, 5 U.S.C. 9902(m) provides a totally separate authority to establish and adjust a “labor relations system.” We believe it is clear that the limitations in 5 U.S.C. 9902(l) apply only to the human resources management system established under 5 U.S.C. 9902(a). Commenters raised questions about the coverage of employees in certain DoD laboratories who are covered by a demonstration project or an alternative system. Section 9902(c) of title 5, U.S. Code, states that the National Security Personnel System will not apply to defense laboratories in organizations listed in Section 9902(c)(2) before October 1, 2008, and will apply after that date only if the Secretary determines that greater flexibilities are available. Consistent with the explanation in the preceding paragraph, the reference to the “National Security Personnel System” in 5 U.S.C. 9902(c) refers to the human resources management system which is defined as the National Security Personnel System in Section 9902(a). Thus, the restrictions in 5 U.S.C. 9902(c) do not apply to the coverage of these laboratory employees under the labor relations system established under 5 U.S.C. 9902(m), and these employees may be covered by subpart I (dealing with labor relations) before October 1, 2008. Commenters objected to the possible coverage of certain civilian mariners who are currently covered by a pay system established under 5 U.S.C. 5348 and are also covered by 5 U.S.C. chapter 71. These employees will be covered by subpart I (dealing with labor relations). However, the Secretary has determined that they will not be covered by the human resources system, including the adverse actions and appeals provisions. Other commenters asked about certain Army Corps of Engineers employees under Public Law 97-257. U.S. Army Corps of Engineers employees paid from Corps of Engineers Special Power Rate Schedules will be covered by subpart I (dealing with labor relations). The Secretary has determined that they will not be covered by the human resources system, including the adverse actions and appeals provisions. Commenters asked whether a category of employees could be covered by some, but not all, provisions of subparts B through H. In particular, commenters noted that National Guard Technicians were eligible for coverage but were subject to certain provisions outside title 5— e.g. , qualification requirements established under title 32, instead of qualification standards established under 5 U.S.C. chapter 51. Since 5 U.S.C. 9902 does not provide authority to modify or waive statutory provisions outside of certain specified chapters in title 5, any such provisions would continue in effect. The Secretary may extend coverage to eligible employees under subparts B through H to the extent those provisions are not in conflict with other statutory requirements. Commenters proposed that certain occupations be excluded from coverage— e.g. , attorneys or law enforcement officers—because of the nature of their work. We disagree. We believe the flexible systems we are authorizing can be applied successfully to all occupational categories. Commenters raised questions regarding the purpose of § 9901.102(f). Paragraph (f) is intended to allow the Secretary to extend NSPS coverage to employees who are currently covered by systems established administratively under authorities outside of title 5, but only when those authorities give DoD the discretion to cover those employees under administratively determined systems or to leave them in the title 5 systems that would otherwise apply. For example, if DoD has discretionary statutory authority to cover a category of employees under an administratively determined classification and pay system instead of the General Schedule, such employees remain potentially eligible for General Schedule coverage and accordingly would also be eligible for NSPS coverage. Commenters questioned whether paragraph (f) could be used to cover educators employed by the DoD Education Activity in an NSPS pay system. Since the pay system for those educators employed overseas (Department of Defense Dependents Schools) is established under nondiscretionary statutory provisions in title 20, they are not eligible for coverage under an NSPS pay system. However, the pay system for those educators employed in the Continental United States (Defense Domestic Elementary and Secondary Schools) is established under discretionary provisions in title 10. Therefore, they are eligible for coverage under an NSPS pay system. Commenters proposed that current employees (or at least current employees meeting certain age and service requirements) be “grandfathered” and left in existing title 5 systems instead of being covered by NSPS, unless they elect otherwise. This proposal is not practicable from an administrative viewpoint and is contrary to the objectives behind the enabling legislation. We believe the flexibilities provided under the proposed NSPS will yield significant benefits to the Government and will also benefit employees based on their performance. It is therefore not acceptable to delay full application of NSPS. Commenters questioned why members of the Senior Executive Service (SES) are not covered by NSPS—specifically, the classification, pay, and performance provisions in subparts B through D. In fact, SES members are eligible for coverage under those NSPS provisions, subject to the conditions in § 9901.102(d). (See coverage provisions in §§ 9901.202(b)(4), 9901.302(b)(4), and 9901.402(b)(1).) We note that the SES pay and performance provisions in title 5 are already designed to be performance-sensitive. Thus, DoD does not plan to cover SES members in its initial implementation spirals. DoD may determine at a later date whether coverage under NSPS pay and performance provisions is necessary given the title 5 authorities that already apply to SES members. In light of the numerous comments regarding the coverage eligibility of specific categories of DoD employees under the various subparts of these regulations, we have prepared the following summary chart showing various categories of employees that are eligible for coverage under the NSPS