Science and Technology Reinvention Laboratory Personnel Demonstration Project at the Naval Sea Systems Command Warfare Centers

SUMMARY: The National Defense Authorization Act for fiscal year 1995

(Pub. L. 103-337) authorizes the Secretary of Defense, with Office of

Personnel Management (OPM) approval, to conduct a Personnel

Demonstration Project at Department of Defense (DoD) laboratories

designated as Science and Technology Reinvention Laboratories. The

legislation requires that most requirements of Section 4703 of Title 5

shall apply to the Demonstration Project. Section 4703 requires OPM to

publish the proposed project plan in the Federal Register. This notice

meets that requirement.

DATES: Comment date: Written comments will be considered if received no

later than April 9, 1997. Hearing date: A public hearing will be held

on the proposed project plan on: March 26, 1997, at the Indian Head

Pavillion, 100 Walter Thomas Road, Indian Head, MD, from 6:00 p.m.

until testimony is completed.

ADDRESSES: Comment address: Send written comments to Shirley Scott,

Head, Demonstration Project Office, NSWCDD, HR Department, 17320

Dahlgren Road, Dahlgren, VA 22448.

FOR FURTHER INFORMATION CONTACT: Shirley Scott at (540) 653-4623.

SUPPLEMENTARY INFORMATION: A public hearing will be held by OPM at the

Indian Head Pavillion, 100 Walter Thomas Road, Indian Head, MD 20640,

during which interested persons or organizations may present their

written or oral views concerning the proposed Demonstration Project

plan. So that OPM may regulate the course of the hearing and provide

time for all who wish to present comments, parties who want to testify

at the hearing are asked to contact one of the persons listed under For

Further Information Contact: for a specific scheduled time. Priority

will be given to scheduled parties; others will be heard in the

remaining available time. Each speaker's presentation will be limited

to 10 minutes. In other respects, the hearing will be informal. The

hearing record will be left open until April 9, 1997 to allow

additional written data, views and arguments from the parties

participating in the hearing.

Dated: February 21, 1997.

Office of Personnel Management.

James B. King,

Director.

Table of Contents

I. Executive Summary

II. Introduction

A. Purpose

B. Problems With Present System

C. Changes Required/Expected Benefits

D. Participating Organizations/Mission

E. Participating Employees

F. Employee/Labor Participation

III. Methodology

A. Project Design

B. Personnel System Changes

1. Classification/Pay

2. Performance Development System

3. Incentive Pay System

4. Reduction-In-Force (RIF)

5. Competitive Examining/Distinguished Scholastic Appointments

C. Project Implementation

D. Entry Into/Exit From The Project

E. Project Duration

IV. Evaluation Plan

V. Waivers of Law/Regulation

VI. Cost

VII. Project Oversight/Management

I. Executive Summary

The Naval Surface Warfare Center and the Naval Undersea Warfare

Center, designated as Science and Technology Reinvention Laboratories,

wish to conduct a Personnel Demonstration Project similar in nature to

that of the 1980 Demonstration Project approved for the Naval Weapons

Center, China Lake, and Naval Ocean Systems Center, San Diego. The

Warfare Centers' project includes the following key project components:

A Broad Banding Classification and Pay System for ``white collar''

employees; a Performance Development System; an Incentive Pay System; a

new Reduction-in-Force (RIF) system; and a Competitive Examining and

Appointment System. The Warfare Centers' project addresses an

organization which is substantially larger (over 23,000 employees), has

greater diversity of mission than previous projects, and has extensive

union involvement at all major sites. In addition, the project plan has

been developed with on-going involvement of the various unions

represented in the Warfare Centers.

II. Introduction

A. Purpose

The overall goal of the Demonstration Project is to implement a

Human Resource Management System that facilitates mission execution and

organization excellence and responds to today's dynamic environment of

downsizing, restructuring and closures by obtaining, developing,

utilizing, incentivizing and retaining high performing employees; and

adjusting workforce levels to meet program and organizational needs.

The system to be demonstrated has the flexibilities to accommodate and

support wide-ranging activity missions, strategies and cultures. It is

responsive to business considerations and permits a high degree of

control over workforce costs. Clearly, it is more streamlined and

understandable for those who will use it as well as those affected by

it. Most importantly, it is focused not just on the needs of the

organization, but also on the needs of the people who are the

organization.

These objectives reflect the Federal and DoD goals of creating a

government that works better and costs less, and a flexible system that

can reduce, restructure or renew to meet diverse mission needs, expand

or contract a workforce quickly, respond to workload exigencies, and

contribute to quality products, people and workplaces. The objectives

also align with the Federal and DoD values and guiding principles of

empowering employees to get results, maximum flexibility tempered with

accountability, innovation and continuous improvement, caring for

people during downsizing, and vital partnerships and teaming with all

the stakeholders in the process.

B. Problems with Present System

The Warfare Centers find the current Federal Personnel System to be

cumbersome, confusing, and unable to provide the flexibility necessary

to respond to the current mandates of downsizing, restructuring, and

possible closure while trying to maintain a high level of mission

excellence. The present system--a patchwork of laws, regulations, and

policies--often inhibits rather than supports the goals of developing,

recognizing, and retaining the employees needed to realign the

organization with its changing fiscal and production requirements.

The current Civil Service General Schedule (GS) system has 15

grades with 10 levels each and involves lengthy, narrative, individual

position descriptions, which have to be classified by complex, OPM-

mandated position classification standards. Because these standards

have to meet the needs of the entire federal government, they are often

not relevant to the needs of the Warfare Centers and are frequently

obsolete. Distinctions between levels are often not meaningful.

Currently, standards do not provide for a clear progression beyond

[[Page 8587]]

the full performance level, especially for science/engineering

occupations where career progression through technical as well as

managerial career paths is important.

In addition, there are limited mechanisms for dealing with an

employee who has been promoted out of his/her level of expertise or

who, after a successful career, has been unable to gain the skills

required of a new work environment. In most cases, the only possible

action may be a reduction in grade. Under the current system a demotion

to a lower grade is considered an adverse action even if there is no

loss in pay. Under the proposal, a reduction in band level without a

loss in pay will not be considered an adverse action.

Performance Management systems require additional emphasis on

continuous, career-long development in a work environment characterized

by an ever increasing rate of change. Since past performance and/or

longevity are the factors on which pay raises are currently assessed,

there is often no positive correlation between compensation and

performance contributions nor value to the organization. These limited

criteria do not take into account the future needs of the organization

nor other culturally relevant criteria which an organization may wish

to use as incentives.

The present Reduction in Force (RIF) process is highly complicated

and relatively unresponsive to requirements for rapid work force

restructuring and retention of employees with mission appropriate

skills. RIF is confused by an augmented service credit for performance

that is based in a performance appraisal system fraught with

contention. Round I adds complexity, confusion, and uncertainty. Cost

savings expected from RIF are drastically reduced by the inordinate

administrative costs of the process and the likelihood that the

employee ultimately separated will be at a lower grade than the

originally targeted position. Additionally there is the expense of

retained grade and retained pay. Current RIF procedures impact

negatively on morale because of the high number of people affected and

frequent misunderstandings of a complicated system that leaves affected

employees wondering why they have been ``targeted''.

And finally, the complexity of the current examining system creates

delays in hiring. Line managers find the complexity limiting as they

attempt to accomplish timely recruitment of needed skills. To compete

with the private sector for the best talent available, they need a

process which is streamlined, easy to administer, and allows for timely

job offers.

C. Changes Required and Expected Benefits

The proposed Demonstration Project responds to problems in the

classification system with a Broad Banding Classification system for GS

employees; to problems in the current performance management system

with a Performance Development and Incentive Pay Systems; to the

problems of the existing RIF procedures with a streamlined RIF system;

and to problems of complicated hiring and examining procedures with a

simplified examining and appointment process.

D. Participating Organizations and Mission

Both the Naval Surface Warfare Center and the Naval Undersea

Warfare Center will participate in the project. The Warfare Centers are

comprised of a total of seven Divisions with 14 major sites nationwide.

The sites are diverse in employment profiles and size and have

bargaining unit populations ranging from a small percentage to more

than half of the workforce. These organizations operate throughout the

full spectrum of research, development, test and evaluation,

engineering and fleet support.

The Warfare Centers are Defense Business Operations Fund (DBOF)

activities. Under DBOF, the cost of operating is paid by billing

customers for work performed. The Warfare Centers seek to maximize

management flexibility to control expenditures since the continued

economic viability of a DBOF activity depends in large measure on

remaining cost competitive with other organizations.

E. Participating Employees

This Demonstration Project will involve civilian personnel at all

Warfare Center sites. There are 14 major sites (over 200 civilian

personnel) and many smaller sites. Currently 23,697 civilians are

employed as shown in Figure 1. The intent of the plan is to cover all

civilian appropriated fund employees at all sites with the exception of

the members of the Senior Executive Service. While the Demonstration

Project, and its five components, cover all General Schedule (GS)

employees, the Federal Wage System (FWS) employees are included only

for purposes of changes in the Performance Development, Reduction-In-

Force and Competitive Examining systems. Likewise, Senior Level (SL)

and Scientific and Technical (ST) employees are covered only under the

Incentive Pay, Performance Development and Reduction-In-Force systems.

The Demonstration Project may be implemented incrementally throughout

the Warfare Centers. The Demonstration Project will be implemented in

bargaining units when those units so request and a negotiated agreement

is reached. Approximately fifty percent of the workforce is represented

by unions.

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F. Employee/Labor Participation

One of the keys to developing a project plan sensitive to the

multiplicity of management and employee needs has been the involvement

of a Steering Committee composed of representatives from the Warfare

Center Divisions and six national unions having bargaining units at the

Warfare Center sites. The American Federation of Government Employees

(AFGE), Metal Trades Council (MTC), International Association of

Machinists (IAM), National Association of Government Employees (NAGE),

the National Federation of Federal Employees (NFFE) and Fraternal Order

of Police (FOP) represent more than half of the more than 25,000

employees in a variety of occupational groups at Warfare Center sites

across the United States. Appendix A further describes the employee/

union participation in this effort. The Steering Committee developed a

project plan capable of meeting the seemingly differing, sometimes

conflicting, goals of management and the unions. The Steering Committee

substantially altered the original concept to address those needs in

order to provide a viable implementation framework capable of meeting

the wide variety of cultures and needs across the Warfare Center

spectrum. The Steering Committee is also working to foster the

establishment of partnerships within the Warfare Centers.

The Steering Committee agreed to the following language with

respect to the implementation of the Demonstration Project in the

Warfare Center bargaining units. ``Essential to the success of the

Demonstration Project within a collective bargaining unit is the

explicit choice of the parties to freely enter into the project with

mutual agreement on all provisions associated with the project. To that

end, either party will have the option NOT to enter the project up to

the point where both parties sign a collective bargaining agreement

covering the Demonstration Project and, if required, that agreement is

ratified and approved. Further the parties may include in the contract

provisions for evaluating, modifying and leaving the project during the

life of the contract.'' Any disputes or impasses that arise in

connection with the negotiation on the implementation of the

Demonstration Project will be subject to mediation but not binding

impasse procedures. For any bargaining subsequent to adoption of the

Demonstration Project, the parties shall use impasse procedures defined

in 5 U.S.C. 7119 unless alternative impasse procedures have been

negotiated. In the event Executive Order 12871 is no longer in effect,

the parties within the Demonstration Project will continue to negotiate

issues covered by 5 U.S.C. 7106(b)(1) to the extent those issues impact

on the provisions of the Demonstration Project. Within bargaining

units, violations of provisions of the Demonstration Project may be

covered by the negotiated grievance procedure.

