U.S. Naval Research Laboratory (NRL) Personnel Management Demonstration Project; Department of the Navy (DON), Washington, DC

SUMMARY: Title VI of the Civil Service Reform Act, 5 U.S.C. 4703,

authorized the Office of Personnel Management (OPM) to conduct

demonstration projects that experiment with new and different personnel

management concepts to determine whether such changes in personnel

policy or procedures would result in improved Federal personnel

management. Section 342 of the National Defense Authorization Act for

Fiscal Year 1995 (Pub. L. 103-337, October 5, 1994) permits the

Department of Defense (DoD), with the approval of the OPM, to carry out

personnel demonstration projects at DoD laboratories designated as

Science and Technology (S&T) Demonstration Project Reinvention

Laboratories. The NRL was designated as one of these laboratories. This

notice establishes the personnel management demonstration project

designed by NRL, with the participation of, review by, and approval of

the DON, the DoD, and the OPM.

DATES: Implementation of this demonstration project will begin no

earlier than 90 days after the date of congressional notification.

FOR FURTHER INFORMATION CONTACT: NRL: Ms. Betty A. Duffield, Director,

Strategic Workforce Planning, Code 1001.2, 4555 Overlook Avenue, SW,

Washington, DC 20375-5320, 202-767-3421. OPM: Mr. John Andre, Office of

Merit Systems Oversight and Effectiveness, Demonstration Project Team,

U.S. Office of Personnel Management, 1900 E Street, NW, Room 7460,

Washington, DC 20415-6000, 202-606-1255.

SUPPLEMENTARY INFORMATION:

1. Background

Title VI of the Civil Service Reform Act, 5 U.S.C. 4703, authorized

OPM to conduct demonstration projects that experiment with new and

different personnel management concepts to determine whether such

changes in personnel policy or procedures would result in improved

Federal personnel management. Section 342 of the National Defense

Authorization Act for Fiscal Year 1995 (Pub. L. 103-337, October 5,

1994) permits the DoD, with the approval of the OPM, to carry out

personnel demonstration projects at DoD laboratories designated as S&T

Demonstration Project Reinvention Laboratories. The NRL was designated

as one of these laboratories.

The purpose of the NRL project is to demonstrate a flexible and

responsive personnel system that will enhance the Laboratory's ability

to attract, retain, and motivate a high-quality workforce. To this end,

the project involves:

(1) Streamlined hiring processes,

(2) Broadbanding,

(3) Simplified position classification,

(4) A Contribution-based Compensation System (CCS),

(5) extended probationary period for new employees, and

(6) modified reduction-in-force (RIF) procedures.

2. Overview

On February 23, 1999, OPM published the proposed demonstration

project in the Federal Register, Volume 64, No. 35, Part III, pages

8964 through 9027. During the public comment period ending April 9,

1999, OPM received comments from seventeen individuals, including two

who presented oral comments at a public hearing held on March 25, 1999.

All comments were carefully considered.

A few of the commenters made statements concerning or suggested

changes to areas that lie outside the project's scope or the

demonstration project authority of 5 U.S.C. Chapter 47. These comments

are not included in the summary below. Most of the commenters raised

questions to clarify the philosophical and procedural aspects of the

innovations. In many instances, these comments are more suitably

addressed in internal guidance and are not included in the summary

below. Several acknowledged that the demonstration did have benefits in

many areas. The following summary addresses the comments received

appropriate for the Federal Register, provides responses, and notes

resultant changes to the original project plan in the first Federal

Register Notice. Most commenters addressed several topics which are

counted separately. Thus, the total number of comments exceeds the

number of individuals cited earlier.

A. Positive Comments

Five commenters were generally supportive of the demonstration.

They saw its various features as beneficial to employees, managers, and

the Laboratory. Specific innovations cited included improvements in

personnel practices such as streamlined hiring processes, simplified

position classification, paybanding, compensation based on contribution

to the organization, pay pool panel review of contribution assessments

to better assure fairness and accuracy, and better alignment of

responsibility, authority, and accountability.

B. General Project Comments

(1) Comment: Two commenters addressed the necessity of implementing

a demonstration project for NRL considering that the studies cited to

evidence the need for change were conducted in the 1980's; that NRL has

been able to attract and retain a highly-qualified motivated workforce;

and that a ``revenue neutral'' plan could not improve overall

performance of an above-average organization and could only provide

more money for top contributors by providing less money to others.

Response: There have been three recent studies (which confirm the

findings in 100+ reports issued over the last 30 years) addressing

science and engineering salary shortfall, especially for entry-level

and senior personnel and those in high-demand disciplines; excessive

recruitment delays resulting in loss of top tiered, highly sought after

candidates; and inadequate workforce reshaping tools. These studies

are: Naval Research Advisory Committee, ``Report on the Department of

the Navy Science and Technology Base,'' 1996; FY-98 Defense

Authorization Act, Section 912(c) ``Technology Leaders'' Working Group

Reports, February 1999; and A Report from a Panel of the National

Academy of Public Administration, ``Naval Research Laboratory: Position

Management Analysis,'' March 1999.

Regarding the ``revenue neutral'' aspects of demonstration

projects, NRL has always followed a practice of cost containment being

an industrially-funded activity. NRL will try to maintain the

demonstration as relatively cost neutral to the degree it can be

measured given productivity increases, the effect of workforce

reshaping, and other such circumstances.

The demonstration project provides that high contributors should be

rewarded more than low contributors as it should be. By combining

within grade increases (WGI's), quality step increases (QSI's), and

career promotion increases into one merit increase fund, this provides

the supervisors the flexibility and means to assign all permanent basic

pay increases based on the actual level of contributions made to the

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organization's mission, not merely longevity or a combination of

longevity and performance.

C. Employee Participation

(1) Comment: Two commenters requested clarifying information

regarding bargaining unit employee and union participation in the

demonstration process.

Response: During the initial design phase, the union representative

elected from NRL's bargaining units served on the Staffing Design Team.

He attended the staffing design team meetings, participated in

discussion of proposed human resource design initiatives, provided

recommendations, and voted on the version he felt most beneficial to

the Laboratory when several options were on the table. He also served

on one of the subcommittees. Also, during development of the proposed

design, the decision was made that NRL would not include the guard and

trade and craft occupations within the demonstration project. Since

NRL's bargaining units are within these occupations, NRL has not

negotiated any inclusion. NRL determined that potential inclusion would

be better negotiated once actual experience had been gained with

proposed initiatives. Unions have been kept informed of the progress of

the demonstration efforts as well as any potential impact it may have

on bargaining unit employees.

(2) Comment: One commenter argues that NRL has failed to meet

statutory requirements to consult with employees who will be covered

under the demonstration.

Response: In addition to including approximately 60 employees on

the initial design teams, NRL consulted with NRL employees in the

following ways:

--Met with each NRL division head to brief the initial demonstration

proposal. This resulted in substantial changes to the proposed RIF

process.

--Prepared and distributed an Employee Briefing Handbook for all NRL

employees.

--Conducted a series of briefings in 1996 to which all NRL employees

were invited (approximately 1,600, over 50 percent attended). During

the early stages of project development, published several articles in

NRL publications provided to all employees.

--Conducted trials of CCS in 1995 and 1996, each involving 9 to 10 NRL

divisions. Significant changes were made to CCS based on the feedback

from those involved in these trials, including reduction in the number

of critical elements to reduce redundancy and better reflect the

balance of different types of NRL work.

--In the last 2 years as the structure of the project has solidified,

NRL has continued to communicate regularly with the workforce about the

project. Articles have been written in lab-wide publications, a web

site established, supervisory training provided, and briefings given to

employees in many NRL divisions.

In all of the above instances, employees were encouraged to provide

comments and suggestions, and were given phone numbers, e-mail and mail

addresses of individuals to whom they could comment. In addition, input

from employees and supervisors continues to mold details of the project

in terms of how the automation and standard operating procedures will

be developed to best assist and support the operation of the project.

D. Accessions and Internal Placements

(1) Comment: Three individuals stated that the hiring of non-

citizens should not be allowed.

Response: The goal of the NRL is to locate, hire, and retain the

best qualified employees to accomplish the esoteric and highly

technical research performed at the Laboratory. In order to attract and

hire top notch scientists and engineers and to satisfy merit

principles, the NRL advertises most of its science and engineering

positions, many times on a nationwide basis, using paid advertisement

in major newspapers and scientific journals. In some cases, the

advertisement yields only one qualified candidate who is, on occasion,

a non-citizen. The Federal government gives strong priority to hiring

U.S. citizens and nationals, but allows for hiring of non-citizens in

certain circumstances if the requirements of the following are met:

immigration law; appropriations act ban on paying certain non-citizens;

and executive order restriction on appointing non-citizens in the

competitive service. If agencies find no qualified citizens available

to fill a competitive service position, and if they meet all of the

requirements of the appropriations ban and immigration rules, they may

hire a non-citizen under an excepted appointment. It is only under

these circumstances that the NRL hires non-citizens. Non-citizens have

historically contributed to U.S. military research in very significant

ways.

(2) Comment: One commenter requested clarification of NRL's

maintained pay provision and the reasons for exceptions to this

provision, particularly the exception relating to the DoD Priority

Placement Program (PPP).

Response: Although participation of all covered employees is

mandatory, acceptance of the new system is essential for the success of

the project. For this reason, the NRL provided a ``grandfather'' clause

for NRL employees on retained grade and pay immediately prior to

implementation of the project by providing indefinite maintained pay

entitlement if their rate of basic pay exceeds the maximum rate for

their career level. However, if these same employees are in a RIF

situation after the demonstration project is implemented, they will be

subject to the demonstration project maintained pay rules while

employed by NRL under the demonstration.

The PPP is the Defense Department's job assistance program for

employees who are facing separation or demotion as a result of a RIF.

Individuals placed through the PPP in lower-graded positions, unless

otherwise ineligible, are entitled by law to retain their grade for a

2-year period or are entitled to indefinite pay retention.

Notwithstanding the requirements of the NRL proposal as it affects its

current employees, longstanding DoD policy has been to protect an

employee's grade or pay to the maximum extent permitted by law. The

NRL's exception to the maintained pay provision as it affects PPP

placements affords this statutory entitlement. The same pay protection

will be afforded NRL employees at the time they are affected by a RIF

and are placed in non-NRL-demonstration positions.

(3) Comment: One commenter requested clarification as to whether

employees who are failing to contribute enough to justify their

existing pay can contribute enough to justify a promotion.

Response: Regarding whether an overcompensated employee may be

promoted, overcompensation would typically suggest that an employee

should not be promoted from his or her current position because he or

she is not contributing at a level that justifies his or her current

salary under the demonstration system. However, there may be

circumstances under which an overcompensated employee would be an

appropriate selectee for a vacancy even into a higher career level. For

example, the new position might be in a different career field in which

the employee had previously been successful. In addition, employees on

maintained pay who are in a career level lower than their target career

level, could receive a CCS promotion up to their target career level.

(4) Comment: One commenter expressed concern that the plan denies

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placement rights to employees in RIF Assessment Category 0

(overcompensated employees who do not receive any portion of a general

increase) even though these employees may be satisfactory performers.

Response: NRL agrees with the commenter. It is not NRL's intent to

penalize satisfactory performers in a RIF situation. The plan does have

a mechanism in place to identify unsatisfactory performers. Thus, only

those employees who have been identified as unsatisfactory performers

will be denied RIF assignment rights.

(5) Comment: One commenter suggested that the conversion plan for

movement to a position outside the demonstration project should be

simplified.

Response: NRL is required to use the standardized conversion plan

the OPM developed for all activities under a demonstration project.

(6) Comment: One commenter requested clarification of why the date

of the last equivalent pay increase is based on eligibility for a pay

raise rather than for actual receipt of a pay raise.

Response: The date of the last equivalent increase is used to

determine an employee's date of eligibility for a within-grade increase

should they return to a position under the traditional General Schedule

(GS) pay system. Unlike the GS pay system, the CCS system does not have

a predetermined equivalent increase dollar amount. Under the CCS, an

employee could receive a pay increase of $0 up to 20 percent (or more

with the Director of Research approval) of their basic pay. Thus, it is

reasonable to consider date of eligibility for a pay raise as the date

of last equivalent increase.

(7) Comment: One commenter questioned whether rating and ranking

would occur under the project when rating and ranking is limited to

those instances when more than 15 candidates apply.

Response: The plan calls for rating and ranking to be done when

there are more than 15 qualified applicants and/or qualified preference

eligibles. Being able to refer up to 15 qualified applicants without

rating and ranking allows the manager a broader pool of applicants from

which to select which is one of the key objectives of this initiative,

i.e., to give the manager the broadest possible range of qualified

candidates from which to choose. Moreover, under the traditional

system, it is conceivable to have 15 qualified applicants with the same

score after the rating and ranking process. When this happens, we are

required to use a tie-breaking method to determine the order in which

candidates are listed on the referral certificate and the rule of three

governs, i.e., selection must be from the top three candidates and a

nonpreference applicant may not be selected over a preference eligible

applicant. Thus, under the traditional system, it can be argued that

equally qualified candidates are not given an equal opportunity to

compete for selection.

E. Compensation

(1) Comment: One commenter suggested that Reductions in Pay owing

to ``Serious Medical Problem or Injury'' should be obviated by

``Reasonable Accommodation.''

Response: Although NRL attemps to accommodate employees with

medical impairments in their position of record, this is not always

feasible. There are circumstances in which a change to a lower level

position is an appropriate way to resolve a situation of medical

inability to perform the original job. Such actions are properly taken

under 5 CFR Chapter 752.

(2) Comment: Two commenters addressed the use of a single action to

consolidate various types of pay actions. One commenter felt this could

be done without the need to implement CCS and the other commenter was

concerned that the different types of pay actions and deductions would

not be visible to employees.

Response: The single pay action is not connected to the CCS but to

the annual determination of total compensation. The demonstration

project consolidates the various compensation decisions currently made

at various times during a year into a decision made on an annual basis.

(By law, GS WGI's are tied to individual employee service accrual.) As

far as visibility of pay actions, each employee will receive a Notice

of Personnel Action, SF-50, that will describe the general increase,

merit increase, locality pay, award and/or allowance situation.

Deductions from salary for health insurance, etc., are reported to

employees through the biweekly leave and earnings statement issued by

the Defense Finance and Accounting Service.

(3) Comment: Three commenters raised questions regarding how NRL

would use market references to establish pay under the demonstration

project.

Response: NRL managers and supervisors will reference market salary

data when making personnel and organizational decisions. As part of the

CCS process, managers and supervisors will refer to the market salary

data to determine if the proposed salary for an individual is

comparable to similar work in the marketplace. In addition, top

management may be able to use market salary data as a factor in

determining the appropriate budget allocation for the merit increase

category for each NRL pay pool. The time after degree (or work

experience) of the workforce may be able to be factored into the

decision process, using the market salary data. As part of the position

management process, managers and supervisors will also consult market

salary data to assist in determining the appropriate Career Level for a

proposed new position. It is NRL's goal to create and maintain a

position and organizational structure that is effective, efficient, and

competitive with similar organizations in private industry and

academia.