systems. This chart is not intended to be comprehensive or authoritative, but covers the major categories of employees in DoD outside of the General Schedule. In the chart, categories of employees that are identified as eligible for coverage under a particular subpart are annotated with “Yes,” and those that are identified as ineligible for coverage are annotated with “No.” The chart and its footnotes must be read together for full information on coverage eligibility. Actual coverage is subject to applicable law and approval by the Secretary under § 9901.102(b). Summary of Non-General Schedule Coverage Eligibility Under 5 CFR Part 9901 Category Eligible for human resources system/appeals process (subparts B-H) Eligible for labor relations system (subpart I) Air and Army Reserve Technicians Yes Yes. Army and Air National Guard technicians (dual status) under 32 U.S.C. 709 Yes 1 Yes. 2 Army and Air National Guard technicians (non dual status) under 32 U.S.C. 709 Yes 1 Yes. 2 Hydropower Corps of Engineers Special Power Rate Schedules (WB pay plan) No Yes. Navy Civil Service Mariner (WM pay plan) No Yes. Overseas Teachers (DoDDS) No Yes. Pentagon Force Protection Agency (title 5 and title 10 employees) Yes 3 Yes. Federal Wage System (WA, WD, WG, WJ, WK, WL, WN, WO, WS, WT, WY, XF, XG, XH pay plans) Yes Yes. Nonappropriated Fund Yes 4 Yes. Domestic Teachers (DDESS) Yes 4 Yes. Defense Laboratories in Organizations listed in 5 U.S.C. 9902(c) No 5 Yes. Armed Services Board of Contract Appeals No for Board members; Yes for other employees No for Board members; Yes for other employees. Court of Appeals for the Armed Forces No for Judges and attorneys in chambers; Yes for other employees 6 No for Judges and attorneys in chambers; Yes for other employees. 6 Consultants and Experts (10 U.S.C. 129b) No No. DARPA, scientists and engineers No No. DCIPS (including DISES) No No. Executive Schedule No No. Faculty at DoD Educational Institutions: Yes 4 Yes. Air University, Air Force Institute of Technology, Army War College/Command & General Staff College, Defense Acquisition University, National Defense University, Defense Language Institute, George C. Marshall Center, Asia-Pacific Center for Security Studies, Western Hemisphere Institute for Security Cooperation, U.S. Naval Postgraduate School, Naval War College/U.S. Marine Corps University, USAF Academy, U.S. Naval Academy, U.S. Military Academy Faculty and staff at USUHS No No. Foreign Nationals (Direct Hire) No No. Schedule C Yes No. SES Yes No. Senior Level (SL/ST) Yes Yes. DoD Office of the Inspector General Yes, unless appointed under authority of the Inspector General Act of 1978 (5 U.S.C. App. § 6) 7 No. 1 Subject to limitations pursuant to 32 U.S.C. 709. 2 But excluded from national level bargaining under 5 U.S.C. 9902(g). 3 Title 10 employees under title 10 discretionary authority and subject to 10 U.S.C. 2674. 4 Under title 10 discretionary authority. 5 Until 2008, excluded from HR system and appeals process pursuant to 5 U.S.C. 9902(c). 6 Pursuant to 10 U.S.C. chapter 47, subchapter XII. 7 Currently there are no appointees under that authority. Section 9901.103—Definitions Section 9901.103 provides definitions of terms used in more than one subpart. Commenters expressed concerns about some definitions. Commenters requested greater clarity with respect to the use of “implementing issuances.” Accordingly, we are revising the definition of “implementing issuances” to make clear that such documents can be issued by only certain high-level DoD officials (despite the Secretary's broad delegation authority), including those formally designated as acting in those high-level positions. We have also clarified that implementing issuances do not include internal operating guides, handbooks, or manuals that do not change conditions of employment. This is consistent with current practice. We have also added a definition of “Military Department.” To address general comments regarding the need for greater specificity where possible, we have added definitions of the terms “initial probationary period” and “in-service probationary period.” These terms are used in subpart E (Staffing and Employment) and subpart F (Workforce Shaping). In addition, we clarified the definition of “NSPS” to more closely track the language in the statute. “NSPS” means the human resources management system established under 5 U.S.C. 9902(a). It does not include the labor relations system established under 5 U.S.C. 9902(m). We do, however, use “NSPS” in the supplementary information and in public statements as a shorthand reference to describe both the HR and the labor relations systems. We also note that chapter 99 is entitled the National Security Personnel System. Commenters expressed concern about the definition of “performance.” In particular, commenters objected to the use of the terms “behavior,” “demeanor,” “attitude,” and “manner of performance” in defining performance. We note that these terms are used in a context that makes clear that we are dealing with observable behaviors that affect the accomplishment of assignments, responsibilities, and organizational goals. We believe performance assessments would not be complete without considering employees' behaviors in carrying out assigned work. For example, customer service is generally a paramount organizational objective. Thus, the manner in which employees treat customers is an important aspect of overall performance. Employee behaviors can be objectively observed and evaluated against established performance expectations. Some commenters suggested that assessments of manner of performance would open the door to abuse, cronyism, punishment for criticism of management, or retaliation against whistleblowers. We disagree. Under NSPS, employees are still protected against prohibited personnel practices and will have the same whistleblower rights they have always had. We note that managers will be held accountable for how they manage this process. A commenter questioned whether the definition of “promotion” allows management [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A05-21494. Public record. Not legal advice.