This Demonstration Project was developed with management and union

input through a collaborative process; however, it was agreed that

union participation did not necessarily constitute full and complete

endorsement of all details of the project. The Project will be

implemented in bargaining units only after there is full agreement

through the collective bargaining process.

While understanding that each bargaining unit will make its own

choice about participating in the Demonstration Project, the Steering

Committee has endeavored to create a project plan to fulfill the mutual

interests of management and employees while supporting the long term

objective of vital, competitive Warfare Centers capable of developing

and delivering the best possible technology to their customers.

III. Methodology

A. Project Design

An overarching objective in the project design has been the

development of a personnel system that provides a maximum opportunity

for local ``tailoring'' to meet the variety of requirements of

organizations engaged in missions ranging from theoretical research

into submarine vulnerability and survivability to the storage of

torpedoes. While the Divisions seek to recruit and retain world class

engineers and scientists in order to remain viable as laboratories,

they must also meet the development and motivational needs of an

extraordinarily diverse workforce; i.e., employees ranging from small

arms repairers in Crane, Indiana to program analysts in Newport, Rhode

Island. In order to accomplish that end, the goal is to begin the

process of delegating decision making to the people who know the most

about what they need and how to get their work accomplished: the

Divisions and sites.

[[Page 8589]]

While much of the Demonstration Project will be applied uniformly,

there are decisions which will be delegated to the Divisions and

activities so that the needs and cultures of those organizations may be

taken into account. Decisions at the local level will be made through

the collective bargaining process.

B. Personnel System Changes

1. Classification and Pay

A fundamental element of the system is a simplified white collar

classification and pay component. The proposed broad banding scheme

reduces the fifteen GS grade levels and the Senior Level (SL) and

Scientific & Technical (ST) pay levels, into five to six broad pay

bands. (See Figure 2) GS occupations are further broken down into three

separate career paths: Scientific and Engineering (ND), Administrative

and Technical (NT), and General Support (NG).

The OPM-developed classification standards are replaced by a small

number of one-page, generic benchmark standards developed within the

Demonstration Project. These standards also serve as the core of the

position description and replace lengthy individually tailored position

descriptions. These generic level descriptors encompass multiple series

and provide maximum flexibility for the organization to assign

individuals consistent with the needs of the organization, established

level or rank that the individual has achieved, and the individual's

qualifications. Career progression between levels will occur by

promotion, and pay progression within levels will occur through

incentive pay. Warfare Centers' long experience with industrial funding

will ensure their ability to control costs, an essential requirement in

today's environment.

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a. Career Paths. The Warfare Centers request exemption from the

current GS classification system and substitute career paths and band

levels. The designated career paths are: Scientific and Engineering

(ND), Administrative and Technical (NT), and General Support (NG). Like

the China Lake system, the GS classification series would be retained.

More detailed descriptions of the career paths and the classification

series for each path are provided below. The breakdown of occupational

series to career paths reflects only those occupations which currently

exist within the two Warfare Centers.

Additional series may be added as a result of changes in mission

requirements or OPM recognized occupations. These additional series

will be placed in the appropriate career path consistent with the

established career path definitions.

Scientific and Engineering: Professional engineering positions and

scientific positions in the physical, biological, mathematical, and

computer sciences; and student positions for training in these

disciplines. Series and titles included in the path are: 0401, General

Biological Science Series; 0403, Microbiology Series; 0408, Ecology

Series; 0440, Genetics Series; 0460, Forestry Series; 0471, Agronomy

Series; 0499, Biological Science Student Trainee Series; 0801, General

Engineering Series; 0803, Safety Engineering Series; 0804, Fire

Protection Engineering Series; 0806, Materials Engineering Series;

0807, Landscape Architecture Series; 0808, Architecture Series; 0810,

Civil Engineering Series; 0819, Environmental Engineering Series; 0830,

Mechanical Engineering Series; 0840, Nuclear Engineering Series; 0850,

Electrical Engineering Series; 0854, Computer Engineering Series; 0855,

Electronics Engineering Series; 0861, Aerospace Engineering Series;

0871, Naval Architecture Series; 0892, Ceramic Engineering Series;

0893, Chemical Engineering Series; 0894, Welding Engineering Series;

0896,

[[Page 8590]]

Industrial Engineering Series; 0899, Engineering and Architecture

Student Trainee Series; 1301, General Physical Science Series; 1306,

Health Physics Series; 1310, Physics Series; 1313, Geophysics Series;

1320, Chemistry Series; 1321, Metallurgy Series; 1330, Astronomy and

Space Science Series; 1350, Geology Series; 1360, Oceanography Series;

1372, Geodesy Series; 1386, Photographic Technology Series; 1399,

Physical Science Student Trainee Series; 1515, Operations Research

Series; 1520, Mathematics Series; 1529, Mathematical Statistician

Series; 1530, Statistician Series; 1550, Computer Science Series; 1599,

Mathematics and Statistics Student Trainee Series.

Administrative and Technical: Professional or specialist positions

in such administrative, technical and managerial fields as finance,

procurement, human resources, computer, legal, librarianship, public

information, safety, social sciences, and program management and

analysis; nonprofessional technician positions that support scientific

and engineering activities through the application of various skills

and techniques in electrical, mechanical, physical science, biology,

mathematics, and computer fields; and student positions for training in

these disciplines. Series and titles included in this path are: 0018,

Safety and Occupational Health Management Series; 0020, Community

Planning Series; 0028, Environmental Protection Specialist Series;

0080, Security Administration Series; 0099, General Student Trainee

Series; 0101, Social Science Series; 0110, Economist Series; 0132,

Intelligence Series; 0170, History Series; 0180, Psychology Series;

0185, Social Work Series; 0187, Social Services Series; 0188,

Recreation Specialist Series; 0201, Personnel Management Series; 0205,

Military Personnel Management Series; 0212, Personnel Staffing Series;

0221, Position Classification Series; 0230, Employee Relations Series;

0233, Labor Relations Series; 0235, Employee Development Series ; 0260,

Equal Employment Opportunity Series; 0299, Personnel Management Student

Trainee Series; 0301, Miscellaneous Administration and Program Series;

0334, Computer Specialist Series; 0340, Program Management Series;

0341, Administrative Officer Series; 0342, Support Services

Administration Series; 0343, Management and Program Analysis Series;

0346, Logistics Management Series; 0391, Telecommunications Series;

0399, Administration and Office Support Student Trainee Series; 0501,

Financial Administration and Program Series; 0505, Financial Management

Series; 0510, Accounting Series; 0560, Budget Analysis Series; 0599,

Financial Management Student Trainee Series; 0602, Medical Officer

Series; 0610, Nurse Series; 0690, Industrial Hygiene Series; 0802,

Engineering Technician Series; 0809, Construction Control Series; 0818,

Engineering Drafting Series; 0856, Electronics Technician Series; 0895,

Industrial Engineering Technician Series; 0899, Engineering and

Architecture Student Trainee Series; 0905, General Attorney Series;

0950, Paralegal Specialist Series; 0962, Contact Representative; 1001,

General Arts and Information Series; 1010, Exhibits Specialist Series;

1015, Museum Curator Series; 1016, Museum Specialist and Technician

Series; 1020, Illustrating Series; 1035, Public Affairs Series; 1060,

Photography Series; 1071, Audiovisual Production Series; 1082, Writing

and Editing Series; 1083, Technical Writing and Editing Series; 1084,

Visual Information Series; 1101, General Business and Industry Series;

1102, Contracting Series; 1103, Industrial Property Management Series;

1104, Property Disposal Series; 1150, Industrial Specialist Series;

1152, Production Control Series; 1173, Housing Management Series; 1176,

Building Management Series; 1199, Business and Industry Student Trainee

Series; 1222, Patent Attorney Series; 1311, Physical Science Technician

Series; 1410, Librarian Series; 1412, Technical Information Services

Series; 1420, Archivist Series; 1521, Mathematics Technician Series;

1601, General Facilities and Equipment Series; 1640, Facility

Management Series; 1654, Printing Management Series; 1670, Equipment

Specialist Series; 1701, General Education and Training Series; 1710,

Educational and Vocational Training Series; 1712, Training Instruction

Series; 1810, General Investigating Series; 1811, Criminal

Investigating Series; 1910, Quality Assurance Series; 2001, General

Supply Series; 2003, Supply Program Management Series; 2010, Inventory

Management Series; 2030, Distribution Facilities and Storage Management

Series; 2032, Packaging Series; 2050, Supply Cataloging Series; 2101,

Transportation Specialist Series; 2130, Traffic Management Series;

2150, Transportation Operations Series; 2181, Aircraft Operations

Series.

General Support: Assistant and clerical positions providing support

in such fields as budget, finance, supply, human resources; positions

providing support through application of typing, clerical, or

secretarial knowledge and skills; positions providing specialized

facilities support such as guards, police officers and firefighters;

and student positions for training in these disciplines. This path

includes the following series and titles: 0019, Safety Technician

Series; 0029, Environmental Protection Assistant Series; 0081, Fire

Protection and Prevention Series; 0083, Police Series; 0085, Security

Guard Series; 0086, Security Clerical and Assistance Series; 0134,

Intelligence Aid and Clerk Series; 0186, Social Services Aid and

Assistant Series; 0189, Recreation Aid and Assistant Series; 0203,

Personnel Clerical and Assistance Series; 0204, Military Personnel

Clerical and Technician Series; 0303, Miscellaneous Clerk and Assistant

Series; 0304, Information Receptionist Series; 0305, Mail and File

Series; 0318, Secretary Series; 0322, Clerk-Typist Series; 0326, Office

Automation Clerical and Assistance Series; 0332, Computer Operation

Series; 0335, Computer Clerk and Assistant Series; 0344, Management

Clerical and Assistance Series; 0350, Equipment Operator Series; 0351,

Printing Clerical Series; 0356, Data Transcriber Series; 0361, Equal

Opportunity Assistance Series; 0382, Telephone Operating Series; 0390,

Telecommunications Processing Series; 0392, General Communications

Series; 0394, Communications Clerical Series; 0399, Administration and

Office Support Student Trainee Series; 0462, Forestry Technician

Series; 0503, Financial Clerical and Assistance Series; 0525,

Accounting Technician Series; 0530, Cash Processing Series; 0540,

Voucher Examining Series; 0544, Civilian Pay Series; 0561, Budget

Clerical and Assistance Series; 0640, Health Technician; 0647,

Diagnostic Radiologic Technologist Series; 0679, Medical Clerk Series;

0698, Environmental Health Technician Series; 0945, Clerk of Court

Series; 0986, Legal Clerical and Assistance Series; 1087, Editorial

Assistance Series; 1105, Purchasing Series; 1106, Procurement Clerical

and Technician Series; 1107, Property Disposal Clerical and Technician

Series; 1411, Library Technician Series; 1531, Statistical Assistant;

1702, Education and Training Technician Series; 2005, Supply Clerical

and Technician Series; 2091 Sales Store Clerical Series; 2102,

Transportation Clerk and Assistant Series; 2131, Freight Rate Series;

2135, Transportation Loss and Damage Claims Examining Series; 2151,

Dispatching Series.