(4) Comment: Three commenters raised various issues regarding the

operation of the Distinguished Contributions Allowance (DCA). Two

commenters indicated that the DCA would not be administered in a

uniform fashion particularly if an employee leaves; one other

questioned the calculation to fund the DCA pool, asking why this quite

generous bonus system is only available to such a limited number of

employees.

Response: Before discussing the Distinguished Contributions

Allowance, there is some philosophy that needs to be pointed out. It is

intended that supervisors and managers utilize fully the base salary

ranges of the career levels and merit increases to move employees

through the career levels as their level of work and contributions grow

to their target career levels or the top of their assigned level. In

addition, contribution, time-off, and special act awards are mechanisms

by which highly deserving employees can be rewarded and recognized for

work accomplished. The Distinguished Contributions Allowance, on the

other hand, is designed to provide compensation for those professional

employees who have attained the highest levels of their career fields;

and because of high grade billet constraints or pay band salary

limitations, NRL cannot adequately compensate them (in light of

industry standards) for the superior, higher level of work (above their

current career level) they are performing and are expected to perform

over the next one to three years (S&E Professional Career Track

employees could receive an extension up to two years for a total of

five years). The DCA is not a part of basic salary; it is not a bonus

or award; and the budget allocation for payment of a DCA is separate

and apart from the other four

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pay categories under the demonstration project.

An employee receiving a DCA is required to sign a memorandum of

understanding because the DCA is a temporary allowance for higher-level

work yet to be performed. If the employee leaves NRL, the DCA would be

terminated because the terms of the DCA would no longer be met (i.e.,

an allocation for contributions made here at NRL). If an employee is no

longer performing work at the higher career level; or is no longer

working on a special project (which was recognized as the reason for

allocating a DCA), the DCA would be terminated. One is only eligible to

receive this allocation as long as the terms of the DCA are being met.

If the employee is not meeting the terms of the DCA, it may be

terminated. This action is not grievable or appealable.

Regarding the funding of the DCA, it was decided that in order to

provide a meaningful allowance for the high level of work expected, NRL

would need the flexibility to set allowances along a continuum up to 25

percent of basic pay. Since the DCA would be reserved for those who had

reached the top of their career levels, it was decided to take a

snapshot of the current population to determine how many employees were

at this level and what their total annual basic salaries were. Using

various percentages of the total annual basic salaries and what the

charge would be (depending on the percentage) to establish the budget

allocation for DCA's, it was determined that a percentage never greater

than 10% of the total annual basic salaries of eligible employees on a

given date would establish the DCA budget allocation. For information

purposes, there were 334 employees at the top of their career levels on

the date of the calculation who would be eligible for DCA

consideration. This is about 11 percent of the NRL workforce.

The DCA budget allocation was established as never greater than 10

percent of the total annual basic salaries of eligible employees. It

was felt that this allocation would provide a pool of funds that could

be used to better compensate extremely high-level contributors when

their contributions are expected to continue for a short period of time

and existing methods do not adequately compensate them (in light of

industry standards). The approval of DCA's rests with the Director of

Research who can incorporate a global perspective to the level of

contributions and allowances being granted. In addition, this

initiative will be evaluated as part of the normal demonstration

project evaluation process.

(5) Comment: One commenter asked why all references to pay

throughout the plan are given in ``basic pay'' without inclusion of

locality-based adjustments.

Response: Basic pay is used throughout the plan because it is

constant, i.e., it does not vary by locality pay area. It is the rate

used government-wide to compute pay actions for employees paid under

the General Schedule pay system before locality pay is applied. Basic

pay, locality pay, and total salary are recorded separately on the

employee's Notification of Personnel Action (SF 50) under the current

system. This will not change under the demonstration project. Since the

information provided the employee concerning pay under the project will

be the same as the information provided under the current system, the

wording in the project should not present a problem to employees.

(6) Comment: One commenter stated that the rules NRL will establish

relating to severance pay for separated employees should be currently

available for review as part of the demonstration process public

comment period.

Response: The commenter is referring to the criteria NRL will need

to define in order to make a reasonable job offer that parallels that

now offered under Title 5 in a reduction-in-force situation. This level

of detail is generally found in the internal operating documents.

(7) Comment: One commenter suggested that NRL should explain

whether, under the process to convert special salary rate employees to

the demonstration project, there are any combinations of factors that

could result in an employee being assigned into a lower equivalent

grade.

Response: The special salary rate conversion process explains that

GS employees will be moved into the career track and career level which

corresponds to their current GS grade and basic pay. Paragraph VI.A.4

further explains that if the new basic pay rate after conversion to the

demonstration project pay schedule exceeds the maximum basic pay

authorized for the career level, the employee will be granted

maintained pay.

(8) Comment: One commenter stated that NRL should clarify whether

in VI.A.4. example, step b., the digit ``1'' in the factor ``1.0787''

is an error.

Response: 1.0787 is correct. To increase an existing quantity (in

this case 1.00 for basic salary) by a percentage (in this case .0787

for DC locality pay), and retain the existing quantity (1.00 for basic

salary), it is proper to multiply by one, plus the percentage to be

increased times the original amount. To increase basic salary by the

additional amount of locality pay (for DC), it is therefore proper to

multiply 1.0787 times the salary. This is so that the original amount

of pay is kept, with the percentage of locality pay added. (This is

equivalent to salary+.0787*salary; 1.0787*basic salary is a simple

operation.)

(9) Comment: Three questions were received on how the 2.4% merit

pay allocation would be distributed among the pay pools.

Response: The method(s) to be used to distribute funds among the

various pay pools will be defined in the NRL Demonstration Standard

Operating Procedures so they may be easily modified throughout the life

of the demonstration without having to publish a new Federal Register.

The actual methodology that will be used for initial implementation of

the demonstration is still being determined. During the life of the

demonstration the distribution of funds and the method(s) to determine

that distribution can be modified as experience dictates. Within the

funds available to a pay pool, the pay pool manager can distribute

funds among occupational, organizational, or other groups.

F. Classification

(1) Comment: One commenter requested detailed information on the

``pending position management study.''

Response: The National Academy of Public Administration Center for

Human Resources Management issued its position management analysis

report for NRL in March 1999. The information gained from this report

will be considered and addressed in appropriate internal operating

guidelines on position management.

(2) Comment: One commenter stated that NRL should articulate the

rationale and equality of applying different high grade constraints to

administrative and technical occupations.

Response: In developing the career tracks and levels for the

demonstration project, an analysis was made of the career progression

of employees under the traditional classification system. It was found

that the science and engineering professionals in the research

divisions actually have a normal career progression to the non-

supervisory ``journeyman'' level of GS-13. Therefore, under the

demonstration, GS-13 was included in the target career level, with no

interim competition or higher-level approval required. At the GS-14 and

15 levels, however, the DoD issues high-grade controls which limit the

number of positions NRL may have

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at these levels and the competition for these billets is keen. In

addition, these positions are beyond the normal progression for the

majority of S&E professionals and many of them are supervisory. Thus,

the GS-14 and 15 positions were combined into one career level. The

Director of Research maintains approval authority over these positions

because of their limited number and because these are the positions

from which many of the senior managers for NRL are chosen.

In the Administrative Specialist and Professional Career Track, the

career progression for employees is generally to the GS-12 level. This

is considered the non-supervisory, ``journeyman'' level for the vast

majority of positions covered by this career track. The GS-13 level is

normally the supervisory level and forms the applicant pool for filling

the senior managerial positions in this career track. While this level

is not considered a high-grade level for DoD high-grade controls, it

does constitute NRL's pool of applicants for the senior administrative

managerial positions and requires Director of Research approval for

movement into this level just as for the S&E Professional Career Track

level that constitutes the pool of applicants for senior S&E managerial

positions. Just as the GS-14 and 15 S&E professional career level is

under the DoD high-grade controls, so is the GS-14 and 15

administrative specialist and professional career level; and the

Director of Research approval is required for movement into this career

level.

(3) Comment: One commenter asked if there were no longer controls

on movement to the top career level in the Administrative Support

Career Track.

Response: Every position at NRL will be assigned a target career

level which is the top level to which an incumbent can progress without

further competition and Position Management Officer approval. These

target career levels vary by occupation and sometimes by position

within an occupation and serve as a control just as the current full

performance level of a position serves as a control.

(4) Comment: Two commenters requested clarification on the Advanced

Research Scientists and Engineers, Career Level V of the S&E

Professional Career Track. Specifically, one asked why this was a DoD

Program and both asked how many positions would be allocated to NRL.

Response: All but one of the current S&T reinvention demonstration

project laboratories requested a Level V or equivalent for their S&T

professional career track. Since this level would place employees in

two of the DoD components in positions equivalent to executive

positions which are tightly controlled, the DoD determined that this

new category of executive resources should be limited until it could be

tested over a 5-year period. Therefore, DoD allocated a total of 40

positions DoD-wide. It is up to NRL (as well as other affected

demonstration projects) to submit requests to DoD for approval of these

positions. DoD has not made specific number allocations to each

demonstration project. It is our understanding that DoD will be

allocating these positions based on merit. Therefore, NRL does not know

how many positions will be approved.

G. CCS Appraisal Process

A total of fifteen commenters provided over forty comments on the

CCS appraisal process. Two commenters praised the process. One believed

CCS had the potential to significantly improve productivity and morale

at NRL, and the second commenter was looking forward to CCS with

optimism. Other comments are related to ten subtopics as follows:

(1) Comments: CCS Complexity: Two commenters believed the system to

be too complicated. One commenter, who did not believe the system was

overly complicated, pointed out that it was based on the current GS

grade and step system.

Response: Any new appraisal system requires a ``learning curve.''

NRL has worked to reduce this by training supervisors (including a pay

pool panel exercise), and by encouraging and supporting trials of CCS

within many NRL pay pools over several years. In addition, NRL

conducted a series of briefings in 1996 to which all NRL employees were

invited (over 50 percent attended), published articles in NRL

publications, provided a handbook to all employees, made available a

videotape and training materials to those seeking more information,

established a demonstration project web site, conducted additional

supervisor and employee briefings in 1998 and 1999, and developed a

question and answer guide for frequently asked questions. NRL plans to

continue its efforts until managers are satisfied with their

understanding of the program.

(2) Comments: Longevity: Five commenters noted that CCS eliminates

salary growth based on longevity. Two were pleased with this approach.

Three viewed this as a negative feature of CCS or at least as having a

potential negative impact on employees transitioning into the

demonstration. Two commenters pointed out that within CCS, a higher

contribution was expected from employees at the 10th step of their

grade as compared to employees at the first step. One suggested an

approach that would convert GS grades to the CCS system in a manner

that would minimize the impact on employees transitioning into the

demonstration and retain the effect of rewarding longevity.

Response: This suggestion was not adopted. It is true that CCS does

not reward longevity, but neither is it designed to penalize longevity.

It is a contribution to organizational mission assessment system,

designed to pay employees for the level of work which they are

contributing to the mission. Since a step 10 pay level in any GS grade

is approximately 30 percent higher than the same grade's step 1 pay

level, it is reasonable to expect a higher level or higher quality

contribution from the higher paid employee.

(3) Comments: Score and Salary Caps: Four commenters expressed

concern about the CCS scoring and the resulting salary implications.

Three of the commenters believed that if they are currently being paid

at the top of their career level, they must score beyond their level in

order not to be considered overcompensated and lose their annual

inflation increase. The fourth commenter was concerned that the score

cap of 80 created a negative psychological impact for those employees

who are paid at the GS-15, step 10 level, since the maximum score

places the employee at the top of their normal pay range which creates

the appearance of the employee being almost overpaid. This commenter

suggested a change to the pay and score line which would allow

employees at the GS-15, step 10 level, access to a few scores above 80.

Response: Three of the commenters apparently misunderstood the

scoring process. Scores within each level encompass the salary spread

of the GS-grades banded together for that level. The highest score

within each level has a salary equivalent that includes the salary of

the top step of the highest GS grade contained in the band. Therefore,

an employee earning a salary at the top of his or her band will not be

considered overcompensated if he or she earns the top score within the

band. All employees who score within their normal pay range will be

granted the annual general increase. Even for employees who score below

their normal pay range and are determined to be overcompensated, denial

of the general increase is not automatic, but is at the discretion of

the pay pool manager.

[[Page 33975]]

The commenter's suggestion for changing the pay line is not

adopted. NRL believes it is necessary to cap the score at 80 to protect

the efficacy and integrity of job or pay classification of NRL

positions. NRL recognizes the effect on employees at the GS-15, step 10

level, i.e., the score of 80 brings employees paid at this level near

the overcompensated range. However, the benefits of protecting the

process outweigh any negative psychological impact the capped scoring

may create. Further, such negative impact may be overcome through

education of the process. The actual monetary impact for employees is

no different from the current system where the awards program is used

to distinguish performance among the employees at the top of their

career level. Also, under CCS, these employees may be eligible

(depending upon their performance and contribution level) for a

Distinguished Contributions Allowance (DCA).

(4) Comments: General Increase Pay: Two commenters believed that

placing the general increase pay at risk by including it in the merit

pool would help to more fairly compensate NRL employees. Five

additional commenters opposed inclusion. One believed that no other

demonstration project included the general increase and that any denial

of general increase is an adverse action that requires a finding of

unsatisfactory performance. Another commenter believed that denial of

general increases with its potential for employees to regress into a

lower career level could create the problem of appealable actions

becoming non-appealable actions.

Response: Several demonstration projects that include denial of

general increase have already been approved and implemented. Such

denials do not constitute an adverse action under 5 CFR Part 432 or

Part 752. NRL considers this to be an important and valuable component

of its demonstration project; therefore, no change is made to eliminate

this provision.

(5) Comment: Yearly Accomplishment Report (YAR): One commenter

stated that mandatory YAR's may not be necessary for all positions at

NRL and suggested several other alternatives which would limit this

requirement.

Response: NRL agrees with the commenter's point and has made a

change that will allow pay pool managers to exempt groups of positions

from the requirement to submit a YAR, and to allow employees to submit

YAR's at their own option in cases where they are not required.

(6) Comment: Contribution Awards: One commenter wanted

clarification on when a contribution award would be granted to an

employee who was in the normal pay range (and therefore already fully

compensated) and when an award would be granted to an overcompensated

employee. The same commenter also questioned the reasoning behind

allowing overcompensated employees on maintained pay to receive awards

and not allowing awards to otherwise overcompensated employees.

Response: Contribution awards may be based on many aspects of

contributions, including quality, productivity, value to a sponsor,

etc., and need not be based solely on the employee's degree of

undercompensation. Employees in the normal pay range may do an

outstanding job that deserves recognition but not necessarily a higher

permanent pay. The project grants pay pool managers and panel members

the authority to determine the factors they will consider in granting

contribution awards, much the same as the authority exists in the

present system.