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b. Broad Bands and Levels of Responsibility. A fundamental purpose

of broad banding is to make the distinctions between levels easier to

discern and more meaningful. In that regard, the 15 GS grade levels are

reduced to no more than six band levels, each representing a defined

level of work. Within each career path, bands typically include the

following categories of positions: student trainee and/or entry level,

developmental, full performance level, and expert and/or supervisor/

manager.

With fewer band levels than GS grades, the level of responsibility

reflected in each band typically encompasses the responsibilities of

two or more GS grade levels. For example, the responsibilities of a

band level covering work at the full performance level may represent a

synthesis of GS-11 and GS-12 responsibilities. For the NT career path,

the responsibilities associated with the top two bands do not precisely

align with equivalent GS levels. Some GS-14 level responsibilities band

best with GS-13 while others band best with GS-15.

Although band VI of the ND career path covers SL and ST positions,

this does not represent a requested change in the basis for

classification or allocation of billets for these positions. The

authority to allocate new billets, classify positions and set initial

pay for assignment to SL and ST positions within the Warfare Centers

will be retained at the Assistant Secretary of the Navy (Manpower and

Reserve Affairs) level. The intent of including these positions in the

SE career path was two fold: (1) to emphasize the dual career

progression for scientists and engineers in nonsupervisory and

nonmanagerial career paths; and (2) to include SL and ST employees in

all other aspects of the Demonstration Project, i.e., performance

development, incentive pay and reduction-in-force systems. Consistent

with our goal of developing, recognizing, and retaining employees

needed to meet our changing organizational needs, the Demonstration

Project seeks the authority to manage its SL and ST workforce under the

same performance development and incentive system as other employees.

This includes the authority at the Division level to adjust the pay of

SL and ST employees up to Level IV of the Executive Schedule. Incentive

pay decisions will be made against criteria relevant to the needs of

the organization including the criticality and difficulty of the

position, critical skills, and current salary level of the employees.

c. Simplified Classification Process. A limited number of Warfare

Center one-page generic, level descriptor that also serve as the core

of preclassified position descriptions will be created within the

Demonstration Project. Those descriptions may be further tailored with

an addendum to provide information on Fair Labor Standards Act (FLSA)

coverage, selective placement factors, specialized knowledge/skills/

abilities, etc. Within the Demonstration Project, the term

``classification of a position'' for positions covered by broad banding

is defined as the placement of a position in its appropriate career

path, occupational series, and band level based on the application of

standards (referred to as level descriptors or benchmark standards)

established at the Warfare Center level. Line managers will be

meaningfully involved in the classification process to make it more

relevant to their organization's needs.

d. Simplified Assignment Process. Today's environment of downsizing

and workforce transition mandates that the organization has maximum

flexibility to assign individuals. Broad banding can be used to address

these needs. As a result of the assignment to a particular level

descriptor, the organization will have maximum flexibility to assign an

employee within broad descriptions consistent with the needs of the

organization, and the individual's qualifications and rank or level.

Subsequent assignments to projects, tasks, or functions anywhere within

the organization requiring the same level and area of expertise, and

qualifications would not constitute an assignment outside the scope or

coverage of the current level descriptor. Such assignments within the

coverage of the generic descriptors are accomplished as realignments

and do not constitute a position change. For instance, a technical

expert can be assigned to any project, task, or function requiring

similar technical expertise. Likewise, a manager could be assigned to

manage any similar function or organization consistent with that

individual's qualifications. This flexibility allows a broader latitude

in assignments and further streamlines the administrative process and

system.

e. Broad Bands and Salary Ranges. The basis for the Demonstration

Project pay system is each band level having a basic salary range that

exactly corresponds to salaries of three or more GS grade levels. This

continued linkage with the GS system will result in adjustments to the

salary ranges through future general and locality pay increases under

the General Schedule System. To more closely replicate the salary

overlap found in the current GS system, there is a one grade extended

salary overlap with each lower band for bands II and above. (See Figure

3) The one exception is the band for ST and SL positions (ND VI).

Consistent with law, the pay range for these positions will continue to

be 120% of GS 15/1 salary up to Executive Level IV. The purpose of the

salary overlap is twofold. First, it is to provide pay setting

flexibilities and cost containment opportunities in promotions. This

reduces the instances of non discretionary promotion pay increases of

greater than 6% that may otherwise be required to advance pay to the

lower end of the next higher band level. The second purpose is to

facilitate an assignment back to the next lower level without loss in

pay when appropriate.

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f. Locality Pay and Special Salary Rates. For each band level, the

basic annual rate of pay will be adjusted to reflect the appropriate

locality pay percentage. The maximum salary with locality pay will be

referred to as ``locality pay point''. When the special salary rates

authorized under the GS system exceed the locality pay point, the top

of the applicable band will be extended to the maximum special salary

rate authorized for that series and geographic location. Placement

within this special rate extension will be restricted to employees in a

series covered by that special rate. An employee will be considered a

special rate employee only if his/her basic pay falls within the

extension, i.e., the basic pay exceeds the locality pay point.

Consistent with the intent of locality pay, special salary rate

employees, as defined above, will not be eligible for locality pay

adjustments. When the locality pay point overtakes the employee's rate

of basic pay through general or locality pay increases, the employee

will no longer be considered a special salary rate employee. In this

instance, the employee's total adjusted basic pay will be increased to

the new locality pay point. The employee's new adjusted salary will

then be reallocated into a new basic pay and a locality pay adjustment

rate. Pay retention provisions and adverse action procedures will not

apply to the reallocation of the employee's salary as the employee's

total adjusted salary will remain the same.

g. Pay Administration. The following definitions and policies will

apply to the movement of employees within the Demonstration Project

from one career path or band level to another, or placement in a

Demonstration Project Career Path from the GS, FWS, or other personnel

systems:

Advanced In-Hire Rate: Upon initial appointment, the individual's

pay may be set anywhere within the band level consistent with the

special qualifications of the individual and the unique requirements of

the position. These special qualifications may be in the form of

education, training, experience, or any combination thereof that is

pertinent to the position in which the employee is being placed.

Geographic Movement Within the Demonstration Project: An employee

covered by broad banding who moves to a new duty station in a different

geographic area and continues to be an employee covered by the Warfare

Center Demonstration Project will have his/her pay in the new area

computed as explained below. In all cases, the geographic movement is

processed before any other simultaneous pay action (e.g., promotion,

reassignment, downgrade, change in series, etc.) effective on the same

day.

1. Regular Range Employees. An employee paid at a rate below the

locality pay point for his or her band level will receive no change in

his or her rate of basic pay upon geographic movement. The employee's

locality pay adjustment will be recomputed using the newly applicable

locality pay percentage, which may result in a higher or lower locality

pay adjustment and, thus, a higher or lower adjusted rate (locality

rate or special rate, as applicable). Exception: For employees who

would be eligible for a special rate under the GS system and who are in

the regular range of a band with a special rate extension, the new

adjusted salary following a geographic move may not be less than the

old adjusted salary multiplied by the factor derived by dividing the

new adjusted band maximum by the old adjusted band maximum.

2. Special Rate Extension Employees. For an employee being paid at

a rate in a special rate extension, the new adjusted salary following a

geographic

[[Page 8593]]

move is equal to the old adjusted salary multiplied by the factor

derived by dividing the new adjusted band maximum by the old adjusted

band maximum; however, the new adjusted rate may not be less than the

applicable locality pay point in the new area.

3. Pay Protection Provision. A special pay protection provision

applies to employees who (a) were entitled to a special rate

immediately before conversion into the demonstration project, (b)

continue to meet the GS special rate eligibility conditions, and (c)

are paid at a rate that equals or exceeds the dollar amount of the pre-

conversion special rate. For these employees, the new adjusted rate

following a geographic move may not be less than the dollar amount of

the employee's pre-conversion special rate. Adverse action and pay

retention provisions of Title 5, United States Code, will not apply to

any reduction in basic pay due solely to the operation of the above

rules.

Promotion: Within the Demonstration Project Broad Banding system a

promotion will be defined as the movement of an employee from a lower

to a higher band level in the same career path, or from one career path

to another wherein the band in the new career path has a higher maximum

salary than the band from which the employee is moving.

After the implementation of the Demonstration Project, for an

employee moving from the GS, a promotion will be defined as placement

in a band level which incorporates a GS grade level which is higher

than the employee's current grade.

For an employee moving from the FWS, a promotion will be defined as

placement in the Demonstration Project in a band level where the

representative rate of the highest GS grade covered (i.e. step 04 of

the highest GS grade) is higher than the representative rate of the

employee's current FWS grade (i.e. step 02).

Promotions will follow basic federal merit promotion policy that

provides for competitive and non-competitive promotions. Upon

promotion, an employee will normally receive an increase of six percent

unless a higher increase is necessary to raise the employee's salary to

the minimum salary of the new band. The employee's total adjusted pay

(basic pay and locality pay; if any) will be used in determining the

amount of the promotion increase and in setting the employee's adjusted

pay in the higher band. Decisions not to increase pay or for increases

of other than six percent or to the minimum level of the band must be

approved at the Division level, unless otherwise delegated to lower

levels. In no situation may an employee's salary upon promotion be

established lower than the minimum salary range of the new band.

Factors to be used to help determine the amount of the increase may

include, but are not limited to, the employee's directly related

experience which may be of immediate use in the new position; the

employee's current pay; and the relationship to salaries of other

similarly qualified employees.

Reassignment: For movement within the Demonstration Project Broad

Banding system, a reassignment will be movement to a position covered

by the same band level, or from one career path to another when the

salary range of the new band level and the employee's current band

level remains the same.

For an employee moving from the GS, a reassignment will be defined

as placement in the Demonstration Project in a band level where the

highest GS grade covered is the same as the employee's current GS

grade.

For an employee moving from the FWS, a reassignment will be defined

as placement in the Demonstration Project in a band level where the

representative rate of the highest GS grade covered (i.e., step 04 of

the highest GS grade included in that broad band) is the same as the

representative rate of the employee's current FWS grade.

Demotion or change to lower band level: For movement within the

Demonstration Project Broad Banding system, a demotion will be defined

as the movement of an employee from a higher band to a lower band

within the same career path, or from one career path to another where

the band in the new career path has a lower maximum salary than the

band from which the employee is moving.

For an employee moving from the GS, a demotion will be defined as

placement in the Demonstration Project in a band level where the

highest GS grade covered is lower than the employee's current GS grade.

For employees moving from the FWS, a demotion will be defined as

placement in the Demonstration Project in a band level where the

representative rate of the highest GS grade covered (i.e. step 04 of

the highest grade included in that pay band) is lower than the

representative rate of the employee's current FWS grade.