Overcompensated employees on maintained pay are eligible for

contribution awards since they are employees displaced from their

original positions unrelated to their own levels of performance or

contribution. These employees may be in positions where they do not

have access to higher level work equivalent to their maintained pay yet

they are outstanding performers in the level of work available to them.

Therefore, they should be allowed the opportunity to be recognized for

such performance in the new position, even if it is at a lower pay

level than the one from which they were displaced.

(7) Comments: Fairness: Eight commenters stated several concerns

about the equitable application of CCS elements. Some thought the

system was too subjective and favoritism would drive the process. Some

believed equitable consideration would not be given to research

employees working primarily off-site (with non-NRL sponsors or in long-

term training). Some expressed concern that more credit would be given

to scientific than support personnel. One questioned what would prevent

managers from inverting the process, i.e., allowing budgets to dictate

appraisals. One commenter was also concerned about the difference in

the sizes of the pay pool and two commenters thought that the panel

makeup would be a conflict of interest for supervisors competing for

the same funds as their subordinates. Three commenters discussed the

360 degree performance evaluation plan; one commented that CCS was

contrary to this philosophy as well as other enlightened philosophies.

The other two commenters strongly recommended using such a process in

connection with CCS.

Response: NRL recognizes the subjective nature of CCS appraisals.

By and large, NRL employees are not ``widget makers.'' Meaningful

assessment demands consideration of quality, value, customer service

and other criteria that are subjective by nature. To reduce favoritism

and promote fairness, the CCS process provides for review of employee

assessments by a group of supervisory officials who are in the same

pool. In the pay pool panel process scores assigned by individual

supervisors are reviewed by other supervisors in the same pay pool. The

supervisors work to apply the CCS level descriptors consistently within

their pay pool, and to identify and correct any inappropriately

inflated or deflated scores. The pay pool manager is a further review

and ultimate approval level.

CCS contains various mechanisms to ensure employees receive proper

credit under the generic elements, descriptors, and discriminators.

Critical elements may be weighted, supplemental criteria can be used to

identify actual work employees are responsible for carrying out, and

discriminators may be considered either separately or in a more

integrated manner for groups of employees. Flexibility was deemed

necessary for individual divisions to tailor the system to their

special needs. Supervisors will continue to determine the value of

employees' accomplishments when assessing their contributions. Work

valued under the current system will likely continue to be valued under

CCS. The CCS elements and level descriptors specifically include

expectations regarding sponsor/customer service to recognize the

importance of this value at NRL. In addition, supervisors and employees

will be encouraged to communicate throughout the appraisal period to

avoid misunderstandings at the end of the year.

Supervisors have always been free to solicit feedback from sponsors

and other customers to consider in employee appraisals. This will

continue to be an option under CCS. However, a formal program providing

for 360 degree evaluations has not currently been implemented. NRL may

consider some type of 360 degree evaluation pilot in the future and

will outline any such plan in the standard operating procedures.

Most pay pools will consist of all employees within an NRL

division;

[[Page 33976]]

standard operating procedures will identify the pay pools more

specifically. A few pay pools, as presently planned, will include fewer

than the recommended 35 employees. These pools will consist of about 25

employees each. NRL believes that keeping employees in the same

supervisory chain together for comparison purposes outweighs the

disadvantage of a smaller pool. Panels are made up of supervisors or

managers from the division. While NRL recognizes the possible

appearance of a conflict of interest, the risk is deemed minimal since

pay pool managers have ultimate approval over appraisal and pay

decisions. In addition, pay pool panel members and managers must be

able to explain any unusual findings to a third party evaluator who

will be monitoring compensation trends.

(8) Comments: Team work: Three commenters raised concerns that CCS

might serve as a disincentive for scientific collaboration and team

work as employees compete for available funds.

Response: The CCS is a ``contribution to organizational mission''

assessment program which is what team building and Total Quality

Leadership espouse. Scientific collaboration, cooperation and team work

should be encouraged among all employees. This is why each career track

under CCS has a critical element that addresses these values

specifically.

(9) Comments: Equitable Pay Distribution: Two commenters were

concerned that no firm rules existed for increasing employees' pay or

denying general increase. One of the commenters wanted clarification on

when NRL would not award a pay increase to move an undercompensated

employee up into the normal pay range, and when it would not deny a pay

increase to move an overcompensated employee down towards the NPR.

Response: One of the primary objectives of the project is to

``provide NRL management with increased authority to manage human

resources * * *.'' While the results of the CCS process provide the

framework for pay adjustment decisions, NRL believes it is important

that management judgment also be applied in making final decisions. To

most effectively accomplish the mission of their organizations, NRL

managers need flexibility in managing their most valuable resource,

their employees. There are many possible situations in which a pay pool

manager might not effect a pay adjustment that moves an over- or

undercompensated employee into the normal pay range. One example might

be the case of an undercompensated employee who achieved a significant

increase in score over the previous year. The pay pool manager may

determine that this employee is unlikely to be in a position to repeat

this level of contribution the next year (perhaps because of a special

project that is ending); therefore, a permanent pay increase that moved

the employee all the way into the normal pay range would be

inappropriate.

(10) Comments: Employee Rights: One commenter asserted that CCS

provisions violate merit principles. The same commenter questioned the

applicability of performance-based action procedures, requested

clarification on what type of actions will no longer have appeal

rights, and offered an alternative approach to limiting appeal rights,

i.e., allow NRL to recover attorney fees from employees if they lose

their appeal and meet certain other conditions. A second commenter

believed that NRL's project provides for reducing employees' pay

through adverse action by 6 percent and denying appeal rights on such

actions. This same commenter suggested merit principles were not being

followed and questioned why all avenues of appeal are being removed. A

third commenter believes there must be an official grievance procedure

for CCS, and suggests that grievances (and decisions to deny the

general increase) be reviewed by a committee consisting of employee

peers, the head of a different division, and someone from OPM or EEO.

Response: Merit principles provide that ``Equal pay should be

provided for work of equal value, with appropriate consideration of

both national and local rates paid by employers in the private sector .

. ., and appropriate incentives and recognition should be provided for

excellence in performance.'' This is precisely what NRL seeks to do

with the merit increase provisions of CCS. Since CCS does not provide

for automatic within-grade increases, appeal rights do not exist for

denial of any set increase. ``Regression'' into a lower career level

resulting from an employee's pay being frozen is not appealable to the

Merit Systems Protection Board (MSPB). Any actual reduction in pay will

be taken through adverse or performance-based action procedures and

will continue to be appealable to the MSPB. There is precedent for

limiting appeal rights when no reduction in pay occurs. Several S&T

reinvention laboratory demonstration projects, as well as China Lake,

one of the earliest projects tested, have similar pay for performance

or contribution to organizational mission methods and do not allow

outside appeal rights for regression into a lower pay level. An NRL

employee retains his or her grievance rights concerning CCS scores

which serve as the basis of pay determinations. Concerning the

applicability of performance regulations, CCS critical elements,

descriptors, and discriminators do meet the definition of 5 CFR 430 and

appropriate steps will be taken before taking any performance-based

action under 5 CFR 432. The suggestion to recover attorney fees from

employees is not deemed feasible and will not be adopted.

The suggestion regarding the content of a committee to review CCS

grievances and general increase denials is not adopted. NRL believes

that these tasks properly belong to managers in the employee's chain

(particularly the pay pool manager), who are responsible for the

effective management of their human resources. The demonstration does

include a procedure for complaints regarding CCS appraisals, which

requires the pay pool panel and pay pool manager to consider the

grievance first. If the employee is not satisfied with the result, he

or she may escalate the grievance to the next level supervisor.

3. Demonstration Project Notice Changes

The following is a summary of substantive changes and

clarifications which have been made to the project proposal.

A. II. Introduction, E. Participating Organizations and Employees.

Wording changed to clarify participation of union representative.

B. III. Accessions and Internal Placement, E. Expanded Detail

Authority. Clarified approval authority on details beyond one year and

limit on details to higher-level positions.

C. III. Accessions and Internal Placements, G. Definitions, 6. Pay

Adjustment. Added a statement that termination of maintained pay is

also a pay adjustment.

D. III. Accessions and Internal Placements, G. Definitions, 9.

Approving Manager. Clarified definition of approving manager and

personnel actions.

E. III. Accessions and Internal Placements, H. Pay Setting

Determinations Outside the CCS, 2. Internal Actions. Added a statement

to clarify that these actions cover employees within the NRL

demonstration.

F. III. Accessions and Internal Placements, J. Expanded Temporary

Promotions. Clarified limit on

[[Page 33977]]

temporary promotions within a 24-month period.

G. IV. Sustainment, B. Integrated Pay Schedule (IPS). Clarified

adjusted basic pay cap.

H. IV. Sustainment, C. Contribution-based Compensation System

(CCS), 2. CCS Process and 4. Annual CCS Appraisal Process. Modified to

clarify that the appropriate discriminators to the position need to be

considered in the assessment process.

I. IV. Sustainment, B. IPS, 5. Distinguished Contributions

Allowance (DCA). Clarified conditions for which a DCA may be

appropriate and clarified eligibility.

J. IV. Sustainment, C. Contribution-based Compensation System

(CCS), 4. Annual CCS Appraisal. Modified to allow exceptions to the

mandatory yearly accomplishment report requirement.

K. IV. Sustainment, C. Contribution-based Compensation System

(CCS), 7. Compensation, c. Locality Increases. Clarified adjusted basic

pay cap.

L. V. Separations, B. RIF, 2. RIF Definitions, c. Service

Computation Date, (1) CCS Process Results Credit, Figure 11. Clarified

eligibility for RIF assessment categories 2. and 3.

M. V. Separations, B. RIF, 3. Displacement Rights, (d) Ineligible

for Displacement Rights. Changed to allow displacement rights to

individuals in Assessment Category 0.

N. VI. Demonstration Project Transition, A. Initial Conversion or

Movement to the Demonstration Project, 3. WGI Buy-in. Clarified

eligibility for the WGI buy-in.

O. VI. Demonstration Project Transition, C. Training. Modified to

clarify degree of training that will be available to various Laboratory

groups.

P. IX. Demonstration Project Costs, A. Transition. Clarified

eligibility for the WGI buy-in.

Q. X. Automation Support, D. RIF Support System (RIFSS). Removed

reference to an Appendix J.

R. Appendix E, Computation of the IPS and the NPR. Illustrative

normal pay range rails redrawn on charts to more accurately reflect

scores and salaries.

Dated: June 17, 1999.

Office of Personnel Management.

Janice R. Lachance,

Director.

Table of Contents

I. Executive Summary

II. Introduction

A. Purpose

B. Problems with the Current System

C. Waivers Required

D. Expected Benefits

E. Participating Organizations and Employees

F. Project Design

III. Accessions and Internal Placements

A. Hiring Authority

1. Background

2. Delegated Examining

B. Legal Authority

C. Determining Employee and Applicant Qualifications

D. Noncitizen Hiring

E. Expanded Detail Authority

F. Extended Probationary Period

G. Definitions

1. Basic Pay

2. Maintained Pay

3. Promotion

4. Reassignment

5. Change to Lower Career Level

6. Pay Adjustment

7. Detail

8. Highest Previous Rate

9. Approving Manager

H. Pay Setting Determinations Outside the CCS

1. External New Hires

2. Internal Actions

a. Promotion

b. Pay Adjustment (Voluntary Change to Lower Pay) or Change to

Lower Career Level (except RIF)

(1) Examples of Voluntary Change to a Lower Career Level

(2) Example of Pay Adjustment (Voluntary Change to Lower Pay) or

Change to a Lower Career Level

c. Pay Adjustment (Involuntary Change to Lower Pay) or Change to

Lower Career Level Due to Adverse or Performance-based Action

d. Involuntary Change to Lower Career Level or Reassignment to a

Career Track with a Lower Salary Range, Other than Adverse or

Performance-based

e. RIF Action (including employees who are offered and accept a

vacancy at a lower career level or in a different career track)

f. Upward Mobility or Other Formal Training Program Selection

g. Return to Limited or Light Duty from a Disability as a Result

of Occupational Injury to a Position in a Lower Career Level or to a

Career Track with Lower Basic Pay Potential than Held Prior to the

Injury

h. Reassignment

i. Student Educational Employment Program

j. Hazard Pay or Pay for Duty Involving Physical Hardship

I. Priority Placement Program (PPP)

J. Expanded Temporary Promotions

IV. Sustainment

A. Position Classification

1. Career Tracks and Career Levels

a. Target Career Level

b. Occupational Series and Position Titling

c. Classification Standards

d. Fair Labor Standards Act (FLSA)

(1) Guidelines for FLSA Determinations

(2) Nonsupervisory and Leader Positions

(3) Supervisory Positions

2. Requirements Document (RD)

3. Delegation of Classification Authority

a. Delegation Authority

b. Position Classification Accountability

B. Integrated Pay Schedule (IPS)

1. Annual Pay Action

2. Overtime Pay

3. Classification Appeals

4. Advanced Research Scientists and Engineers (ARSAE)

5. Distinguished Contributions Allowance (DCA)

a. Eligibility

b. Nomination

c. Reduction or Termination of a DCA

d. Lump-Sum DCA Payments

e. DCA Budget Allocation

f. Concurrent Monetary Payments

C. Contribution-based Compensation System (CCS)

1. General

2. CCS Process

3. Pay Pool Annual Planning

a. Element Weights and Applicability

b. Supplemental Criteria

4. Annual CCS Appraisal Process

5. Exceptions

6. Normal Pay Range (NPR)--Basic Pay Versus Contribution

7. Compensation

a. General Increases

b. Merit Increases

c. Locality Increases

d. Contribution Awards

8. Career Movement Based on CCS

a. Advancements in Level Which May Be Approved by the Pay Pool

Manager

b. Advancements in Level Which Must Be Approved by the Director

of Research (DOR)

c. Advancement to Level V of the Science and Engineering (S&E)

Professional Career Track

d. Regression to Lower Level

9. CCS Grievance Procedures

V. Separations

A. Performance-based Reduction-in-pay or Removal Actions

B. RIF

1. RIF Authority

2. RIF Definitions

a. Competitive Area

b. Competitive Level

c. Service Computation Date

(1) CCS Process Results Credit

(2) Credit From Other Rating Systems

(3) RIF Cutoff Date

3. Displacement Rights

a. Displacement Process

b. Retention Standing

c. Vacant Positions

d. Ineligible for Displacement Rights

e. Change to Lower Level Due to an Adverse or Performance-based

Action

3. Notice Period

4. RIF Appeals

5. Separation Incentives

6. Severance Pay

7. Outplacement Assistance

VI. Demonstration Project Transition

A. Initial Conversion or Movement to the Demonstration Project

1. Placement into Career Tracks and Career Levels

2. Conversion of Retained Grade and Pay Employees

3. WGI Buy-in

4. Conversion of Special Salary Rate Employees

B. CCS Startup

C. Training

[[Page 33978]]

1. Types of Training

a. NRL Employees

b. Supervisors and Managers

c. Support Personnel

D. New Hires into the Demonstration Project

E. Conversion or Movement from Demonstration Project

1. Grade Determination

2. Pay Setting

3. ARSAE

4. Determining Date of Last Equivalent Increase

VII. Demonstration Project Duration

A. General

B. 5-year Reexamination

VIII. Demonstration Project Evaluation Plan

A. Overview

B. Evaluation Models

C. Evaluation

D. Method of Data Collection

IX. Demonstration Project Costs

A. Transition

B. Cost Containment and Controls

C. Implementation Costs

X. Automation Support

A. General

B. Defense Civilian Personnel Data System (DCPDS)

C. Core Document (COREDOC)

D. RIF Support System (RIFSS)

E. CCS Data System (CCSDS)

Appendix A: Required Waivers to Laws and Regulations

Appendix B: Definitions of Career Tracks and Career Levels

Appendix C: Table of Occupational Series within Career Tracks

Appendix D: Classification and CCS Elements

Appendix E: Computation of the IPS and the NPR

Appendix F: Requirements Document Sample

Appendix G: Sample OPM Intervention Impact Evaluation Model

Appendix H: NRL Internal Evaluation

I. Executive Summary

Over the last 30 years, many studies of the DoD laboratories have

been conducted on laboratory quality and personnel. Virtually all of

these studies have recommended improvements in personnel policies,

organization, and management. In order to respond to the findings of

these studies, this proposed personnel demonstration project

encompasses streamlined hiring processes, simplified position

classification, the CCS, and modified RIF procedures.

The demonstration project described herein was designed by the NRL,

with the participation of and review by the DoN, the DoD, and the OPM.

The purpose of the demonstration project is to develop and implement a

personnel management system that will enable NRL to obtain, maintain,

and retain the highest quality workforce possible to accomplish its

mission in support of national defense. There are four primary

objectives of the demonstration project:

(1) Provide NRL increased authority to manage human resources,

(2) Enable NRL to hire and retain the best qualified employees,

(3) Enable NRL to compensate its employees equitably at a rate that

is more competitive with the labor market, and

(4) Provide a direct link between levels of individual contribution

and the compensation received.

Initially, the demonstration project will cover all NRL employees

except Senior Executive Service (SES) members, scientific and

professional (ST) employees (above GS-15), guards, and trade and craft

employees. The guards and trade and craft employees may be included at

a later time, after more experience is gained in the operation of the

CCS. The project will be reviewed and evaluated throughout its duration

by OPM, DoD, DoN, and NRL. In addition to evaluation topics, such as

goal attainment and employee and management acceptance, the project

will be assessed for cost containment. After 5 years, the project will

be evaluated to determine if it is to be made permanent, modified, or

terminated. Areas not specifically addressed will use provisions that

currently exist in 5 United States Code (U.S.C.) and 5 Code of Federal

Regulations (CFR).

II. Introduction

A. Purpose

The goal of this personnel demonstration project is to develop and

implement a human resources management system that will enable NRL to

obtain, maintain, and retain, into the 21st century, the highest

quality workforce possible to accomplish its mission in support of

national defense. NRL's mission is to conduct a broadly-based

multidisciplinary program of scientific research and advanced

technological development directed toward new and improved materials,

equipment, techniques, systems, and related operational procedures for

the DoN. The human resources management system must enable NRL to

attract and retain the best scientists, engineers, and support

personnel available in the labor market.

The demonstration project has the following four primary

objectives:

a. Provide NRL management with increased authority to manage human

resources consistent with its operation under the Navy Working Capital

Fund (NWCF) as an industrially-funded activity;

b. Provide a recruitment process, within the context of merit

principles, that will enable NRL to hire the best qualified employees

at a reasonable cost and for competitive compensation;

c. Provide a compensation system that will enable NRL to compensate

its employees equitably at a rate that is commensurate with their

levels of responsibility and contribution, and is competitive with

those found in the labor market; and

d. Provide a direct link between levels of individual contribution

and the compensation received.

B. Problems With the Current System

The demonstration project addresses a set of issues regarding human

resources in the Federal laboratory system. These problems have been

extensively documented in a long series of reports by blue-ribbon

panels. These include the following: the Packard Report,* the Grace

Commission Report,** the Fowler Report,*** and other high-level

analyses of the state of Federal research capabilities. In all of these

reports, there is a common theme * * * that Federal laboratories need

more efficient, cost effective, and timely processes and methods to

acquire and retain a highly creative, productive, educated, and trained

workforce.

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

* White House Science Council, ``Report of the White House

Science Council, Federal Laboratory Review Panel,'' (Packard

Report), May 1983.

** Task Force on Research and Development (R&D), ``President's

Private Sector Survey on Cost Control, Task Force Report on R&D,''

(Grace Commission Report), 8 December 1983.

*** Defense Science Board, ``Report of the Defense Science Board

1987 Summer Study on Technology Base Management,'' (Fowler Report),

December 1987.

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

The NRL must be able to compete with the private sector for the

best talent and be able to make job offers in a timely manner with the

attendant compensation that attracts high-quality employees. Once

hired, NRL must have the means to motivate and reward employees for

their innovative contributions to ensure that the creative process is

continually renewed. Compensation levels must be directly linked to the

levels of individual contributions. High contributors must be rewarded

both to encourage their continued contributions and to ensure their

retention at NRL. Similarly, lower contributing individuals should

receive less compensation, or, in some cases, be encouraged to seek

other employment.

C. Waivers Required

NRL proposes changes in the following broad areas to address its

problems in human resources management: accessions and internal

placements, sustainment, and separations. Appendix A lists the laws,

[[Page 33979]]

rules and regulations requiring waivers to enable NRL to implement the

proposed system.

D. Expected Benefits

The demonstration project is expected to result in:

(1) Maintaining the quality of the NRL workforce in the scientific

and engineering disciplines as well as administrative specialist and

professional and support professions;

(2) More timely processing of personnel actions;

(3) Increased retention of high-level contributors and wider

distribution of salaries; and

(4) increased satisfaction with human resources management

processes by employees and managers.

E. Participating Organizations and Employees

Initially, the demonstration project would cover all NRL employees

except SES members, ST employees, guards, and trade and craft

employees. The guards and trade and craft employees may be included at

a later time, after more experience is gained in the operation of the

CCS. Figure 1 identifies the employees by group for major geographic

locations. NRL sites with less than 10 employees each are identified as

``Other'' in Figure 1.

BILLING CODE 6325-01-P

[[Page 33980]]

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[[Page 33981]]

A union representative elected from the following bargaining units

served on the Staffing Design Team and participated in the development

of the accession and internal placement interventions proposed in this

plan:

Federal Firefighters Association--Firefighters, Chesapeake Beach,

MD (as of 6/23/98 this function was transferred to another activity)

Washington Area Metal Trades Council--Trades and Crafts Employees,

Washington, DC

International Association of Machinists and Aerospace Workers--

Guards, Washington, DC

F. Project Design

In response to the authority granted by Congress to develop a

demonstration project, NRL's Director of Research (DOR) set up five

design teams to develop the project plan. Each team was led by a senior

NRL manager from outside the Human Resources Office (HRO), and was

responsible for developing project proposals in one of the five primary

functional areas of the project. Each team was comprised of two human

resources advisors, an Equal Employment Opportunity (EEO) advisor,

several midlevel supervisors or managers, an NRL Administrative Council

representative, and several employee representatives (including

bargaining unit representatives when appropriate).

III. Accessions and Internal Placements

A. Hiring Authority

1. Background

Private industry and academia are the principal recruiting sources

for scientists and engineers at NRL. It is extremely difficult to make

timely offers of employment to hard-to-find scientists and engineers.

Even when a candidate is identified, he or she often finds another job

opportunity before the lengthy recruitment process can be completed.

2. Delegated Examining

a. Competitive service positions within the NRL Demonstration

Project will be filled through Merit Staffing or under Delegated

Examining.

b. The ``Rule of Three'' will be eliminated. When there are no more

than 15 qualified applicants and no preference eligibles, all eligible

applicants are immediately referred to the selecting official without

rating and ranking. Rating and ranking will be required only when the

number of qualified candidates exceeds 15 or there is a mix of

preference and nonpreference applicants. Statutes and regulations

covering veterans' preference will be observed in the selection process

and when rating and ranking are required. If the candidates are rated

and ranked, a random number selection method using the application

control number will be used to determine which applicants will be

referred when scores are tied after the rating process. Veterans will

be referred ahead of non-veterans with the same score.

B. Legal Authority

For actions taken under the auspices of the NRL Demonstration

Project, the legal authority, Public Law 103-337, will be used. For all

other actions, NRL will continue to use the nature of action codes and

legal authority codes prescribed by OPM, DoD, or DoN.

C. Determining Employee and Applicant Qualifications

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[[Page 33982]]

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BILLING CODE 6325-01-C

Special DoN or DoD requirements not covered by the OPM

Qualification Standards Operating Manual for GS Positions, such as

Defense Acquisition Workforce Improvement Act (DAWIA) qualification

requirements for acquisition positions and physical performance

requirements for sea duty, work on board aircraft, etc., must be met.

D. Noncitizen Hiring

Where Executive Orders or other regulations limit hiring

noncitizens, NRL will have the authority to approve the hiring of

noncitizens into competitive service positions when qualified U.S.

citizens are not available. Under the demonstration project, as with

the current system, a noncitizen may be appointed only if it has been

determined there are no qualified U.S. citizens. In order to make this

determination, the position will be advertised extensively throughout

the nation using paid advertisements in major newspapers or scientific

journals, etc., as well as the ``normal'' recruiting methods. If a

noncitizen is the only qualified candidate for the position, the

candidate may be appointed. The selection is subject to approval by the

NRL approving manager. The demonstration project constitutes a

delegated examining agreement from OPM for the purposes of 5 CFR

213.3102(bb).

E. Expanded Detail Authority

Under the demonstration project, NRL's approving manager would have

the authority:

(1) To effect details up to 1 year to demonstration project

positions without the current 120-day renewal requirement; and

(2) To effect details to a higher level position in the

demonstration project up to 1 year within a 24-month period without

competition.

Details beyond one-year require the approval of the Commanding

Officer (CO), NRL and are not subject to the 120-day renewal

requirement.

F. Extended Probationary Period

All current laws and regulations for the current probationary

period are retained except that nonstatus candidates hired under the

demonstration project in occupations where the nature of the work

requires the manager to have more than one year to assess the

employee's job performance will serve a 3-year probationary period.

Employees with veterans' preference will maintain their rights under

current law and regulation.

G. Definitions

1. Basic Pay

The total amount of pay received at the rate fixed through CCS

adjustment for the position held by an employee including any merit

increase but before any deductions and exclusive of additional pay of

any other kind.

2. Maintained Pay

An employee may be entitled to maintain his or her rate of basic

pay if

[[Page 33983]]

that rate exceeds the maximum rate of basic pay for his or her career

level as a result of certain personnel actions (as described in this

plan). An employee's initial maintained pay rate is equal to the lesser

of (1) the basic pay held by the employee at the time an action is

taken which entitles the employee to maintain his or her pay or (2) 150

percent of the maximum rate of basic pay of the career level to which

assigned. The employee is entitled to maintained pay for 2 years or

until the employee's basic pay is equal to or more than the employee's

maintained pay, whichever occurs first. Exceptions to the 2-year limit

include employees on grade and pay retention ``grandfathered'' in upon

initial conversion into the demonstration project, former special rate

employees receiving maintained pay as a result of conversion into the

project, and employees placed through the priority placement programs.

Employees will receive half of the across-the-board GS percentage

increase in basic pay and the full locality pay increase while on

maintained pay. Upon termination of maintained pay, the employee's

basic pay will be adjusted according to the CCS appraisal process. If

the employee's basic pay exceeds the maximum basic pay of his or her

career level upon expiration of the 2-year period, the employee's pay

will not be reduced; the employee will be in the overcompensated range

of basic pay category for CCS pay increase purposes, see Figure 10.

Maintained pay shall cease to apply to an employee who:

(1) has a break in service of 1 workday or more; or

(2) is demoted for personal cause or at the employee's request.

The employee's maintained rate of pay is basic pay for purposes of

locality pay (locality pay is basic pay for purposes of retirement,

life insurance, premium pay, severance pay, advances in pay, workers'

compensation, and lump-sum payments for annual leave but not for

computing promotion increases). Employees promoted while on maintained

pay may have their basic pay (excluding locality pay) set up to 20

percent greater than the maximum basic pay for their current career

level or retain their ``maintained pay,'' whichever is greater.

3. Promotion

The movement of an employee to a higher career level within the

same career track or to a different career track and career level in

which the new career level has a higher maximum basic salary rate than

the career level from which the employee is leaving.

4. Reassignment

The movement of an employee from one position to another position

within the same career level in the same career track or to a position

in another career track and career level in which the new career level

has the same maximum basic salary rate as the career level from which

the employee is leaving.

5. Change to Lower Career Level

The movement of an employee to a lower career level within the same

career track or to a different career track and career level in which

the new career level has a lower maximum basic salary range than the

career level from which the employee is leaving.

6. Pay Adjustment

Any increase or decrease in an employee's rate of basic pay where

there is no change in the employee's position. Termination of

maintained pay is also a pay adjustment.

7. Detail

The temporary assignment of an employee to a different

demonstration project position for a specified period when the employee

is expected to return to his or her regular duties at the end of the

assignment. (An employee who is on detail is considered for pay and

strength purposes to be permanently occupying his or her regular

position.)

8. Highest Previous Rate

NRL will establish maximum payable rate rules that parallel the

rules in 5 CFR 531.202 and 531.203 (c) and (d).

9. Approving Manager

Managers at the directorate, division head, division

superintendent, or directorate-level staff offices who have budget

allocation/execution; position management; position classification;

recruitment; and staffing authorities for their organization.

H. Pay Setting Determinations Outside the CCS

1. External New Hires

a. This includes reinstatements. Initial basic pay for new

appointees into the demonstration project may be set at any point

within the basic pay range for the career track, occupation, and career

level to which appointed that is consistent with the special

qualifications of the individual and the unique requirements of the

position. These special qualifications may be consideration of

education, training, experience, scarcity of qualified applicants,

labor market considerations, programmatic urgency, or any combination

thereof which is pertinent to the position to which appointed. Highest

previous rate may be used to set the pay of new appointees into the

demonstration project. (The approving manager authorizes the basic

pay.)

b. Transfers from within DoD and other Federal agencies will have

their pay set using pay setting policy for internal actions based on

the type of pay action.

c. A recruitment or relocation bonus may be paid using the same

provisions available for GS employees under 5 U.S.C. 5753. Employees

placed through the DoD Priority Placement Program (PPP), the DoN

Reemployment Priority List (RPL), or the Federal Interagency Career

Transition Assistance Plan are entitled to the last earned rate if they

have been separated.