Salary adjustment: A salary adjustment is defined as an increase in

an employee's base pay (by other than the incentive pay process) within

the employee's current band level to an amount which does not exceed

the top of the band. The salary adjustment may be used to adjust the

pay of individuals who have acquired a level of education that would

otherwise make the employee qualified for an appointment at a higher

level and would be used in lieu of a new appointment. For example, this

authority may be used to adjust the pay of graduate level Cooperative

Education (COOP) students or employees who have obtained an advanced

degree, e.g., Ph.D.

Other: Current provisions for Highest Previous Rate, Pay Retention

(except as otherwise noted), Special Recruitment and Relocation

Bonuses, Retention Allowances and Accelerated Promotions will continue.

The use of OPM's Operating Manual for ``Qualification Standards For

General Schedule Positions'' will continue with minor modifications;

``Band'' will be substituted for ``Grade'' where appropriate and the

time in grade requirement will be eliminated.

2. Performance Development System

The philosophical base of this Demonstration Project is that

employees are valued and trusted and are the organization's most

critical assets. Accordingly, the primary objectives of the

Demonstration Project are to: Develop employees to meet the changing

needs of the organization; to help employees achieve their career

goals; to improve performance in current positions; to retain high

performers, and to improve communication with customers, colleagues,

managers and employees. The system focuses on continuous performance

improvement and minimizes administrative requirements. On-going

dialogue between the employee and supervisor is fundamental to this

development focus, and Performance Development Resources are provided

as part of the system to facilitate this dialogue and assist with

diagnosis of performance issues. The emphasis on continued improvement

is carried over into the process for addressing performance problems.

The proposed system substitutes an early intervention which focuses

immediately on a formal performance plan designed to support the

employee's success. A determination of unacceptable performance is made

only if the employee does not meet the requirements for acceptable

performance detailed in that plan. The following paragraphs describe

the key components of the Performance Development System. Figure 4

depicts the relationship of these components

[[Page 8594]]

and their linkage with the Incentive Pay system.

BILLING CODE 6325-01-P

[GRAPHIC] [TIFF OMITTED] TN25FE97.008

BILLING CODE 6325-01-C

a. Performance Development Resources. At the heart of the

performance development system is the concept of providing

organizational resources to support the development process. While the

design of these resources will be delegated to each Division, they will

typically consist of a pool of people, including union representatives,

who act as a support system to identify or help provide for the needs

of employees and managers in the development process. Current

limitations regarding union involvement in discussions concerning

assigning and directing employees will not prevent the parties within

the Demonstration Project from developing appropriate procedures for

the Performance Development Resources.

The Resources will be available to facilitate communications around

expectations and needs, and help supervisors and employees seek

agreement throughout all aspects of the performance development

process. Should performance problems arise, these resources will be

particularly useful in diagnosing issues impacting performance (e.g.,

employee skills, attitudes and motivation, clarity of job expectations,

systemic issues, access to information and resources, relationships

with co-workers and supervisor, etc.) and identifying options for

addressing these issues (e.g., development opportunities, tools or

equipment to support improved performance, reassignment of the employee

to a position that better matches his/her capabilities and interests,

etc.). They will also make referrals to others who may be helpful, and

identify systemic or organization wide issues which may be affecting

performance.

Supervisors are expected to utilize the Resources for assistance in

preventing and alleviating performance problems. Employees may also use

the resources to assist them in correcting self-identified performance

problems, in development planning to enhance their career opportunities

consistent with the needs of the organization, and to facilitate

communication and feedback with their supervisors, etc.

b. Two Level Rating System. The system employs a two level rating

system: ``acceptable'' and ``unacceptable'' performance. ``Acceptable''

performance is defined as ``performance that fulfills the requirements

for which the position exists.'' An employee's performance may not be

determined ``unacceptable'' unless the employee has been placed on and

failed a performance plan. Employee performance ratings will be

documented annually.

c. Establishing Performance Expectations. Clear, mutually

understood performance expectations that are linked to organizational

goals, strategies and values are fundamental to successful individual

and organizational performance. The outcome of this component of the

Performance Development System is clear communication of the products

and/or services to be delivered by the employee(s), and the success

criteria against which those outputs will be assessed. Documentation of

outputs and success criteria is expected when necessary to facilitate

mutual understanding of performance expectations.

The most effective means of creating a common understanding is

through a process in which the supervisor and

[[Page 8595]]

employee(s) discuss requirements and establish performance goals and

expectations. Employees and supervisors are expected to actively

participate in these discussions to seek clarity regarding expectations

and identify potential obstacles to meeting goals. In addition,

employees should explain (to the extent possible) what they need from

their supervisor to support goal accomplishment. The timing of these

goal setting discussions will vary based on the nature of work

performed, but will occur at least annually. More frequent, task

specific, discussions of expectations may be more appropriate in some

organizations. In cases where work is accomplished by a team, team

discussions regarding goals and expectations may be appropriate;

however, expectations for individual contributions to the team goals

should always be clearly specified. Either the supervisor, the

employee, or the union may enlist the assistance of the Performance

Development Resources to facilitate effective dialogue with regard to

these issues.

Documentation of performance expectations is a helpful mechanism

for ensuring clarity of understanding and providing a focus for later

discussions on progress and developmental needs. As a minimum, formal

documentation of expectations is required when an employee begins a new

or substantially different job. Documentation in other situations is

based on the needs and desires of the employee and supervisor, and may

rely on other existing documentation (e.g., project plans, process

documentation, customer requirements, etc.) No prescribed format is

required for such documentation; the employee and supervisor are

encouraged to seek agreement on what form of documentation will meet

their needs and who will be responsible for producing it. The

assistance of the Performance Development Resources may be enlisted by

either party to support their efforts to reach agreement. In bargaining

units, documentation procedures will be subject to bargaining. Current

limitations regarding union involvement in decisions concerning

assigning and directing employees will not prevent the parties within

the Demonstration Project from developing appropriate procedures for

documenting performance discussions.

d. On-going Performance Dialogue. To facilitate performance

development, employees and supervisors will engage in on-going

dialogue. Ideally this dialogue will occur as part of normal day-to-day

interactions for the purpose of ensuring a common understanding of

expectations, reviewing whether expectations are being met, providing

support in identifying resources or solving problems, providing

coaching on complex or sensitive issues, providing information to

increase the understanding of the project context, and keeping the

supervisor informed of progress. In addition to this on-going

interaction, however, it is expected that periodically a more formal

dialogue will occur focused on reviewing progress, discussing customer

feedback, exploring process improvements that could remove obstacles to

effective performance, and identifying developmental needs to support

continual improvement and career growth. The employee and supervisor

should seek agreement on the frequency and form for both the formal and

informal dialogues to ensure they will meet their needs. Either the

supervisor, the employee or the union may call upon the Performance

Development Resources to facilitate communications or conflict

resolution around these issues. In cases where work is accomplished by

a team, team meetings may be an appropriate forum for some of this

interaction; however, team discussions do not eliminate the need for

the supervisor to have some form of individual dialogue with each

employee.

The expected outcomes from this on-going dialogue component are

plans to support the continuous improvement of individual and

organizational performance. Documentation of these discussions and

resulting plans is encouraged to the extent that it contributes to

clarity of understanding and facilitates later review of progress on

continuous improvement efforts. The nature and content of such

documentation is based on the needs and desires of the employee and

supervisor. No prescribed format is required for such documentation;

the employee and supervisor are encouraged to seek agreement on what

form of documentation will meet their needs and who will be responsible

for producing it. The assistance of the Performance Development

Resources may be enlisted by either party to support their efforts to

reach agreement.

In bargaining units, these procedures are subject to bargaining.

Current limitations regarding union involvement in decisions concerning

assigning and directing employees will not prevent the parties within

the Demonstration Project from developing appropriate procedures for

ongoing performance dialogues and for documenting performance

discussions.

e. Feedback from Multiple Sources. The primary purpose of feedback

in the Performance Development System is to provide employees with

information regarding how well their performance is meeting customer

requirements in order to help the employees continually improve their

performance. The outputs expected from this component are data and

customer feedback which enable review of performance against success

criteria. These data provide input to the review and continuous

performance improvement planning discussed as part of the on-going

dialogue component.

The responsibility for employee development and continuous

improvement is jointly held between the supervisor and employee. They

are expected to work together to identify internal and external

customers and to define and implement a process by which the employee

can regularly receive feedback. A variety of mechanisms may be

appropriate, such as customer surveys, process measures which track

customer requirements, and discussions with customers. Supervisors are

expected to facilitate this process and work with employees to

interpret the feedback and establish improvement goals. Performance

Development Resources may be helpful during this process. Their

assistance may be requested by the supervisor, the employee or the

union. Current limitations regarding union involvement in decisions

concerning assigning and directing employees will not prevent the

parties within the Demonstration Project from developing appropriate

mechanisms and procedures for obtaining feedback from multiple sources.

Managers and supervisors are also expected to obtain feedback from

their customers, including their employees, and to use that feedback as

a basis for establishing both personal and organizational performance

development goals. The use of an anonymous instrument is appropriate

for providing feedback to supervisors and managers on the impact of

their behavior. The use of these instruments will help focus attention

on desired leadership behaviors, structure the feedback in a

constructive manner, and offset the power imbalance that often prevents

supervisors from getting useful feedback from their employees. When

necessary, supervisors and managers may choose to use the Performance

Development Resources to help support their own developmental needs.

f. Performance Plan. When an employee has continued performance

difficulties, the organization will provide a formal Performance Plan

to support the supervisor and employee in resolving the performance

problems.

[[Page 8596]]

Use of the Performance Development Resources will be an integral part

of this effort. Supervisors are expected to call on the Resources for

assistance in preventing or alleviating performance problems before the

need for formal action arises. When there is an indication that

performance is not consistently meeting customer requirements,

supervisors are expected to call on the Resources to analyze the causes

of the difficulty and develop an approach for resolving it. Development

of a formal Performance Plan is indicated if and when it is determined

that the employee's performance (vs. system performance) is a

contributor to the problem and informal intervention has not been

successful in correcting the problem. Use of the Performance

Development Resources is expected throughout the period of the

Performance Plan in an attempt to facilitate a solution to the problem.

The Performance Plan must be written, and will clearly document

organizational expectations for successful job performance, specify

accountability, identify developmental resources to correct any skill

deficiencies, define the time frame of the performance plan, specify

organizational support that will be provided and how performance

results will be monitored. In addition, the Plan will clearly specify

the potential consequences if performance is not acceptable. Periodic

discussions between the supervisor and employee must occur during the

time frame of the Performance Plan to review progress; these

discussions must be documented. Current limitations regarding union

involvement in decisions concerning assigning, directing, removing or

reducing in grade employees will not prevent the parties within the

Demonstration Project from developing appropriate procedures and

documentation in connection with Performance Plans. (Note: Nothing in

this subsection will preclude action under Title 5, United States Code,

Chapter 75, when appropriate.)

g. Accountability for Performance. An employee will be given a

rating of unacceptable only if and when the employee is unable to

successfully complete the Performance Plan. When an employee's

performance is rated as unacceptable, one of four actions will be

taken: (1) removal from the Federal Service, (2) placement in a lower

band level with a corresponding reduction in pay (demotion), (3)

reduction in pay while remaining in the same band level, or (4)

placement in a lower band level with no reduction in pay (demotion).