2. Internal Actions

These actions cover employees within the demonstration project,

including demonstration project employees who apply and are selected

for a position within the project.

a. Promotion. When an employee is promoted, the basic pay after

promotion may be up to 20 percent greater than the employee's current

basic pay. However, if the minimum rate of the new career level is more

than 20 percent greater than the employee's current basic pay, then the

minimum rate of the new career level is the new basic pay. The

employee's basic pay may not exceed the basic pay range of the new

career level. Highest previous rate may be applied, if appropriate.

(The approving manager authorizes the basic pay.) Note: Most target

career level promotions will be accomplished through the CCS appraisal

and pay adjustment process (see section IV.C.8).

b. Pay Adjustment (Voluntary Change to Lower Pay) or Change to

Lower Career Level (except RIF). When an employee accepts a voluntary

change to lower pay or lower career level, basic pay may be set at any

point within the career level to which appointed, except that the new

basic pay will not exceed the employee's current basic pay or the

maximum basic pay of the career level to which assigned, whichever is

lower. Highest previous rate may be applied, if appropriate. (The

approving manager authorizes the basic pay.)

(1) Examples of Voluntary Change to a Lower Career Level. An

employee in an Administrative Specialist and Professional Career Track,

Career Level III, position may decide he or she would prefer a Career

Level II position in the Administrative Support Career Track because it

offers a different work

[[Page 33984]]

schedule or duty station. An employee in Level IV of the Administrative

Specialist and Professional Career Track who has a family member with a

serious medical problem and wants to be relieved of supervisory

responsibilities may request a change to Career Level III.

(2) Example of Pay Adjustment (Voluntary Change to Lower Pay) or

Change to a Lower Career Level. An employee may accept a change to

lower pay or to a lower career level through a settlement agreement. A

Research Physicist who is in Level III and is being paid near the top

of Level III, is rated unacceptable in the critical element Research

and Development (R&D) Business Management. In settlement of a proposal

to remove this employee for unacceptable performance, an agreement is

reached which reduces the employee's pay to a rate near the beginning

of Level III.

c. Pay Adjustment (Involuntary Change to Lower Pay) or Change to

Lower Career Level Due to Adverse or Performance-based Action. When an

employee is changed to a lower career level, or receives a change to

lower pay due to an adverse or performance-based action, the employee's

basic pay will be reduced by at least 6 percent, but will be set at a

rate within the rate range for the career level to which assigned. (The

approving manager authorizes the basic pay.) Such employees will be

afforded appeal rights as provided by 5 U.S.C. 4303 or 7512.

d. Involuntary Change to Lower Career Level or Reassignment to a

Career Track with a Lower Salary Range, Other than Adverse or

Performance-based. If the change is not a result of an adverse or

performance-based action, the basic pay will be preserved to the extent

possible within the basic pay range of the new career level. If the pay

cannot be set within the rate range of the new career level, it will be

set at the maximum rate of the new career level and the employee's pay

will be reduced. If the change is a result of a position

reclassification resulting in the employee being assigned to a lower

career level or reassigned to a different career track with a lower

maximum basic salary range, the employee is entitled to maintained pay

if the employee's current salary exceeds the maximum rate for the new

band.

e. RIF Action (including employees who are offered and accept a

vacancy at a lower career level or in a different career track). The

employee is entitled to maintained pay, if the employee's current

salary exceeds the maximum rate for the new band.

f. Upward Mobility or Other Formal Training Program Selection. The

employee is entitled to maintained pay, if the employee's current

salary exceeds the maximum rate for the new band.

g. Return to Limited or Light Duty from a Disability as a Result of

Occupational Injury to a Position in a Lower Career Level or to a

Career Track with Lower Basic Pay Potential than Held Prior to the

Injury. The employee is entitled indefinitely to the basic pay held

prior to the injury and will receive full general and locality pay

increases. If upon reemployment, an employee was not given the higher

basic pay (basic pay received at the time of the injury), any

retirement annuity or severance pay computation would be based on his

or her lower basic pay (salary based on placement in a lower career

level). Even though the Department of Labor (DOL) would make up the

difference between the lower basic pay and the higher basic pay earned

at the time of injury, the DOL portion is not considered in the

retirement or severance pay computation.

h. Reassignment. The basic pay normally remains the same. Highest

previous rate may be applied, if appropriate. (The approving manager

authorizes the basic pay.)

i. Student Educational Employment Program. Initial basic pay for

new appointees may be set at any point within the basic pay range for

the career track, occupation, and career level to which appointed.

Basic pay may be increased upon return to duty (RTD) or conversion to

temporary appointment, in consideration of the student's additional

education and experience at the time of the action. Students who work

under a parallel work study program may have their basic pay increased

in consideration of additional education and/or experience. Basic pay

for students may be increased based on their CCS appraisal. (The

approving manager authorizes the basic pay.)

j. Hazard Pay or Pay for Duty Involving Physical Hardship.

Employees under the demonstration project will be paid hazardous duty

pay under the provisions of 5 CFR part 550, subpart I.

I. Priority Placement Program (PPP)

Current PPP procedures apply to new hires and internal actions.

J. Expanded Temporary Promotions

Current regulations require that temporary promotions for more than

120 days to a higher level position than previously held must be made

competitively. Under the demonstration project, NRL would be able to

effect temporary promotions of not more than 1 year within a 24-month

period without competition to positions within the demonstration

project.

IV. Sustainment

A. Position Classification

The position classification changes are intended to streamline and

simplify the process of identifying and categorizing the work done at

NRL. NRL will establish an Integrated Pay Schedule (IPS) for all

demonstration project positions in covered occupations. The IPS will

replace the current GS and extend the pay schedule to the equivalent of

the ES-4 level of the ``Rates of Basic Pay for the Members of the

Senior Executive Service (SES).''

1. Career Tracks and Career Levels

Within the IPS, occupations with similar characteristics will be

grouped together into four career tracks. Each career track consists of

a number of career levels, representing the phases of career

progression that are typical for the respective career track. The

career levels within each career track are shown in Figure 3, along

with their GS equivalents. The equivalents are based on the levels of

responsibility as defined in 5 U.S.C. 5104, and not on current basic

pay schedules. Appendix B provides definitions for each of the career

tracks and the career levels within them.

The career tracks and career levels were developed based upon

administrative, organizational, and position management considerations

at NRL. They are designed to enhance pay equity and enable a more

seamless career progression to the target career level for an

individual position or category of positions. This combination of

career tracks and career levels allows for competitive recruitment of

quality candidates at differing rates of compensation within the

appropriate career track, occupation, and career level. It will also

facilitate movement and placement based upon contribution, in

conjunction with the CCS described in paragraph IV.C. Other benefits of

this arrangement include a dual career track for S&E employees and

greater competitiveness with academia and private industry for

recruitment. Appendix C identifies the occupational series currently

within each of the four career tracks.

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[[Page 33985]]

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BILLING CODE 6325-01-C

[[Page 33986]]

a. Target Career Level. Each position will have a designated target

career level under the demonstration project. This target career level

will be identified as the career level to which an incumbent may be

advanced without further competition within a career track. These

target career levels will be based upon present full performance

levels. Target career levels may vary based upon occupation or career

track. Employees' basic pay will be capped at the target career level

until other appropriate conditions (competition, availability of a

high-grade billet, position management approval, increase in or

acquisition of higher level duties, approval of an accretion of duties

promotion, etc.) have been met, and the employee has been promoted into

the next higher level.

b. Occupational Series and Position Titling. Presently, NRL

positions are identified by occupational groups and series of classes

in accordance with OPM position classification standards. Under the

demonstration project, NRL will continue to use occupational series

designators consistent with those currently authorized by OPM to

identify positions. This will facilitate related personnel management

requirements, such as movement into and out of the demonstration

project. Other occupational series may be added or deleted as needed to

support the demonstration project. Interdisciplinary positions will be

accommodated within the system based upon the qualifications of the

individual hired.

Titling practices consistent with those established by OPM

classification standards will be used to determine the official title.

Such practice will facilitate other personnel management requirements,

such as the following: movement into and out of the demonstration

project, reduction in force, external reporting requirements, and

recruitment. CCS career level descriptors and Requirements Document

(RD) (see paragraph IV.A.2) information will be used for specific

career track, career level, and titling determinations.

c. Classification Standards. Under the proposed demonstration

project, the number of classification standards would be reduced from

over 70 to 4 (see Figure 2.) Each standard would align with one of the

four career tracks and would cover all positions within that career

track. Each career track has two or three elements that are considered

in both classifying a position and in judging an individual's

contributions for pay setting purposes. Each element has generic

descriptors for every career level. These descriptors explain the type

of work, degree of responsibility and scope of contributions that need

to be ultimately accomplished to reach the highest basic pay potential

within each career level. (See Appendix D.) To classify a position, a

manager would select the career level which is most indicative overall

of the type of duties to be performed and the contributions needed. For

example: A supervisor needs a secretarial position for a branch. In

reading the elements and descriptors for the Administrative Support

Career Track, the supervisor determines that the Level II descriptors

illustrate the type of work and contributions needed. Therefore, the

position would be classified as a Secretary, Level II.

d. Fair Labor Standards Act (FLSA). Demonstration project positions

will be covered under the FLSA and 5 CFR part 551. Determination of

their status (exempt or nonexempt) will be made based on the criteria

contained in 5 CFR Part 551. The status of each new position under the

demonstration project will be determined using computer assisted

analysis as part of an automated process for preparing the RD. Those

positions for which the computer is unable to make the final FLSA

determination will be ``flagged'' for referral to a human resources

specialist for determination.

(1) Guidelines for FLSA Determinations.

a. Supervisory Information: provided through an automated system in

a checklist format; results of this checklist have an impact on FLSA

determination.

b. FLSA Information: provided through an automated system in a

checklist format; results of this checklist in conjunction with the

supervisory information provide a basis for the FLSA determination.

c. If required, the section entitled ``Purpose of Position'' will

be used to assist in FLSA determination.

d. RD's requiring additional review before being finalized will be

forwarded to a human resources specialist to review the FLSA

determination.

(2) Nonsupervisory and Leader Positions. Figure 4 shows the exempt

or nonexempt status applicable to nonsupervisory and leader positions

in the indicated career track and career level. In those cases where

``Review'' is indicated, the FLSA status must be determined based on

the specific duties and responsibilities of the subject position.

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[[Page 33987]]

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BILLING CODE 6325-01-C

(3) Supervisory Positions. FLSA determination for supervisory

positions must be made based on the duties and responsibilities of the

particular position involved. As a rule, if a position requires

supervision of employees who are exempt under FLSA, the supervisory

position is likely to be exempt also.

2. Requirements Document (RD)

An RD will replace the Optional Form 8 and position description

used under the current classification system. The RD will be prepared

by managers using a menu-driven, automated system. The automated system

will enable managers to classify and establish many positions without

intervention by a human resources specialist. The abbreviated RD will

combine the position information, staffing requirements, and

contribution expectations into a 1- or 2-page document. Appendix F

provides a sample RD for an Electronics Engineer, Level II.

3. Delegation of Classification Authority

Classification authority will be delegated to managers as a means

of increasing managerial effectiveness and expediting the

classification function. This will be accomplished as follows:

a. Delegated Authority.

1. The NRL Commanding Officer (CO) will delegate classification

authority to the management levels shown in Figure 5, i.e., DOR,

Associate Directors of Research (ADORS), division superintendents or

equivalent levels, and the HRO Director (the HRO Director may further

delegate to selected HRO specialists).

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[[Page 33988]]

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BILLING CODE 6325-01-C

[[Page 33989]]

2. The classification approval must be at least one level above the

first-level supervisor of the position.

3. First-line supervisors at any level will provide classification

recommendations.

4. HRO support will be available for guidance and recommendations

concerning the classification process. (Any dispute over the proper

classification between a manager and the HRO will be resolved by the

Director of Research [DOR].)

b. Position Classification Accountability. Those to whom authority

is delegated are accountable to the DOR. The DOR is accountable to the

CO. Those with delegated authority are expected to comply with

demonstration project guidelines on classification and position

management, observe the principle of equal pay for equal work, and

ensure that RD's are current. First-line supervisors will develop

positions using the automated system. All positions must be approved

through the proper chain of command.

B. Integrated Pay Schedule

Under the demonstration project, an IPS will be established which

will cover all demonstration project positions at NRL. This IPS, which

does not include locality pay, will extend from the basic pay for GS-1,

step 1 to the basic pay for ES-4 (from ``Rates of Basic Pay for Members

of the Senior Executive Service (SES)''). The adjusted basic pay cap,

which does include locality pay, is Executive Level IV, currently

$118,400, for all demonstration project employees except S&E

Professional Career Level V employees. The adjusted basic pay cap for

S&E Professional Career Level V employees is Executive Level III,

currently $125,900.

1. Annual Pay Action

NRL will eliminate separate pay actions for within-grade increases,

general and locality pay increases, performance awards, quality step

increases, and most career promotions, and replace them with a single

annual pay action (including either permanent or bonus pay or both)

linked to the CCS. This will eliminate the paperwork and processing

associated with multiple pay actions which average 3 per employee per

year.

2. Overtime Pay

Overtime will be paid in accordance with 5 CFR part 550, subpart A.

All nonexempt employees will be paid overtime based upon their ``hourly

regular rate of pay,'' as defined in existing regulation (5 CFR part

551).

3. Classification Appeals

An employee may appeal the occupational series, title, career

track, or career level of his or her position at any time. An employee

must formally raise the area of concern to supervisors in the immediate

chain of command, either verbally or in writing. If an employee is not

satisfied with the supervisory response, he or she may then appeal to

the DoD appellate level. If an employee is not satisfied with the DoD

response, he or she may then appeal to the OPM only after DoD has

rendered a decision under the provisions of this demonstration project.

Since OPM does not accept classification appeals on positions which

exceed the equivalent of a GS-15 level, appeal decisions involving

Career Level V for Advanced Research Scientists and Engineers (ARSAE)

will be rendered by DoD and will be final. Appellate decisions from OPM

are final and binding on all administrative, certifying, payroll,

disbursing, and accounting officials of the Government. Time periods

for case processing under 5 CFR subpart F, sections 511.603, 511.604,

and 511.605 apply.

An employee may not appeal the accuracy of the RD, the

demonstration project classification criteria, or the pay-setting

criteria; the propriety of a basic pay schedule; the assignment of

occupational series to the occupational family; or matters grievable

under an administrative or negotiated grievance procedure or an

alternative dispute resolution procedure.

The evaluation of classification appeals under this demonstration

project is based upon the demonstration project classification

criteria. Case files will be forwarded for adjudication through the HRO

and will include copies of appropriate demonstration project criteria.

4. Advanced Research Scientists and Engineers (ARSAE)

The NRL demonstration project includes a Career Level V for the

Science and Engineering (S&E) Professional Career Track. Career Level V

is created for ARSAE's.