For the third category of action, the amount of reduction in pay

will be up to, but may not exceed, the maximum amount of incentive pay

(see below) that the employee could be eligible to receive during the

current payout period, i.e., up to the equivalent of 4 continuing pay

points as of the most recent payout cycle. Following the pay reduction,

the objective is to restore performance and pay commensurate with it. A

formal Development Plan will be established to maximize the opportunity

for success in the assignment by clearly identifying performance

expectations and defining a plan to achieve them within an appropriate

time frame, not to exceed 12 months. The activity's Performance

Development Resources will be utilized throughout this process. If and

when performance improves during the period in which the employee is

otherwise ineligible for incentive pay, some or all of the reduced pay

may be restored. Such restoration is not retroactive and is separate

and apart from incentive pay.

For the fourth category of action, the employee may be moved to the

next lower band level provided no loss in pay results and the

employee's pay does not exceed the top of the lower band level. Within

the Demonstration Project, this would not be considered an adverse

action and would not be appealable through a statutory appeals process

except for preference eligible employees. Employees will be provided

with a written notice of the decision and preference eligibles will be

notified of their right to appeal the action to the Merit Systems

Protection Board. Current limitations regarding union involvement in

decisions concerning reducing employees in grade will not prevent the

parties within the Demonstration Project from developing procedures for

the non-adverse reduction in band level. The decision to reduce an

employee to a lower band level with no reduction in pay will be subject

to review under existing grievance or alternative dispute resolution

procedures.

3. Incentive Pay System

The Incentive Pay System provides a mechanism for encouraging and

rewarding performance contributions and other outcomes resulting from

the continuous improvement focus of the performance development system.

Incentive Pay for Employees Covered by Broad Banding: Supervisors

will conduct an annual review of each employee's salary and decide how

total compensation should be adjusted to reflect the employee's

performance contribution to the organization. The adjustment may be

made as a continuing increase to base pay and/or as a one-time cash

bonus to adjust total compensation. The philosophical foundation for

incentive pay is described below:

BILLING CODE 6325-01-P

[[Page 8597]]

[GRAPHIC] [TIFF OMITTED] TN25FE97.009

BILLING CODE 6325-01-C

a. Eligibility. All employees who are making positive performance

contributions as demonstrated by acceptable performance will share in

incentive pay with the amounts and time intervals set by the Divisions

and sites. Employees receiving an unacceptable rating since the last

incentive payout are ineligible for the next incentive pay

consideration.

b. Incentive Pay Pool. Payments under the Incentive Pay System are

made from the incentive pay pool. Within the

[[Page 8598]]

incentive pay pool, there are separate funds for continuing pay

increases and bonus payments. The incentive pay pool is not used to

fund promotions between pay bands. It is also not used to fund general

pay increases, special rate increases, or locality pay increases;

rather, employees will continue to receive any such increases

consistent with other employees outside the demonstration project.

The incentive pay pool will be operated within the parameters of

the overall finance system governing the Warfare Centers. As a Defense

Business Operating Fund (DBOF) activity, the Warfare Centers are 100

percent industrially funded and operate as ``not-for-profit''

competitors within the Department of Defense. Under DBOF, the Centers

are reimbursed for their work by their customers through billings based

on stabilized rates. The assistant Secretary of the Navy for Financial

Management and Comptroller oversees the establishment of these

stabilized rates through reviews of Biannual Financial Management

Budget submissions, which are highly visible at all Command levels.

This funding process imposes a discipline in controlling costs

(including salary expenditures) for the Warfare Centers that is not

present under appropriated funded organizations.

The size of the continuing pay fund is based on appropriate

factors, including the following:

a. historical spending for within-grade increases, quality step

increases, and in-level career promotions (with dynamic adjustments to

account for changes in law or in staffing factors e.g., average

starting salaries and the distribution of employees among job

categories and band levels);

b. labor market conditions and the need to recruit and retain a

skilled workforce to meet the business needs of the organization; and

c. the fiscal condition of the organization.

Given the implications of base pay increases on long-term pay and

benefit costs, the amount of the continuing pay fund will be derived

after a cost analysis with documentation of the mission-driven

rationale for the amount. Any decision to substantially reduce the

amount of funds devoted to continuing pay increases would typically

occur only in lieu of more drastic cost cutting measures (e.g., RIF or

furlough). As part of the evaluation of the project, average salary

(base pay) will be tracked over time using two comparison groups: (1)

the original two Navy Demonstration labs in China Lake and San Diego,

and (2) a comparison group constructed using OPM's Central Personnel

Data File.

The size of the bonus pay fund will be based on appropriate

factors, including the following:

a. historical spending for performance awards, special act awards,

and awards for beneficial suggestions;

b. the organization's fiscal condition and financial strategies;

and

c. employee retention rates.

The decision process for defining the size of the incentive pay

pool and the two funds within that pool will be established at the

Division/site level. The design of the decision process, insofar as it

affects bargaining unit employees, will be subject to collective

bargaining.

d. Delegated Criteria Setting. The criteria and process for

incentive pay will be substantially defined at the Division/site level.

The incentive pay decision may be based on some combination of past,

present and future performance. Examples of criteria may include

criticality of skills, difficulty of position, criticality of position,

individual or team contributions, suggestions for improving system or

organization processes, length and/or quality of experience, current

total compensation, etc. The criteria and process for incentive pay

distribution for bargaining unit employees are subject to collective

bargaining. Current limitations regarding union involvement in

decisions concerning assigning and directing employees will not prevent

the parties from developing the criteria and process for incentive pay

decisions. (Note: The movement of an employee within a band based on

the execution of an incentive pay decision is not a ``classification''

action.)

e. Pay points. The payout process will utilize a point system to

distribute incentive pay increases. A maximum of four (4) points will

be available, thus each employee performing in an acceptable manner

will be eligible to receive 0,1,2,3 or 4 pay points in the form of

continuing pay, bonus pay or some combination.

For FWS employees, cash awards continue to be available under the

existing Incentive Awards system based on performance and special acts.

f. Communication and Documentation. It is important that employees

understand what is expected in order to receive a pay increase.

Supervisors will interpret organizational criteria for their employees

to clarify how it applies to their work and have periodic assessment

discussions with employees to prevent surprise decisions at the time of

payout. These assessment discussions should normally be held separately

from performance development dialogues. Supervisors and employees are

encouraged to seek agreement on their documentation needs. In addition,

supervisors are expected to document their payout recommendation

decisions and to discuss their decision rationale with employees. In

bargaining units, documentation procedures will be subject to

bargaining. Current limitations regarding union involvement in

decisions concerning assigning and directing employees will not prevent

the parties from developing documentation procedures for the

communication and documentation of incentive pay discussions and

decisions.

g. Reconsideration of Incentive Pay Decisions. Employees will have

the opportunity for a reconsideration of incentive pay decisions. While

the specific purpose of the reconsideration is to address employee

concerns about such decisions, the process is also intended to

facilitate communication and understanding between employees and

supervisors/managers concerning performance contributions and their

impact on pay decisions. In addition, the process seeks to identify

possible systemic problems that need to be addressed. In that regard,

reconsideration is considered a positive and integral component of an

effective incentive pay system by providing a mechanism to support

continuous improvement. Accordingly, employees will not be discouraged

from requesting reconsideration. Neither will they be subjected to

reprisal or stigma. The specific process for reconsideration will be

defined at the Division/site level. Current limitations regarding union

involvement in decisions concerning assigning and directing employees

will not prevent the parties from developing procedures for the

reconsideration of incentive pay decisions. That process will include,

but will not necessarily be limited to, the following characteristics:

It should be administratively streamlined; provide expedited

resolution; maintain appropriate confidentiality; be fair and

impartial; address assertions of harmful error involving issues of

process and procedure; and ensure that management payout decisions

reflect reasonableness in judgment in evaluating applicable criteria.

h. Guidance on Managing Incentive Pay. Each Division is expected to

develop policies and criteria to guide the implementation of the

incentive pay system which are consistent with their mission,

strategies and organizational values, and supportive of the Naval Sea

Systems Command and Warfare Center

[[Page 8599]]

strategic plans. Some Divisions may rely on individual management

judgment based on general guidance, while other Divisions may define a

more mechanical process based on highly objective criteria. Additional

guidance may be provided by major organizational components (e.g.,

departments or directorates) to tailor or interpret the command-level

criteria for their specific mission and strategies. Each major

organizational component will have authority to manage the incentive

pay allocation derived from the salaries of employees in that

component. Departments/Directorates may further delegate authority to

manage a prorated portion of the fund to the next lower echelon.

Supervisors and managers within the unit will be assessing the nature

of each employee's contribution, consistent with the organization's

policy and criteria as reflected in the written guidance. They will

then make recommendations to a second level reviewer regarding the

number of pay points to be awarded to each employee (i.e., 0 to 4

points) and the nature of incentive pay (i.e., continuing pay and/or

bonus pay). Decisions regarding approval/disapproval of recommendations

will be made at the organizational level to which authority has been

delegated to manage the pay pool; typically this will be the second or

third level reviewer. In cases where work is accomplished by a team,

the team members may be involved in formulating the recommendation for

distribution of incentive pay.

4. Reduction in Force (RIF)

Flexible and responsive alternatives are needed to restructure an

organization in a short period of time. The current RIF system is

complicated, costly, and relatively unresponsive to the needs of the

organization.

The proposed RIF system will have a single round of competition to

replace the current ``two round'' process. Once the position to be

abolished has been identified, the incumbent of that position may

``displace'' another employee when the incumbent has a higher retention

standing and is fully qualified for the position occupied by the

employee with a lower standing. Retention standing is based on tenure,

veteran's preference, length of service, and performance. However,

there will be no augmented service credit based on performance ratings.

An employee rated as unacceptable during the 12 month period preceding

the effective date of a RIF may only displace an employee rated

unacceptable during that same period. The same ``undue disruption''

standard currently utilized will serve as the criteria to determine if

an employee is fully qualified. The displaced individual may similarly

displace other employees. If/when there is no position in which an

employee can be placed by this process or assigned to a vacant

position, that employee will be separated.

Displacement is limited to one broad band level below the

employee's present level. A preference eligible employee with a

compensable service connected disability of 30 percent or more may

displace up to two broad band levels (or the equivalent of five General

Schedule grades) below the employee's present level. Employees not

covered by broad banding (FWS), may ``displace'' up to three grades/

intervals (five grades/intervals for preference eligibles with a

service connected disability of 30 percent or more).

The new system will eliminate retained grade but will preserve

retained pay.

All positions included in the Demonstration Project within an

activity at a specific geographic location will be considered a

separate competitive area.