Current legal definitions of SES and ST positions do not fully meet

the needs of NRL. The SES designation is appropriate for executive

level managerial positions whose classification exceeds the GS-15 grade

level. The primary knowledge and abilities of SES positions relate to

supervisory and managerial responsibilities. Positions classified as

STs are reserved for bench research scientists and engineers; these

positions require a very high level of technical expertise and they

have little or no supervisory responsibility.

NRL currently has positions (typically branch head, principal

investigator or team leaders) that have characteristics of both SES and

ST classifications. Most branch heads in NRL are responsible for

supervising other GS-15 positions, including non-supervisory research

engineers and scientists and, in some cases, ST positions. Most branch

heads are classified at the GS-15 level, although their technical

expertise warrants classification beyond GS-15. Because of their

management responsibilities, these individuals are excluded from the ST

system. Because of management considerations, they cannot be placed in

the SES. Management considers the primary requirement for branch heads

to have knowledge of and expertise in the specific scientific and

technology areas related to the mission of their branches.

Historically, the incumbents of these positions have been recognized

within the community as scientific and engineering leaders who possess

primarily scientific or engineering credentials and are considered

experts in their field. However, they must also possess strong

managerial and supervisory ability. Therefore, although some of these

employees have scientific credentials that might compare favorably with

ST criteria, classification of these positions as ST is not an option

because the managerial and supervisory responsibilities inherent in the

positions cannot be ignored.

Current GS-15 branch heads will convert into the demonstration

project at Career Level IV. After conversion they will be reviewed

against established criteria to determine if they should be

reclassified to Career Level V. Other positions possibly meeting

criteria for classification to Career Level V will be reviewed on a

case-by-case basis. The salary range is a minimum of 120 percent of the

minimum rate of basic pay for GS-15 with a maximum rate of basic pay

established at the rate of basic pay (excluding locality pay) for SES

level 4 (ES-4). Vacant positions in Career Level V will be

competitively filled to ensure that selectees are preeminent

researchers and technical leaders in the specialty fields who also

possess substantial managerial and supervisory abilities.

DoD will test Career Level V for a 5-year period. ARSAE positions

established in Career Level V will be subject to limitations imposed by

OPM and DoD. Career Level V will be established only in an S&T

Reinvention Laboratory which employs scientists,

[[Page 33990]]

engineers, or both. ARSAE incumbents of Career Level V positions will

work primarily in their professional capacity on basic or applied

research and secondarily perform managerial or supervisory duties. The

number of Career Level V, or equivalent, positions within the DoD will

not exceed 40. These 40 positions will be allocated by Assistant

Secretary of Defense (Force Management Policy) and administered by the

respective services. The number of ARSAE Career Level V positions will

be reviewed periodically to determine appropriate position

requirements. Career Level V position allocations will be managed

separately from SES, ST, and Senior Level (SL) positions. An evaluation

of the Career Level V concept will be performed during the fifth year

of the demonstration project.

Specific details regarding the control and management of all Level

V assets will be included in the demonstration project's operating

procedures. Level V is expected to afford NRL the ability to more

effectively and efficiently exercise managerial control at the local

level, while adhering to merit staffing, affirmative action, and equal

employment opportunity principles.

5. Distinguished Contributions Allowance (DCA)

The DCA is a temporary monetary allowance up to 25 percent of basic

pay (which, when added to an employee's rate of basic pay, may not

exceed the rate of basic pay for ES-4) paid on either a bi-weekly basis

(concurrent with normal pay days) or as a lump sum following completion

of a designated contribution period(s), or combination of these, at the

discretion of NRL. It is not basic pay for any purpose, i.e.,

retirement, life insurance, severance pay, promotion, or any other

payment or benefit calculated as a percentage of basic pay. The DCA

will be available to certain employees at the top of their target

career levels, whose present contributions are worthy of scores found

at a higher career level, whose level of contribution is expected to

continue at the higher career level for at least 1 year, and current

market conditions require additional compensation.

Assignment of the DCA rather than a change to a higher career level

will generally be appropriate for such employees under the following

circumstances: employees have reached the top of their target career

levels and (1) when it is not certain that the higher level

contributions will continue indefinitely (e.g., a special project

expected to be of 1- up to 5-year duration), or (2) when no further

promotion or compensation opportunities are available or externally

imposed limits (such as high-grade restrictions) make changes to higher

career levels unavailable, and in either situation, current market

conditions compensate similar contributions at a greater rate in like

positions in private industry and academia and there is a history of

significant recruitment and retention difficulties associated with such

positions.

a. Eligibility.

(1) Employees in Levels III and IV of the S&E Professional Career

Track and those in Levels III, IV, and V of the Administrative

Specialist and Professional Career Track are eligible for the DCA if

they have reached the top CCS score for their target career level with

a recommendation for a higher Overall Contribution Score (OCS) for

their contributions, they have reached the maximum rate of basic pay

available for their target career level, there are externally imposed

limits to higher career levels or the higher level contributions are

not expected to last indefinitely, and market conditions require

greater compensation for these contributions.

(2) Employees may receive a DCA for up to 3 years. The DCA

authorization will be reviewed and reauthorized as necessary, but at

least annually at the time of the CCS appraisal through nomination by

the pay pool manager and approval by the DOR. Employees in the S&E

Professional Career Track may receive an extension of up to 2

additional years (for a total of 5 years). The DCA extension

authorization will be reviewed and reauthorized as necessary, but at

least on an annual basis at the time of the CCS appraisal through

nomination by the pay pool manager and approval by the DOR.

(3) Monetary payment may be up to 25 percent of basic pay.

(4) Nominees would be required to sign a memorandum of

understanding or a statement indicating they understand that the DCA is

a temporary allowance; it is not a part of basic pay for any purpose;

it would be subject to review at any time, but at least on an annual

basis, and the reduction or termination of the DCA is not appealable or

grievable.

b. Nomination. In connection with the annual CCS appraisal process,

pay pool managers may nominate eligible employees who meet the criteria

for the DCA. Packages containing the recommended amount and method of

payment of the DCA and a justification for the allowance will be

forwarded through the supervisory chain to the DOR. Details regarding

this process will be addressed in standard operating procedures. These

details will include time frames for nomination and consideration,

payout scheme, justification content and format, budget authority,

guidelines for selecting employees for the allowance and for

determining the appropriate amount, and documentation required by the

employee acknowledging he or she understands the criteria and temporary

nature of the DCA.

c. Reduction or Termination of a DCA.

(1) A DCA may be reduced or terminated at any time the NRL deems

appropriate (e.g., when the special project upon which the DCA was

based ends; if performance or contributions decrease significantly; or

if labor market conditions change, etc.). The reduction or termination

of a DCA is not appealable or grievable.

(2) If an employee voluntarily separates from NRL before the

expiration of the DCA, an employee may be denied DCA payment. Authority

to establish conditions and/or penalties will be spelled out in the

written authorization of an individual's DCA.

d. Lump-Sum DCA Payments.

(1) When NRL chooses to pay part or all of an employee's DCA as a

lump sum payable at the end of a designated period, the employee will

accrue entitlement to a growing lump-sum balance each pay period. The

percentage rate established for the lump-sum DCA will be multiplied by

the employee's biweekly amount of basic pay to determine the lump sum

accrual for any pay period. This lump-sum percentage rate is included

in applying the 25-percent limitation.

(2) If an employee covered under a lump-sum DCA authorization

separates, or the DCA is terminated (see paragraph c), before the end

of that designated period, the employee may be entitled to payment of

the accrued and unpaid balance under the conditions established by NRL.

NRL may establish conditions governing lump-sum payments (including

penalties in cases such as voluntary separation or separation for

personal cause) in general plan policies or in the individual

employee's DCA authorization.

e. DCA Budget Allocation. The DOR may establish a total DCA budget

allocation that is never greater than 10 percent of the basic salaries

of the employees currently at the cap in the S&E Professional Career

Track, Career Levels III and IV, and the Administrative Specialist and

Professional Career Track, Career Levels III, IV, and V.

f. Concurrent Monetary Payments. Employees eligible for a DCA may

be authorized to receive a DCA and a

[[Page 33991]]

retention allowance at the same time, up to a combined total of 25

percent of basic pay. A merit increase which raises an employee's pay

to the top rate for his or her target career level (thus making the

employee eligible for the DCA) may be granted concurrent with the DCA.

Receipt of the DCA does not preclude an employee from being granted any

award (including a contribution award) for which he or she is otherwise

eligible.

C. Contribution-based Compensation System (CCS)

1. General

The purpose of the CCS is to provide an effective means for

evaluating and compensating the NRL workforce. It provides management,

at the lowest practical level, the authority, control, and flexibility

needed to develop a highly competent, motivated, and productive

workforce. CCS will promote increased fairness and consistency in the

appraisal process, facilitate natural career progression for employees,

and provide an understandable basis for career progression by linking

contribution to basic pay determinations.

CCS combines performance appraisal and job classification into one

annual process. At the end of each CCS appraisal period, basic pay

adjustment decisions are made based on each employee's actual

contribution to the organization's mission during the period.

A separate function of the process includes comparison of

performance in critical elements to acceptable standards to identify

unacceptable performance that may warrant corrective action in

accordance with 5 CFR part 432. Supervisory officials determine scores

to reflect each employee's contribution, considering both how well and

at what level the employee is performing. Often the two considerations

are inseparable. For example, an employee whose written documents need

to be returned for rework more often than those of his or her peers

also likely requires a closer level of oversight, an important factor

when considering level of pay.

The performance planning and rating portions of the demonstration

project's appraisal process constitute a performance appraisal program

which complies with 5 CFR part 430 and the DoD Performance Management

System, except where waivers have been approved. Performance-related

actions initiated prior to implementation of the demonstration project

(under DoN performance management regulations) shall continue to be

processed in accordance with the provisions of the appropriate system.

2. CCS Process

CCS measures employee contributions by breaking down the jobs in

each career track using a common set of ``elements.'' The elements for

each career track shown in Figure 6 and described in detail in Appendix

D have been initially identified for evaluating the contributions of

NRL personnel covered by this initiative. They are designed to capture

the highest level of the primary content of the jobs in each career

level of each career track. Within specific parameters, elements may be

weighted or even determined to be not applicable for certain categories

of positions. All elements applicable to the position are critical as

defined by 5 CFR part 430.

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For each element, ``Discriminators'' and ``Descriptors'' are

provided to assist in distinguishing low to high contributions. The

discriminators (2-4 for each element) break down aspects of work to be

measured within the element. The descriptors (one for each career level

for each discriminator) define the expected level of contribution at

the top of the related career level for that element.

Scores currently range between 0 and 89; specific relationships

between scores and career levels are different for each career track.

(See Figure 7.) Basic pay adjustments are based on a comparison of the

employee's level of contribution to the normal pay range for that

contribution and the employee's present rate of basic pay.

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[[Page 33994]]

Supervisors and pay pool panels determine an employee's

contribution level for each element considering the discriminators as

appropriate to the position. A contribution score, available to that

level, is assigned accordingly. For example, a scientist whose

contribution in the Technical Problem Solving element for S&E

Professionals is determined to be at Level II may be assigned a score

of 18 to 47. Eighteen reflects the lowest level of responsibility,

exercise of independent judgment, and scope of contribution; and 47

reflects the highest. For Level III contributions, a value of 44 to 66

may be assigned. Each higher career level equates to a higher range of

values up to a total of 89 points for S&E professionals. The maximum

score of (currently) 89 provides for S&E Professional Level V employees

the potential for basic pay of SES Level 4, currently $118,000, plus

locality pay up to a cap of Executive Level III, currently $125,900.

Each element is judged separately and level of work may vary for

different elements. The scores for each element are then averaged to

determine the Overall Contribution Score (OCS).

The CCS process will be carried out within a pay pool that

typically consists of all employees in an NRL division. Pay pools

should have a minimum size of about 35 employees; the largest pay pool

may have about 300 employees. To facilitate equity and consistency,

element weights and applicability and CCS score adjustments are

determined by a pay pool panel, rather than by individual supervisors.

Basic pay adjustments, contribution awards, and DCA's may be

recommended by the pay pool panel or by individual supervisors. Pay

pool panels will consist of supervisory officials or other individuals

who are familiar with the organization's work and the contributions of

its employees. In most cases division heads (mostly SES members)

function as pay pool managers, with final authority to decide weights,

scores, basic pay adjustments, and awards.

3. Pay Pool Annual Planning

Prior to the beginning of each annual appraisal period, the pay

pool manager and panel will review pay pool-wide expectations in the

areas described below.

a. Element Weights and Applicability. As written, all elements are

weighted equally. If pay pool panels and managers decide that some

elements are more important than others or that some do not apply at

all to the effective accomplishment of the organization's mission, they

may establish element weights including a weight of zero which renders

the element not applicable. Element weights are not intended for

application to individual employees. Instead, they may be established

only for subcategories of positions, not to exceed a maximum of five

subcategories in each career track. Subcategories for S&E Professionals

might be: Bench Level S&E, Supervisor, Program Manager, and Support

S&E. Subcategories should include a minimum of five positions, when

possible. Weights must be consistent within the subcategory.

b. Supplemental Criteria. The CCS level descriptors are designed to

be general so that they may be applied to all employees in the career

track. Supervisors and pay pool panels may establish supplemental

criteria to further inform employees of expected contributions. This

may include (but is not limited to) examples of contributions which

reflect work at each level for each element, taskings, objectives, and/

or standards.

4. Annual CCS Appraisal Process (See Figure 8)

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[[Page 33996]]

The NRL appraisal period will be 1 year, with a minimum appraisal

period of 90 days. At the beginning of the appraisal period, or upon an

employee's arrival at NRL or into a new position, the following

information will be communicated to employees so that they are informed

of the basis on which their performance and contributions will be

assessed: their career track and career level; applicable elements,

descriptors and discriminators; element weights; any established

supplemental criteria; OCS's which correspond to each employee's NPR

(see section IV.C.6); and basic acceptable performance standards. The

CCS Summary Form (Appendix D) will be used to facilitate and document

this communication. All employees will be provided this information;

however, employees in some situations may not receive CCS scores. These

situations are described in section IV.C.5, Exceptions. The

communication of information described by this paragraph constitutes

performance planning as required by 5 CFR 430.206(b).

Supervisor and employee discussion of organizational objectives,

specific work assignments, and individual performance expectations (as

needed), should be conducted on an ongoing basis. Either the supervisor

or the employee may request a formal review during the appraisal

period; otherwise, a documented review is required only at the end of

the appraisal period.

At the end of the appraisal period, employees will provide input

describing their contributions by preparing a Yearly Accomplishment

Report (YAR). Pay pool managers may exempt groups of positions from the

requirement to submit YARs; in cases where YARs are not required,

employees may submit them at their own discretion. Standard operating

procedures will provide guidance for pay pools and employees on the

content and format of YARs, and on other types of information about

employee contributions which should be developed and considered by

supervisors. This will include procedures for capturing contribution

information regarding employees who serve on details, who change

positions during the appraisal period, who are new to NRL, and other

such circumstances.