5. Competitive Examining and Distinguished Scholastic Appointments

The Warfare Center needs a process which will allow for the rapid

filling of vacancies, is less labor intensive, and is responsive to our

needs. Restructuring the examining process and providing an authority

to appoint candidates meeting distinguished scholastic achievements

will help achieve these goals. When a Division implements the

Demonstration Project for some portion of their workforce, this

component may be available for all occupations. This will eliminate the

imposition of multiple examining and appointment systems on the public

and will strengthen efficiencies gained under the Demonstration

Project. To further minimize resource requirements and the complexities

inherent in administering two different sets of examining and hiring

processes, this component may also be applied to GS and FWS positions

in activities for which the Warfare Center Divisions provide human

resource services.

a. Delegated Examining Authority. The Warfare Centers propose to

demonstrate a streamlined examining process for both permanent and non-

permanent positions. This authority will be further delegated to the

Division level. This authority will apply to all positions with

exception of positions in the Senior Executive Service, to Senior Level

(ST/SL) positions, to the Executive Assignment System or positions of

Administrative Law Judge. This authority will include the coordination

of recruitment and public notices, the administration of the examining

process, the administration of veteran's preference, the certification

of candidates, and selection and appointment consistent with merit

principles.

b. Description of Examining Process: The primary change in the

examining process to be demonstrated is the grouping of eligible

candidates into three Quality Groups using numerical scores and the

elimination of consideration according to the ``rule of three''.

For each candidate, minimum qualifications will be determined using

OPM's Operating Manual for ``Qualification Standards For General

Schedule Positions''/''Job Qualification Systems For Trades and Labor

Occupations (Handbook X-118C)'' including any selective placement

factors identified for the position. Candidates who meet basic

(minimum) qualifications will be further evaluated based on knowledge,

skills and abilities which are directly linked to the position(s) to be

filled. Based on this assessment, candidates will receive a numerical

score of 70, 80, or 90. No intermediate scores will be granted except

for those eligibles who are entitled to veterans preference. Preference

eligibles meeting basic (minimum) qualifications will receive an

additional 5 or 10 points (depending on their preference eligibility)

which is added to the minimum scores identified above. Candidates will

be placed in one of three quality groups based on their numerical

score, including any veterans preference points: Basically Qualified

(score of 70 and above), Highly Qualified (score of 80 and above), or

Superior (score of 90 and above). The names of preference eligibles

shall be entered ahead of others having the same numerical.

For scientific/engineering and professional positions at the

equivalent of GS-9 and above, candidates will be referred by quality

groups in the order of the numerical ratings, including any veterans

preference points. For all other positions, i.e., other than

scientific/engineering and professional positions at the equivalent of

GS-9 and above, preference eligibles with a compensable service-

connected disability of 10 percent or more who meet basic (minimum)

eligibility will be listed at the top of the highest group certified.

In selecting the top candidate, selecting officials should be

provided with a reasonable number of qualified candidates from which to

choose. All candidates in the highest group will be

[[Page 8600]]

certified. If there is an insufficient number of candidates in the

highest group, candidates in the next lower group may be certified in

rank order. When two or more groups are certified, candidates will be

identified by quality group (i.e., Superior, Highly Qualified,

Basically Qualified) in the order of their numerical scores. In making

selections, to pass over any preference eligible(s) to select a

nonpreference eligible requires approval under current pass over or

objection procedures.

c. Distinguished Scholastic Achievement Appointment: The Warfare

Centers further propose to establish a Distinguished Scholastic

Achievement Appointment using an alternative examining process which

provides the authority to appoint undergraduates and graduates through

the doctoral level who meet basic eligibility as determined by using

OPM's Operating Manual for ``Qualification Standards For General

Schedule Positions'' plus any previously established selective

placement factors, if applicable and the following scholastic

standards:

3.5 grade-point average (GPA) or above on a 4.0 scale for

required courses in the major field of study, or for all course work;

or

graduated in the top 10% of their graduating class.

At the undergraduate level, the GPA may be based on 4 years of

education or on those courses completed during the final 2 years of the

curriculum.

Veterans preference procedures will apply when selecting candidates

under this authority. Preference eligibles who meet the above criteria

will be considered ahead of nonpreference eligibles. In making

selections, to pass over any preference eligible(s) to select a

nonpreference eligible requires approval under current objection

procedures.

This authority allows for the competitive appointment to positions

at the equivalent of GS-7 through GS-11, and GS-12 for positions

involved in research. Distinguished Scholastic Achievement Appointments

will enable the Warfare Centers to respond quickly to hiring needs with

eminently qualified candidates possessing distinguished scholastic

achievements.

C. Project Implementation

While many of the basic elements of each component of the project

will be implemented uniformly at all sites through policies established

at the Warfare Center level, a number of policies, procedures, or

processes will be delegated to the Division and/or site levels. This

permits the system to be operationally defined, within a Warfare Center

directed framework, to fit the culture and needs of the local

organizations. In bargaining units, the project will be implemented

only after there is full agreement through the collective bargaining

process.

D. Entry Into and Exit From the Project

1. Initial Conversion of Current Workforce. For the most part,

current GS/GM employees will be converted automatically from their

current grades to the appropriate career paths and band levels.

However, the Warfare Centers consider it essential to the success of

the project that employees, upon entering the project, feel that they

are not losing a pay entitlement accrued under the GS system.

Accordingly, current employees of the Warfare Centers will be ``made

whole'' through a one year ``buy-in'' period. On the day of conversion,

employees typically will receive base pay increases for prorated step

increase equivalents. Employees at the 10th step are not eligible for

the increase. Further, during the first 12 months following conversion,

employees will receive pay increases for non-competitive promotion

equivalents when the grade level of the promotion is encompassed within

the same band, the employee's performance warrants the promotion and

promotions would have otherwise occurred during that period. Employees

who receive an in-level promotion at the time of conversion will not

receive a prorated step increase equivalent.

Additionally, in many cases, employees who are today covered by a

local or national special salary rate will no longer be considered a

special rate employee under the Demonstration Project and will thus

gain eligibility for full locality pay. To control conversion costs and

to avoid a salary increase windfall for these employees, the adjusted

salaries of these employees will not change. Rather, the employees will

receive a new basic pay rate computed by dividing their adjusted basic

pay by the locality pay factor for their area. A full locality

adjustment will then be added to the new basic pay rate. Adverse action

and pay retention provisions will not apply to the conversion process

as there will be no change in total salary.

2. New and Transfer Employees. New hires, including employees

transferring from other Federal activities, will be converted into the

Demonstration Project in the career path and at the level and pay

consistent with the duties and responsibilities of the position and

individual qualifications.

3. Exit From the Demonstration Project. Employees who leave the

Demonstration Project broad banding system to accept federal employment

in the traditional Civil Service system will have their pay set by the

gaining activity. To assist activities in setting pay and in

determining whether such placement constitutes a promotion,

reassignment, or change to lower grade, the employee's band and salary

level will be converted to a General Schedule equivalent grade prior to

leaving the Demonstration Project in the following manner:

Employees who exit the Demonstration Project will be tentatively

converted to a GS grade most comparable to the employee's current

Demonstration Project level and salary. In instances where the current

salary is in the area between two overlapping GS grades within the same

level, the converted grade is either (1) the higher of the two

overlapping GS grades if the current salary meets or exceeds Step 4 of

the higher GS grade, or (2) the lower of the overlapping grades if the

current salary is less than Step 4 of the higher GS grade. In those

instances where the current salary falls below the established GS

salary range for the lowest GS grade covered by that Demonstration

Project band level, the converted grade is the lowest GS grade level in

that band. In those situations where an employee has not been promoted

or placed in a lower pay band while covered by the Demonstration

Project, the employee will be converted at a level which is no lower

than the GS grade held immediately prior to entering the Demo project.

This converted GS grade is the GS equivalent grade and is not

necessarily the grade the employee will have upon transfer or

reassignment outside the Demonstration Project.

An employee's pay within the converted GS grade is set by

converting the demonstration project adjusted rate of pay to a rate on

the highest applicable adjusted rate range for the converted GS grade

(including locality rates and special rates, as applicable). For

example, if the highest applicable adjusted rate range under the GS pay

system for a particular employee is a special rate range, the adjusted

project rate (locality rate or special rate) is converted to the lowest

special rate in that range that equals or exceeds the project rate;

from this converted special rate, the employee's unadjusted GS rate and

locality rate would be derived. This pay conversion is done before

processing any geographic movement or other pay-related action

coinciding with the employee's conversion out of the demonstration

project.

When an employee transfers to another activity, the employee's

rating

[[Page 8601]]

of record will be transferred. When the gaining activity uses other

than a two level performance system, the employee may be provided a

supplementary performance assessment using the gaining organizations

appraisal criteria. If the employee requests such an appraisal, the

employee will be responsible for providing the criteria to the

supervisor for completion. Gaining organizations are not bound to use

this supplementary performance appraisal in any formal actions.

E. Project Duration

The initial implementation period for the Project will be five

years. At that time, the entire demonstration project will be

reexamined to determine whether to continue, modify or terminate the

Project.

IV Evaluation Plan

Chapter 47 (Title 5 U.S.C.) requires that an evaluation system be

implemented to measure the effectiveness of the proposed personnel

management interventions. An evaluation plan for the entire laboratory

demonstration program covering 24 DOD labs was developed by a joint

OPM/DOD Evaluation Committee. A Comprehensive evaluation plan was

submitted to the Office of Defense Research & Engineering in 1995 and

subsequently approved. (Proposed Plan for Evaluation of the Department

of Defense S&T Laboratory Demonstration Program, Office of Merit

Systems Oversight & Effectiveness, June 1995). The overall evaluation

effort will be coordinated and conducted by OPM's Personnel Resources

and Development Center(PRDC). The primary focus of the evaluation is to

determine whether the waivers granted result in a more effective

personnel system than the current as well as an assessment of the costs

associated with the new system.

The present personnel system with its many rigid rules and

regulations is generally perceived as an impediment to mission

accomplishment. The Demonstration Project is intended to remove some of

those barriers and therefore, is expected to contribute to improved

organizational performance. While it is not possible to prove a direct

causal link between intermediate and ultimate outcomes (improved

personnel system performance and improved organizational

effectiveness), such a linkage is hypothesized and data will be

collected and tracked for both types of outcome variables.

An intervention impact model (Appendix B) will be used to measure

the effectiveness of the various personnel system changes or

interventions. Additional measures will be developed as new

interventions are introduced or existing interventions modified

consistent with expected effects. Measures may also be deleted when

appropriate. Activity specific measures may also be developed to

accommodate specific needs or interests which are locally unique.

The evaluation model for the Demonstration Project identifies

elements critical to an evaluation of the effectiveness of the

interventions. The overall evaluation approach will also include

consideration of contact variables that are likely to have an impact on

project outcomes: e.g., HRM regionalization, downsizing, cross-service

integration, and the general state of the economy. However, the main

focus of the evaluation will be on intermediate outcomes, i.e., the

results of specific personnel system changes which are expected to

improve human resources management. The ultimate outcomes are defined

as improved organizational effectiveness, mission accomplishment and

customer satisfaction.

Data from a variety of different sources will be used in the

evaluation. Information from existing management information systems

supplemented with perceptual data will be used to assess variables

related to effectiveness. Multiple methods provide more than one

perspective on how the demonstration project is working. Information

gathered through one method will be used to validate information

gathered through another. Confidence in the findings will increase as

they are substantiated by the different collection methods. The

following types of data will be collected as part of the evaluation:

(1) Workforce data; (2) personnel office data; (3) employee attitudes

and feedback using surveys, structured interviews and focus groups; (4)

local activity histories; (5) core measures of laboratory

effectiveness.