Supervisors will review the employee's YAR and other available

information about the employee's contributions during the appraisal

period and determine an initial CCS score for each element considering

the discriminators as appropriate to the position. In addition,

supervisors will determine whether the employee's performance was

acceptable or unacceptable in each element when compared against the

basic acceptable performance standards. The rating of the elements (all

that are applicable are designated critical as defined by 5 CFR part

430) will serve as the basis for assignment of a summary level of

Acceptable or Unacceptable. If any element is rated unacceptable, the

summary level will be Unacceptable; otherwise the summary level will be

Acceptable. Unacceptable ratings must be reviewed and approved by a

higher level than the first-level supervisor.

If an employee changes positions during the last 90 days of the

appraisal period, the losing supervisor will conduct a performance

rating (i.e., rate each element Acceptable or Unacceptable and

determine the summary level) at the time the employee moves to the new

position. This will serve as the employee's rating of record. For

employees who report to NRL during the last 90 days of the appraisal

period, any close-out rating of Acceptable (or its equivalent) or

better from another Government agency will serve as the employee's

rating of record (the employee will be rated Acceptable). The

determination of CCS scores and application of related pay adjustments

for such employees is set forth in section IV.C.5, ``Exceptions''.

The pay pool panel will meet to compare scores, make appropriate

adjustments, and determine the final OCS for each employee. Final

approval of CCS scores and element and summary ratings will rest with

the pay pool manager (unless higher level approval is requested or

deemed necessary). Supervisors will communicate the element scores,

ratings, summary level, and OCS to each employee, and discuss the

results and plans for continuing growth. Employees rated Unacceptable

will be provided assistance to improve their performance (see paragraph

V.A).

The CCS process will be facilitated by an automated system, the

CCSDS. During the appraisal process, all scores and supervisory

comments will be entered into the CCSDS. The CCSDS will provide

supervisors, pay pool panel members, and pay pool managers with

background information (e.g., YARS, employees' prior year scores and

current basic pay) and spreadsheets to assist them in comparing

contributions and determining scores. Records of employee appraisals

will be maintained in the CCSDS, and the system will be able to produce

a hard copy document for each employee which reflects his or her final

approved score.

5. Exceptions

All employees who have worked 90 days or more by the end of the

appraisal period will receive a performance rating of record. However,

in certain situations NRL does not consider the actual determination of

CCS scores to be necessary. In other situations, it may not be feasible

to determine a meaningful CCS score. Therefore, the determination of

CCS scores will not be required for the following types of employees:

a. Employees on intermittent work schedules;

b. Those on temporary appointments of 1 year or less;

c. Those who work less than 6 months in an appraisal period (e.g.,

on extended absence due to illness);

d. Those on long-term training for all or much of the appraisal

period;

e. Employees who have reported to NRL or to a new position during

the 90 days prior to the end of the appraisal period; and

f. Student Educational Employment Program employees.

If supervisors believe that the nature of such an employee's

contributions provide a meaningful basis to determine a CCS score, they

may appraise employees in the categories listed above, provided that

the employee has worked at least 90 days in an NRL position during the

appraisal period.

Those employees mentioned above who are not appraised under CCS

will not be eligible for merit increases or contribution awards. (This

will affect the calculation of service credit for RIF (see section

V.C.). All employees listed above will be given full general and

locality increases (as described in sections IV.C.7.a, ``General

Increases,'' and IV.C.7.c, ``Locality Increases''). All employees are

eligible for awards under NRL's Incentive Awards Program, such as ``On-

the-Spot'' and Special Act Awards, as appropriate.

6. Normal Pay Range (NPR)--Basic Pay Versus Contribution

The NRL CCS assumes a relationship between the assessed

contribution of the employee and a normal range of pay. For all

possible contribution scores available to employees, the NPR spans a

basic pay range of 12 percent. Employees who are compensated below the

NPR for their assessed score are considered ``undercompensated,'' while

employees compensated above the NPR are considered ``overcompensated.''

The lower boundary of the NPR is initially established by fixing

the basic pay equivalent to GS-1, step 1 of the General Schedule

(without locality pay), with a CCS score of zero. The upper

[[Page 33997]]

boundary is fixed at the basic pay equivalent to GS-15, step 10 of the

General Schedule (without locality pay), with a CCS score of 80. The

distance between these upper and lower boundaries for a given overall

contribution score is 12 percent of basic pay for all available CCS

scores. Using these constraints, the interval between scores is

approximately 2.37 percent through the entire range of pay. The lines

were extended using the same interval so that the upper boundary of the

normal range of basic pay accommodates the basic pay for SES Level IV.

This currently occurs at a contribution score near 90. (The actual end

point will vary depending on any pay adjustment factors, e.g., general

increase.) The formula used to derive the NPR may be adjusted in future

years of the demonstration project. See Appendix E for further details

regarding the formulation of the NPR.

Each year the boundaries for the NPR plus the minimum and maximum

rate of basic pay for each career level (except the maximum rate for

Level V of the S&E Professional Career Track) will be adjusted by the

amount of the across-the-board GS percentage increase granted to the

Federal workforce. At the end of each annual appraisal period,

employees' contribution scores will be determined by the CCS process

described above, then their overall contribution scores and current

rates of basic pay will be plotted as a point on a graph along with the

NPR. The position of the point relative to the NPR gives a relative

measure of the degree of over-or undercompensation of the employee, as

shown in Figure 9. Points which fall below the NPR indicate

undercompensation; points which fall above the NPR indicate

overcompensation.

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[[Page 33999]]

7. Compensation

Presently, employee pay is established, adjusted, and/or augmented

in a variety of ways, including general pay increases, locality pay

increases, special rate adjustments, within-grade increases (WGI's),

quality step increases (QSI's), performance awards, and promotions.

Multiple pay changes in any given year (averaging 3 per employee) are

costly to process and do not consider comprehensively the employee's

contributions to the organization. Under the demonstration project, NRL

will distribute the budget authority from the sources listed above into

4 pay categories: (1) general increase, (2) locality increase, (3)

merit increase, and (4) contribution awards. From these pay categories,

a single annual pay action would be authorized based primarily on

employees' contributions. Competitive promotions will still be

processed under a separate pay action; most career promotions will be

processed under the CCS.

In general, the goal of CCS is to pay in a manner consistent with

employee contribution or, in other words, migrate employees' basic pay

closer to the NPR. One result may be a wider distribution of pay among

employees for a given level of duties.

After the CCS appraisal process has been completed and the

employees' standing relative to the NPR has been determined, the pay

pool manager, in consultation with the pay pool panel or other pay pool

supervisory and staff officials, will determine the appropriate basic

pay change and contribution award, if appropriate, for each employee.

Standard operating procedures will provide guidance, including market

salary reference data, to assist pay pool managers in making pay

determinations. In most cases, the pay pool manager will approve basic

pay changes and awards. In some cases, however, approval of a higher

level official will be required. Figure 10 summarizes the eligibility

criteria and applicable limits for each pay category.

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BILLING CODE 6325-01-C

The Contribution-based Compensation System Data System (CCSDS) will

calculate each employee's OCS and his or her standing in relation to

the NPR. The system will provide a framework to assist pay pool

officials in selecting and implementing a payout scheme. It will alert

management to certain formal limits in granting pay increases; e.g., an

employee may not receive a permanent increase above the maximum rate of

basic pay for his or her career level until a corresponding level

change has been effected. Once basic pay and award decisions have been

finalized and approved, the CCSDS will prepare the data file for

processing the pay actions, and maintain a consolidated record of CCS

pay actions for all NRL demonstration project employees.

a. General Increases. General increase budget authority will be

available to pay pools as a straight percentage of employee salaries,

as derived under 5 U.S.C. 5303 or similar authority. Pay pool panels or

managers may reduce or deny general pay increases for employees whose

contributions are in the overcompensated category. (See Figure 10.)

Such reduction or denial may not place an employee in the

[[Page 34000]]

undercompensated category. An employee receiving maintained pay (except

one receiving maintained pay for an occupational injury who receives a

full general pay increase) will receive half of the across-the-board GS

percentage increase in basic pay until the employee's basic pay is

within the basic pay range assigned for their current position or for 2

years, whichever is less. NRL employees on pay retention at the time of

demonstration project implementation or as a result of placement

through the DoN RPL, DoD PPP or the Federal Interagency Career

Transition Assistance Plan will receive half of the across-the-board GS

percentage increase until the employee's maintained pay is exceeded by

the maximum rate for the employee's career level or the maintained pay

is ended due to a promotion. General increase authority not expended is

available to either the merit increase or contribution award pay

categories or both.

b. Merit Increases. Merit increases will be calculated after the

determination of employees' general increases. Merit increases may be

granted to employees whose contribution places them in the ``normal''

or ``undercompensated'' categories. (See Figure 10.) In general, the

higher the range in which the employee is contributing compared to his

or her basic pay, the higher the merit increase should be. However, the

following limitations apply: a merit increase may not place any

employee's basic pay (1) in the ``overcompensated'' category (as

established by the NPR for the upcoming year, which has been adjusted

by the amount of the new general increase); (2) in excess of SES Level

IV; (3) in excess of the maximum rate of basic pay for the individual's

career level (unless the employee is being concurrently advanced to the

higher career level); or (4) above any outside-imposed dollar limit

(e.g., high-grade ceiling). Merit increases for employees in the NPR

will be limited to 6 percent of basic pay, not to exceed the upper

limit of the NPR for the employee's score. In addition, merit increases

for employees in the undercompensated range may not exceed 6 percent

above the lower rail of the NPR, or 20 percent of basic pay without DOR

approval.

The NRL merit increase category will include what is now WGI's,

QSI's, and career ladder promotions. This category will be set each

year near 2.4 percent of total NRL basic pay rates (including the

general increase rate approved for the coming year). This is close to

the average of NRL's expenditures for step increases and promotions

over the last 3 years. This percentage has been used by other

demonstration projects in the past. The 2.4 percent figure will be

adjusted as necessary to facilitate cost containment over the life of

the demonstration project.

The amount of budget authority available to each pay pool will be

determined annually by the DOR. Factors to be considered by the DOR in

determining annual budget authority may include market salaries,

mission priorities, and organizational growth. Because statistical

variations will occur in year-to-year personnel growth, any unexpended

merit increase authorities may be carried over for use in the next

cycle or transferred to the Contribution Awards Category. Any

unexpended merit increase authority must be used no later than the

payout for the next rating cycle.

c. Locality Increases. All employees will be entitled to the

locality pay increase authorized by law for their official duty

station. In addition, the locality-adjusted pay of any employee may not

exceed the rate for Executive Level IV, currently $118,400, except

that, for employees in Career Level V of the S&E Professional Career

Track, the locality-adjusted pay cap is Level III of the Executive

Schedule (currently $125,900 from ``Rates of Pay for the Executive

Schedule,'' effective since January 1998).

d. Contribution Awards. Authority to pay contribution awards (lump-

sum payments recognizing significant contributions) will be initially

available to pay pools as a straight 1.5 percent of employees' basic

pay (similar to the amount currently available for performance awards).

The percentage rate may be adjusted in future years of the

demonstration project. In addition, unexpended general increase and

merit increase budget authorities may be used to augment the award

category. Contribution awards may be granted to those employees whose

contributions place them in the ``normal'' or ``undercompensated''

category, and to employees in the ``overcompensated'' category who are

on maintained pay. Standard operating procedures will provide guidance

to pay pool managers in establishing and applying criteria to determine

significant contributions which warrant awards. An award exceeding

$10,000 requires DOR approval. (See Figure 10.) Any unexpended

contribution award authority must be used at the payout for the next

rating cycle. Pay pools may also grant time-off as a contribution

award, in lieu of or in addition to cash.

8. Career Movement Based on CCS

Movement through the career levels will be determined by

contribution and basic pay at the time of the annual CCS appraisal

process.

The NRL demonstration project is an integrated system that links

level of work to be accomplished (as defined by a career track and

career level) with individual achievement of that work (as defined by

an OCS) to establish the rate of appropriate compensation (as defined

by the career track pay schedule), and to determine progression through

the career track. This section addresses only changes in level which

relate directly to the CCS determination.

When an employee's OCS falls within 3 scores of the top score

available to his or her current career level, supervisors should

consider whether it is appropriate to advance the employee to the next

higher level (refer to IV.A.1.a for other criteria). If progression to

the next higher level is deemed warranted, supporting documentation

would be included with the CCS appraisal and forwarded through the

appropriate channels for approval. If advancement is not considered

appropriate at this time, the employee would remain in his or her

current career level. Future basic pay raises would be capped by the

top of the employee's current career level unless the employee

progresses to the next higher career level through a CCS-related

promotion, an accretion of duties promotion, or a competitive

promotion.

a. Advancements in Level Which May be Approved by the Pay Pool

Manager. Advancements to all levels except Levels IV and V of the S&E

Professional and the Administrative Specialist and Professional Career

Tracks may be approved by the pay pool manager (this may be changed in

future years of the demonstration project if there are changes in the

way high-grade positions are defined).

b. Advancements in Level Which Must be Approved by the Director of

Research (DOR). Advancement to (1) levels outside target career levels

or established position management criteria; (2) Levels IV and V of the

S&E Professional Career Track; and (3) Levels IV and V of the

Administrative Specialist and Professional Career Track require

approval by the DOR or his or her designee. These levels include

(presently) all of NRL's high-grade billets. Details regarding the

process for nomination and consideration, format, selection criteria,

and other aspects of this process will be addressed in the standard

operating procedures. In the event that unanticipated high-grade

[[Page 34001]]

turnover results in vacancies prior to the end of the appraisal period,

NRL may carry out this process at other times of the year.

c. Advancement to Level V of the Science and Engineering (S&E)

Professional Career Track. Vacancies in the billets allotted to NRL in

this level will be filled as described in section IV.B.4.

d. Regression to Lower Level. (See Figure 9, ``Employee A''). If an

employee is contributing less than expected for the level at which he

or she is being paid, the individual may regress into a lower career

level through reduction or denial of general increases and

ineligibility for merit increases. (This is possible because the NPR

plus the minimum and maximum pay rates for each career level will be

adjusted upwards each year by the across-the-board GS percentage

increase in basic pay.) If the employee's basic pay regresses to a

point below the pay overlap area between his or her level and the next

lower level, it will no longer be appropriate to designate him or her

as being in the higher level. Therefore, the employee will be formally

changed to the lower level. The employee will be informed of this

change in writing, but procedural and appeal rights provided by 5

U.S.C. 4303 and 7512 (and related OPM regulations) will not apply

(except in the case of employees who have veterans' preference). NRL is

providing for waivers of the statute and regulations for such actions.

Further, because a change to lower level under such circumstances is

not discretionary, the change may not be grieved under NRL's

administrative grievance procedures.