V. Waivers of Law and Regulation

A. Waivers to Title 5, United States Code

Chapter 33, Section 3317(a): Competitive service, certification from

register (in so far as ``rule of three'' is eliminated under the

Demonstration project).

Chapter 33, Section 3318(a): In so far as ``rule of three'' is

eliminated under the Demonstration project.

Chapter 43, Section 4301: Definitions

Chapter 43, Section 4302: Establishment of performance appraisal

systems.

Chapter 43, Section 4303: Modified to the extent that an employee may

be removed, reduced in band level with a reduction in pay, reduced in

pay without a reduction in band level or reduced in band level without

a reduction in pay based on unacceptable performance. For employees who

are reduced in band level without a reduction in pay, Sections 4303(b)

and 4303(e) do not apply.

Chapter 43, Section 4303(b)(1)(A)(ii): Requirement for critical

elements.

Chapter 51, Section 5101-5111: Purpose, definitions, basis,

classification of positions, review, authority--To the extent that

white collar employees will be covered by broad banding. Pay category

determination criteria for Federal Wage System positions remain

unchanged.

Chapter 53, Section 5301; 5302(1), (8), and (9); Section 5303; and

Section 5304: Pay Comparability System. (To the extent necessary to

allow Demonstration project employees covered by broad banding to be

treated as General Schedule employees and to allow basic rates of pay

under the Demonstration project to be treated as scheduled rates of

basic pay.) (This waiver does not apply to Federal Wage System (FWS)

employees. This waiver does not apply to SL/ST employees who continue

to be covered by these positions, as appropriate.)

Section 404 of the Federal Employees Pay Comparability Act of 1990 (PL

101-509): Special Pay Adjustments for Law Enforcement Officers in

Selected Cities. (To the extent necessary to allow law enforcement

officers under the demonstration project to be treated as law

enforcement officers under the General Schedule.)

Chapter 53, Section 5305: Special Pay Authority. (This waiver does not

apply to FWS employees.)

Chapter 53, Sections 5331-5336: General Schedule Pay Rates.

Chapter 53, Section 5362: Grade Retention.

Chapter 53, Section 5363: Pay Retention. (Only to the extent necessary

to provide that pay retention does not apply to--(1) conversions from

General Schedule special rates to Demonstration project pay and

reallocations of Demonstration project pay rates within special rate

extensions to locality adjusted pay rates due to promotions or general

or locality pay increases, as long as the employee's total rate of pay

is not reduced; and (2) reductions in basic pay due solely to the

operation of the pay setting

[[Page 8602]]

rules for geographic movement within the Demonstration Project.)

Chapter 55, Section 5545(d): Hazardous Duty Differential. ( Only to the

extent necessary to allow Demonstration project employees covered by

broad banding to be treated as General Schedule employees.) (This

waiver does not apply to FWS and SL/ST employees.)

Chapter 57, Sections 5753, 5754, and 5755: Recruitment; Relocation

Bonuses; Retention Allowances; Supervisory Differentials: (Only to the

extent necessary to allow employees and positions under the

Demonstration project covered by broad banding to be treated as

employees and positions under the General Schedule.) (This waiver does

not apply to FWS employees. This waiver does not apply to SL/ST

employees who continue to be covered by these provisions, as

appropriate.)

Chapter 59, Section 5941: Allowances based on living costs and

conditions of environment; employees stationed outside continental

United States or Alaska (Only to the extent necessary to provide that

COLA's paid to employees under the demonstration project are paid in

accordance with regulations prescribed by the President (as delegated

to OPM)). (This waiver does not apply to FWS employees. This waiver

does not apply to SL/ST employees who continue to be covered by these

provisions, as appropriate.)

Chapter 71, Section 7106(a)(2): In so far as provision on assigning and

directing, documenting performance discussions, Performance Development

Resources, Performance Plans, criteria and process for incentive pay,

and communication and documentation requirements for incentive pay and

reconsideration of incentive pay decisions; and, in so far as provision

on reducing employees in grade may prevent the parties from negotiating

procedures for non-adverse assignment of employees to a lower pay band.

Chapter 71, Section 7119(b)(1): In so far as provision for either party

to request impasse proceedings would be contrary to provisions of the

Demonstration project.

Chapter 75, Section 7512(3): To the extent necessary to exclude

reductions in band level not accompanied by a reduction in pay taken

under Chapter 43.

Chapter 75, Section 7512(4): Adverse Action. (Only to the extent

necessary to provide that adverse action provisions do not apply to--

(1) conversions from General Schedule special rates to Demonstration

project pay and reallocations of Demonstration project pay rates within

special rate extensions to locality adjusted pay rates due to

promotions or general or locality pay increases, as long as the

employee's total rate of pay is not reduced; and (2) reductions in

basic pay due solely to the operation of the pay setting rules for

geographic movement within the demonstration project.)

B. Waivers to Title 5, Code of Federal Regulations

Part 300, Sections 300.601 through .605: Time in grade restrictions are

eliminated in the Demonstration project.

Part 332, Section 332.401(b): Only to the extent that for non-

professional or scientific positions equivalent to GS-9 and above,

preference eligibles with a compensable service-connected disability of

10 percent or more who meet basic (minimum) qualification requirements

will be entered at the top of the highest group certified without the

need for further assessment.

Part 332, Section 332.402: ``Rule of three'' will not be used in the

Demonstration project.

Part 332, Section 332.404: Order of selection is not limited to highest

three eligibles.

Part 351, Section 351.402(b): Competitive area to the extent that the

Demonstration project will be a separate competitive area within the

activity.

Part 351, Sections 351.403(a) and (b): Competitive levels to the extent

that there is no requirement for the establishment of competitive

levels in the Demonstration project.

Part 351, Section 351.404(a) and (b): Retention register to the extent

that the requirement to establish separate retention registers by

competitive level is eliminated.

Part 351, Section 351.501(a)(3): For order of retention, delete ``as

augmented by credit for performance under Section 351.504.

Part 351, Section 351.504: Credit for performance to the extent that

the Demonstration project eliminates service credit for performance.

Part 351, Section 351.601 through .608: References to competitive

levels are eliminated.

Part 351, Section 351.701(b) and (c) Assignment rights (bump and

retreat). To the extent that the distinction between bump and retreat

is elimininated and the placement of ``white collar'' Demonstration

Project employees is restricted to no more than one broad band level

below the employee's current level, except that for a preference

eligible with a compensable service connected disability of 30 percent

or more, the limit is two broad band levels (or the equivalent of five

General Schedule grades) below the employee's present level.''

Part 430, Subpart B: Performance appraisal for General Schedule,

Prevailing Rate and certain other employees: Employees under the

Demonstration project will not be subject to the requirements of this

subpart.

Part 432: Modified to the extent that an employee may be removed,

reduced in band level with a reduction in pay, reduced in pay without a

reduction in band level and reduced in band level without a reduction

in pay based on unacceptable performance. Also modified to delete

referenced to critical element. For employees who are reduced in band

level without a reduction in pay, Sections 432.105 and 432.106(a) do

not apply, except that such sections continue to apply to preference

eligible employees.

Part 432, Section 432.104 and .105: Proposing and Taking Action Based

on Unacceptable Performance: In so far as references to ``critical

elements'' are deleted and adding that the employee may be ``reduced in

grade or pay or removed'' if performance does not improve to acceptable

levels after a reasonable opportunity. In addition, requirements waived

to the extent that a reduction in band level is taken based on skill

utilization criteria when there is no reduction in pay.

Part 511, Section 511.201: Coverage of and exclusions from the General

Schedule. (To the extent that White Collar positions are covered by

broad banding. Pay category determination criteria for Federal Wage

System positions remain unchanged.)

Part 511, Section 511.601: Classification appeals--modified to the

extent that white collar positions established under 5 U.S.C. 4703,

although specifically excluded from Title 5, are covered by the

classification appeal process outlined in this section, as amended

below.

Part 511, Section 511.603(a): Right to appeal--substitute ``band'' for

grade.

Part 511, Section 511.607(b): Non Appealable Issues--add to the list of

issues which are neither appealable nor reviewable, ``the assignment of

series under 5 U.S.C. 4703 to appropriate career paths.''

[[Page 8603]]

Part 530, Subpart C: Special Salary Rates.

Part 531, Subparts B, D, and E: Determining The Rate of Basic Pay,

Within-Grade Increases, and Quality Step Increases.

Part 531, Subpart C and F: Special Pay Adjustments for Law Enforcement

Officers and Locality-Based Comparability Payments. (Only to the extent

necessary to allow Demonstration Project employees covered by broad

banding to be treated as General Schedule employees and to allow basic

rates of pay under the demonstration project to be treated as scheduled

annual rates of pay.) (This waiver does not apply to FWS employees.

This waiver does not apply to SL/ST employees who continue to be

covered by these provisions, as appropriate.)

Part 536: All provisions pertaining to grade retention.

Part 536, Section 536.104: Pay Retention. (Only to the extent necessary

to provide that pay retention does not apply to--(1) conversions from

General Schedule special rates to Demonstration project pay and

reallocations of Demonstration project pay rates within special rate

extensions to locality adjusted pay rates due to promotions or general

or locality pay increases, as long as the employee's total rate of pay

is not reduced; and (2) reductions in basic pay due solely to the

operation of the pay setting rules for geographic movement within the

Demonstration Project.)

Part 550, Section 550.703: Severance Pay. (Modify the definition of

``reasonable offer'' by replacing ``two grade or pay levels'' with

``one band level'' and ``grade or pay level'' with ``band level''.)

(This waiver does not apply to FWS employees.)

Part 550, Section 550.902, definition of ``employee'': Hazardous Duty

Pay. (Only to the extent necessary to treat demonstration project

employees covered by broad banding as General Schedule employees.)

(This waiver does not apply to FWS and SL/ST employees.)

Part 575, Subparts A, B, C, and D: Recruitment Bonuses, Relocation

Bonuses, Retention Allowances, and Supervisory Differentials. (Only to

the extent necessary to allow employees and positions under the

demonstration project covered by broad banding to be treated as

employees and positions under the General Schedule.) (This waiver does

not apply to FWS employees. This waiver does not apply to SL/ST

employees who continue to be covered by these provisions, as

appropriate.)

Part 591, Subpart B: Cost-of-Living Allowances and Post Differential-

Nonforeign Areas. (To the extent necessary to allow demonstration

project employees covered by broad banding to be treated as employees

under the General Schedule.) (This waiver does not apply to FWS

employees. This waiver does not apply to SL/ST employees who continue

to be covered by these provisions, as appropriate.)

Part 752: Section 752.401(a)(3): To the extent necessary to exclude

reductions in band level not accompanied by a reduction in pay taken

under Chapter 43.

Part 752: Section 752.401(a)(4): Adverse Action. (Only to the extent

necessary to provide that adverse action provisions do not apply to--

(1) conversions from General Schedule special rates to Demonstration

project pay and reallocations of Demonstration project pay rates within

special rate extensions to locality adjusted pay rates due to

promotions or general or locality pay increases, as long as the

employee's total rate of pay is not reduced; and (2) reductions in

basic pay due solely to the operation of the pay setting rules for

geographic movement within the demonstration project.)

VI. Cost

The goal of this Demonstration Project is the implementation of a

system in which payroll costs and resource utilization can be

controlled consistent with the organization's larger fiscal strategies.

This is especially critical in our industrially funded (DBOF)

environment. The continued economic viability of the DBOF activities

depends in large measure on controlling expenditures and remaining cost

competitive with other organizations. This Demonstration Project

proposes a system of pay incentives and processes that are flexible and

can operate in harmony with the organization's operational needs and

the financial needs of the larger organization. The costs of project

implementation will be borne by the Divisions/sites.

Costs associated with the development of the Demonstration project

include software automation, training and project evaluation. All

funding will be provided through the Warfare Centers budget. Training

costs will be approximately $192K per thousand employees. The timing of

the expenditure will be site specific and dependent upon the

implementation schedules. Because automation requirements will be

minimized as a result of system similarities to existing Navy

Demonstration Projects, costs are estimated at $100K for the first two

years of project implementation. Evaluation costs are estimated at

approximately $60K per year.

VII. Project Oversight and Management

Project oversight and management will be carried out by the Warfare

Center's Executive Group, composed of the Commanders and Technical

Directors of the two Warfare Centers. They will be assisted by the

Demonstration Project Management Office and the Steering Committee.

(See Figure 5)

The Steering Committee, chaired by a senior executive or senior

Navy officer appointed by the Executive Group, is comprised of a senior

member of each Division of the Warfare Centers, and a member from the

American Federation of Government Employees, Metal Trades Council,

International Association of Machinists, National Association of

Government Employees, National Federation of Federal Employees, and

Fraternal Order of Police. This group serves as an advisory body to the

Executive Group which makes final decisions on the Demonstration

Project proposal and implementation. The role of the Steering Committee

is to aggregate and analyze incoming data from formal and informal

evaluations and make recommendations. It may also include facilitating

information sharing, mediating impasses, and promotion of partnership

roles.

BILLING CODE 6325-01-P

[[Page 8604]]

[GRAPHIC] [TIFF OMITTED] TN25FE97.010

BILLING CODE G325-01-C

Appendix A: Employee/Union Involvement Methodology

From the inception of the Naval Sea Systems Command Warfare

Centers' Personnel Demonstration Project, employee involvement in

crafting the Project Proposal was viewed as essential to producing a

plan that considered the needs of all parties. National union

representatives participated as members of the Steering Committee which

developed the Personnel Demonstration Project Proposal and will be

overseeing its implementation. While the process that produced the

Project Proposal was a collaborative one, union participation did not

necessarily constitute full and complete endorsement of all details of

the Proposal.

At the Warfare Centers' various Divisions and sites, employees and

unions are involved through a variety of communications strategies.

Within the Divisions, communications teams composed of a cross section

of the workforce have been formed for the purpose of disseminating

information about the project as well as a focal point for employee

questions. Further, Divisions are establishing groups or committees to

help guide the implementation of the Project throughout the

organization. This model of broad participation is envisioned to

continue throughout the life of the Demonstration Project.

Unions Represented

Dahlgren, VA--American Federation of Government Employees

White Oak, MD--American Federation of Government Employees; Metal

Trades Council

Panama City, FL--National Federation of Federal Employees

Crane, IN--American Federation of Government Employees; Fraternal Order

of Police

Louisville, KY--International Association of Machinists & Aerospace

Workers

Carderock, MD--Metal Trades Council; Federal Firefighters Association;

Pattern Maker Association

Annapolis, MD--National Federation of Federal Employees

Philadelphia, PA--Metal Trades Council; Fraternal Order of Police;

International Association of Firefighters

Ft. Lauderdale, FL--American Federation of Government Employees

Port Hueneme, CA--National Association of Government Employees; Federal

Union of Scientists and Engineers

Indian Head, MD--American Federation of Government Employees;

International Association of Firefighters; International Association of

Machinists and Aerospace Workers

McAlester, OK--American Federation of Government Employees

Keyport, WA--Metal Trades Council

Newport, RI--National Association of Government Employees; Federal

Union of Scientists and Engineers

New London, CT--National Association of Government Employees

Appendix B: Project Evaluation and Oversight

Intervention Impact Model--DOD Lab Demonstration Program

1. Compensation

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

Intervention Expected effects Measures Data sources

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

a. Broad banding..................... --Increased --Perceived flexibility --Attitude survey.

organizational

flexibility.

--Reduced --Actual perceived time --Personnel office

administrative savings. data, PME results,

workload, paperwork attitude survey.

reduction.

--Advanced in-hire --Starting salaries of --Workforce data.

rates. banded v. non-banded

employees.

[[Page 8605]]

--Slower pay --Progression of new --Workforce data.

progression at entry hires over time by

levels. band, career path.

--Increased pay --Mean salaries by --Workforce data.

potential. band, career path,

demographics.

--Increased --Employee perceptions --Attitude survey.

satisfaction with of advancement.

advancement.

--Increased pay --Pay satisfaction, --Attitude survey.

satisfaction. internal/external

equity.

--Improved recruitment. --Offer/acceptance --Personnel office

ratios--Percent data.

declinations.

--No change in high --Number/percentage of --Workforce data.

grade (GS-14) high grade salaries

distribution. pre/post banding.

b. Conversion buy-in................. --Employee acceptance.. --Employee perceptions --Attitude survey.

of equity, fairness.

--Cost as a percent of --Workforce data.

payroll.

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

2. Performance Management

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

Intervention Expected benefits Measures Data sources

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

a. Cash awards/bonuses............... --Reward/motivate --Perceived --Attitude survey.

performance. motivational power.

--To support fair and --Amount and number of --Workforce data.

appropriate awards by career path,

distribution of awards. demographics.

--Perceived fairness of --Attitude survey.

awards.

--Satisfaction with --Attitude survey.

monetary awards.

b. Performance/contribution based pay --Increased pay- --Perceived pay- --Attitude survey.

progression. performance link. performance link.

--Perceived fairness of --Attitude survey.

ratings.

--Improved performance --Satisfaction with --Attitude survey.

feedback. ratings.

--Employee trust in --Attitude survey.

supervisors.

--Adequacy of --Attitude survey.

performance feedback.

--Decreased turnover of --Turnover by --Workforce data.

high performers; performance rating

increased turnover of category.

low performers.

--Differential pay --Pay progression by --Workforce data.

progression of high/ performance rating

low performers. category, career path.

--Alignment of --Linkage of --Performance

organizational and performance expectations,

individual performance expectations to strategic plans;

expectations and strategic plans/goals; attitude survey/focus

results. performance groups.

expectations;

perceived involvement.

--Increased employee --Performance --Attitude survey/focus

involvement in management procedures. groups; personnel

performance planning regulations.

and assessment.

c. New appraisal process............. --Reduced --Employee and --Attitude survey.

administrative burden. supervisor perception

of revised procedures.

--Improved --Perceived fairness of --Focus group.

communication. process.

d. Performance development........... --Better communication --Feedback and coaching --Focus groups.

of performance procedures used.

expectations.

--Improved satisfaction --Organizational --Attitude surveys.

and quality of commitment.

workforce.

--Perceived workforce --Attitude survey.

quality.

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3. ``White Collar'' Classification

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Intervention Expected effects Measures Data sources

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

a. Improved classification systems --Reduction in amount --Time savings; --Personnel office

with generic standards. of time and paper-work reduction of paper data.

spent on work/number of

classification. personnel actions

(classification/

promotions).

--Ease of use.......... --Managers' perceptions --Attitude survey.

of time savings, ease

of use, improved

ability to recruit.

--Improved recruitment --Perceived quality of --Focus groups/

of employees with recruits. Interviews.

appropriate skills.

--GPA's of new hires, --Personnel office

education levels. data.

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b. Classification authority delegated --Increased supervisory --Perceived authority.. --Attitude survey.

to managers. authority/

accountability.

--Decreased conflict --Number of --Personnel records.

between management and classification

personnel staff. disputes/appeals pre/

post.

--Management --Attitude survey.

satisfaction with

service provided by

personnel office.

--No negative impact on --Internal pay equity.. --Attitude survey.

internal pay equity.

c. Dual career ladder................ --Increased flexibility --Assignment --Focus groups,

to assign employees. flexibility. surveys.

--Sup/non-sup ratios... --Workforce data.

--Improved internal --Perceived internal --Attitude survey.

mobility. mobility.

--Increased pay equity. --Perceived pay equity. --Attitude survey.

--Flatter organization. --Supervisory/non- --Workforce data.

supervisory ratios.

--Improved quality of --Employee perceptions --Attitude survey.

supervisory staff. of quality of

supervisors.

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4. Staffing/Recruitment

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

Intervention Expected benefits Measures Data

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

Competitive examining and categorical --Improved hiring --Management --Attitude survey.

grouping. process. satisfaction with

hiring process, time

to hire, perceived

quality of new hires.

--increased quality of --GPA's of new hires, --Personnel office data

hires. education levels. (from issue of Form 52

to referral of

candidates).

--Increased timeliness. --Time to fill --Attitude survey.

positions.

--No negative impact on --Candidate/employee

fairness of process, satisfaction.

openness to

competition.

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5. RIF

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Intervention Expected effects Measures Data sources

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

Modified RIF......................... --Prevent loss of high --Separated employees --Workforce data;

performing employees by demographics, attitude survey/focus

with needed skills. performance. groups.

--Contain cost and --Satisfaction with RIF --Attitude survey/focus

disruption. process. groups.

--Cost comparisons of --Rightsizing and

traditional v. documenting systems/

modified RIF; time to personnel office/

conduct RIF; number of budget data.

appeals/reinstatements.

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6. Combination of All Interventions

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

Intervention Expected effects Measures Data sources

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

All.................................. --Improved --Combination of --All data sources.

organizational personnel measures.

effectiveness.

--Improved management --Employee/management --Attitude survey.

of R&D workforce. satisfaction.

--Improved planning.... --Planning procedures.. --Strategic planning

documents.

--Improved cross --Perceived --Attitude survey;

functional effectiveness of organizational charts.

coordination. planning procedures.

--Actual/perceived --Attitude survey.

coordination.

--Increased product --Customer satisfaction --Customer satisfaction

success. surveys.

--Cost of innovation... --Project training/ --Demo project office

development cost records; contract

(staff salaries, documents.

contract cost,

Training hours per

employee).

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[[Page 8607]]

7. Context

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Intervention Expected effects Measures Data sources

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

a. Regionalization................... --Reduced servicing --HR servicing ratios.. --Attitude survey.

ratios/cost.

--No negative impact on --Average cost per --Workforce data.

service quality. employee served.

--Service quality, --Attitude survey/

timeliness. focus groups.

b. GPRA.............................. --Improved --Other measures to be --As established.

organizational developed.

performance.

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[FR Doc. 97-4761 Filed 2-21-97; 1:08 pm]

BILLING CODE 6325-01-P