9. CCS Grievance Procedures

An employee may grieve the appraisal received under CCS using

procedures specifically designed for CCS appraisals. Under these

procedures, the employee's grievance will first be considered by the

pay pool panel, who will recommend a decision to the pay pool manager.

If the employee is not satisfied with the pay pool manager's decision,

he or she may file a second-step grievance with the next higher level

management official. This official will render a final NRL decision on

the grievance.

The following are not grievable: pay actions resulting from CCS

(receipt, non-receipt or amount of general increase, merit increase,

DCA or contribution award); reductions in level without reduction in

pay due to regression (see section IV.C.8.d); any action for which

another appeal or complaint process exists.

V. Separations

A. Performance-Based Reduction in Pay or Removal Actions

This section applies to reduction in pay or removal of

demonstration project employees based solely on unacceptable

performance. Adverse action procedures under 5 CFR part 752 remain

unchanged.

When a supervisor determines during or at the end of the appraisal

period that the employee is not completing work assignments

satisfactorily, the supervisor must make a determination as to whether

the employee is performing unacceptably in one or more of the critical

elements. All CCS elements applicable to the employee's position are

critical as defined by 5 CFR part 430.

Unacceptable performance determinations must be made by comparing

the employee's performance to the acceptable performance standards

established for elements.

At any time during or at the end of the appraisal period that an

employee's performance is determined to be unacceptable in one or more

critical elements, the employee will be provided assistance in

improving his or her performance. This will normally include clarifying

(or further clarifying) the meaning of terms used in the acceptable

performance standards (e.g., ``timely'' ``thorough research'' and

``overall high quality'') as they relate to the employee's specific

responsibilities and assignments. An employee whose performance is

unacceptable after he or she has been given a reasonable opportunity to

improve may be removed or reduced in grade or level, in accordance with

the provisions of 5 U.S.C. 4303 and related OPM regulations. Employees

may also be removed or reduced in grade or level based on unacceptable

performance under the provisions of 5 U.S.C. 7512. All procedural and

appeal rights set forth in the applicable statute and related OPM

regulations will be afforded to demonstration project employees removed

or reduced in grade or level for unacceptable performance.

B. RIF

1. RIF Authority

Under the demonstration project, NRL would be delegated authority

to approve RIF as defined in Secretary of the Navy Instruction 12351.5E

and the use of separation pay incentives.

2. RIF Definitions

a. Competitive Area. A separate competitive area will be

established by geographic location for all personnel included in the

demonstration project.

b. Competitive Level. Positions in the same occupational career

level, which are similar enough in duties and qualifications that

employees can perform the duties and responsibilities including the

selective placement factor, if any, of any other position in the

competitive level upon assignment to it, without any loss of

productivity beyond what is normally expected.

c. Service Computation Date (SCD). The employee's basic Federal SCD

would be adjusted for CCS results credit.

(1) CCS Process Results Credit.

a. An employee's basic Federal SCD may be credited with up to 20

years credit based on the results of the CCS process. The CCS RIF

Assessment Category would be used to determine the number of RIF years

credited. The CCS RIF Assessment Category is the combination of the

employee's standing under the CCS relative to the NPR and any merit

increase, DCA, contribution award or promotion. Figure 11 shows the RIF

years available for each CCS RIF Assessment Category.

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BILLING CODE 6325-01-C

b. If an employee has fewer than three CCS process results, the

value (RIF years available) of the actual number of process results on

record will be divided by the number of actual process results on

record. In cases where an employee has no actual CCS process results,

the employee will be given the additional RIF CCS process results

credit for the most common, or ``modal'' NRL demonstration project CCS

RIF Assessment Category for the most recent CCS appraisal period.

(2) Credit from Other Rating Systems. Employees who have been rated

under different patterns of summary rating levels will receive RIF

appraisal credit as follows:

--If there are any ratings to be credited for the RIF given under a

rating system which includes one or more levels above fully successful

(Level 3), employees will receive credit as follows: 12 years for Level

3, 16 years for Level 4, 20 years for Level 5; or

--If an employee comes from a system with no levels above Fully

Successful (Level 3), they will receive credit based on the

demonstration project's modal CCS RIF assessment category.

(3) RIF Cutoff Date. To provide adequate time to properly determine

employee retention standing, the cutoff date for use of new CCS process

results is set at 30 days prior to the date of issuance of RIF notices.

3. Displacement Rights

(a) Displacement Process. Once the position to be abolished has

been identified, the incumbent of that position may displace another

employee within the incumbent's current career track and career level

when the incumbent has a higher retention standing and is fully

qualified for the position occupied by an employee with a lower

standing. If there are no displacement rights within the incumbent's

current career track and career level, the incumbent may exercise his

or her displacement rights to any position previously held in the next

lower career level, regardless of career track, when the position is

held by an employee with a lower retention standing. In the case of all

preference eligibles, they may displace up to the equivalent of 3

grades or intervals below the highest equivalent grade of their current

career level in the same or a different career track regardless of

whether they previously held the position provided they are fully

qualified for the position and the position is occupied by an employee

with a lower retention standing. Preference eligibles with a

compensable service connected disability of 30 percent or more may

displace an additional 2 GS grades or intervals (total of 5 grades)

below the highest equivalent grade of their current career level

provided they have previously held the position and the position is

occupied by an employee in the same subgroup with a later RIF service

computation date.

(b) Retention Standing. Retention standing is based on tenure,

veterans' preference, length of service, and contribution.

(c) Vacant Positions. Assignment may be made to any available

vacant position including those with promotion potential in the

competitive area.

(d) Ineligible for Displacement Rights. Employees who have been

notified in writing that their performance is considered to be

unacceptable.

(e) Change to Lower Level due to an Adverse or Performance-based

Action. An employee who has received a written decision to change him

or her to

[[Page 34003]]

a lower level due to adverse or performance based action will compete

from the position to which he or she will be or has been demoted.

3. Notice Period

The notice period and procedures in 5 CFR subpart H, section

351.801 will be followed.

4. RIF Appeals

Under the demonstration project, employees affected by a RIF

action, other than a reassignment, maintain their right to appeal to

the Merit Systems Protection Board if they feel the reason for the RIF

is not valid or if they think the process or procedures were not

properly applied.

5. Separation Incentives

NRL will have delegated authority to approve separation incentives

and will use the current calculation methodology of a lump sum payment

equal to an employee's severance pay calculation or $25,000, whichever

is less.

6. Severance Pay

Employees will be covered by the severance pay rules in 5 CFR part

550, subpart G, except that NRL will establish rules for determining a

``reasonable offer'' that parallel Title 5 rules.

7. Outplacement Assistance

All outplacement assistance currently available would be continued

under the demonstration project.

VI. Demonstration Project Transition

A. Initial Conversion or Movement to the Demonstration Project

1. Placement into Career Tracks and Career Levels

Conversion or movement of GS employees into the demonstration

project will be into the career track and career level which

corresponds to the employee's current GS grade and basic pay. If

conversion into the demonstration project is accompanied by a

simultaneous change in the geographic location of the employee's duty

station, the employee's overall GS pay entitlements (including locality

rate) in the new area will be determined before converting the

employee's pay to the demonstration project pay system. Employees will

be assured of placement within the new system without loss in total

pay. Once under the demonstration project, employee progression through

the career tracks and career levels up to their target career level is

dependent upon contribution score, not upon previous methods (e.g.,

WGI's, QSI's, or career promotions as previously defined).

2. Conversion of Retained Grade and Pay Employees

NRL's workforce will be grouped into career tracks and associated

pay levels with designated pay ranges rather than the traditional grade

and step. Therefore, grade and pay retention will be eliminated. NRL

will grant ``maintained pay'' (as defined in section III.G.2,

``Maintained Pay''), which is related to the current meaning of

``retained pay'' but does not provide for indefinite retention of pay

except in certain situations. Employees currently on grade or pay

retention will be immediately placed on maintained pay at their current

rate of basic pay if this rate exceeds the maximum rate for their

career level and ``grandfathered'' in the appropriate career level.

Employees on grade retention will be placed in the career level

encompassing the grade of their current position. Employees will

receive half of the across-the-board GS percentage increase in basic

pay and the full locality pay increase until their basic pay is within

the appropriate basic pay range for their current position without time

limitation.

3. WGI Buy-In

The participation of all covered NRL employees in the demonstration

project is mandatory. However, acceptance of the system by NRL

employees is essential to the success of the demonstration project.

Therefore, on the date that employees are converted to the project pay

plan, they will be given a permanent increase in pay equal to the

earned (time spent in step) portion of their next WGI based on the

value of the WGI at the time of conversion so that they will not feel

they are losing a pay entitlement accrued under the GS system.

Employees will not be eligible for this basic pay increase if their

current rating of record is unacceptable at the time of conversion.

There will be no prorated payment for employees who are at step 10 or

receiving a retained rate at the time of conversion into the

demonstration project.

4. Conversion of Special Salary Rate Employees

Employees who are in positions covered by a special salary rate

prior to the demonstration project will no longer be considered a

special salary rate employee under the demonstration project. These

employees will, therefore, be eligible for full locality pay. The

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

employees will receive a new basic rate of pay computed by dividing

their basic adjusted pay (higher of special salary rate or locality

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

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

will not apply to the conversion process as there will be no change in

total salary. However, if an employee's new basic pay rate after

conversion to the demonstration project pay schedule exceeds the

maximum basic pay authorized for the career level, then the employee

will be granted maintained pay under paragraph III.G.2 until the

employee's salary is within the range of the career level.

For example, an Electronics Engineer, GS-855-9, step 5, is paid

$44,715 per annum in accordance with special GS salary rates as of

January 1999 for Table Number: 0422. The employee is located in the

locality area of Washington-Baltimore, DC-MD-VA-WV. Under the

demonstration project, the computation of the engineer's new basic rate

of pay with a full locality adjustment and WGI buy-in is computed as

follows:

a. Basic adjusted pay divided by locality pay factor=new basic rate

of pay

b. New basic rate of pay multiplied by the full locality adjustment

for current area=full locality adjustment amount for special rate

employees.

c. New basic rate of pay + WGI buy-in amount x locality pay

factor = demonstration special rate for conversion.

EXAMPLE:

a. $44,715 (basic adjusted pay) divided by 1.0787 (locality pay

factor) = $41,453 (new basic rate of pay)

b. $41,453 (new basic rate of pay) x .0787 (full locality

adjustment factor for current area) = $3,262 (full locality adjustment

amount)

c. $41,453 (new basic rate of pay) + $500 (example WGI buy-in

amount) = $41,953 (new conversion basic rate of pay) x 1.0787

(locality pay factor) = $45,254 (demonstration special rate for

conversion)

B. CCS Startup

CCS elements, descriptors, discriminators and standards have been

established as the appraisal criteria for the 1998-1999 cycle which

began June 1, 1998. Except for its compensation components, CCS is

consistent with DoN's two-level appraisal program, which was effected

in 1998. The CCS process will be used to appraise employees at the end

of the 1998-1999 cycle on September 30, 1999. The first CCS payout is

expected to occur at the beginning of the first full pay period in

January 2000.

[[Page 34004]]

C. Training

An extensive training program is planned for everyone in the

demonstration project including the supervisors, managers, and

administrative staff. Training will be tailored, as discussed below, to

fit the requirements of every employee included in the demonstration

project and will address employee concerns and as well as the benefits

to employees. In addition, leadership training will be provided, as

needed, to managers and supervisors as the new system places more

responsibility and decision making authority on them.

NRL training personnel will provide local coordination and

facilities, supplemented by contractor support as needed. Training will

be provided at the appropriate stage of the implementation process.

1. Types of Training

Training packages will be developed to encompass all aspects of the

project and validated prior to training the workforce. Specifically,

training packages will be developed for the following groups of

employees:

a. NRL Employees. NRL demonstration project employees will be

provided an overview of the demonstration project and employee

processes and responsibilities.

b. Supervisors and Managers. Supervisors and managers under the

demonstration project will be provided training in supervisory and

managerial processes and responsibilities under the demonstration

project.

c. Support Personnel. Administrative support personnel, HRO

personnel, financial management personnel, and Management Information

Systems Staff will be provided training on administrative processes and

responsibilities under the demonstration project.

D. New Hires Into the Demonstration Project

The following steps will be followed to place employees (new hires)

entering the system:

a. The career track and career level will be determined based upon

the employee's education and experience in relation to the duties and

responsibilities of the position in which he or she is being placed,

consistent with OPM qualification standards.

b. Basic pay will be set based upon available labor market

considerations relative to special qualifications requirements,

scarcity of qualified candidates, programmatic urgency, and education

and experience of the new candidate.

c. Employees placed through the DoN RPL, the DoD PPP, or the

Federal Interagency Career Transition Assistance Plan who are eligible

for maintained pay will receive one half of the across-the-board GS

percentage increase in basic pay and the full locality pay increase

until the employee's basic pay is within the basic pay range of the

career track and career level to which assigned. Employees are eligible

for maintained pay as long as there is no break in service and if the

employee's rate of pay exceeds the maximum rate of his or her career

level.

E. Conversion or Movement From Demonstration Project

In the event the demonstration project is terminated or employees

leave the demonstration project through promotion, change to lower

grade, reassignment or transfer, conversion back to the GS system may

be necessary. The converted GS grade and GS rate of pay must be

determined before movement or conversion out of the demonstration

project and any accompanying geographic movement, promotion, or other

simultaneous action. An employee will not be converted at a level which

is lower than the GS grade held immediately prior to entering the

Demonstration project, unless, since that time, the employee has

undergone a reduction in career level. The converted GS grade and rate

will become the employee's actual GS grade and rate after leaving the

demonstration project and will be used to determine the pay action and

GS pay administration rules for employees who leave the project to

accept a position in the traditional Civil Service system. The

following procedures will be used to convert the employee's

demonstration project career level to a GS equivalent grade and the

employee's demonstration project rate of pay to the GS equivalent rate

of pay.

1. Grade Determination

Employees will be converted to a GS grade based on a comparison of

the employee's current adjusted rate of basic pay to the highest GS

applicable rate range considering only those grade levels that are

included in the employee's current career level. The highest GS

applicable rate range includes GS basic rates, locality rates, and

special salary rates. Once a grade range is determined, the following

procedures will be used to determine the GS grade:

a. Identify the highest GS grade within the current career level

that accommodates the employee's adjusted rate of basic pay (including

any locality payment).

b. If the employee's adjusted rate of basic pay equals or exceeds

the applicable step 4 rate of the identified highest GS grade, the

employee is converted to that grade.

c. If the employee's adjusted rate of basic pay is lower than the

applicable step 4 of the highest grade, the employee is converted to

the next lower grade.

d. If under the above-described ``step 4'' rule, the employee's

adjusted project rate exceeds the maximum rate of the grade assigned

but fits in the rate range for the next higher applicable grade (i.e.,

between step 1 and step 4), then the employee shall be converted to the

next higher applicable grade.

e. For two-grade interval occupations, conversion should not be

made to an intervening (even) grade level below GS-11.

f. Employees in Level IV of the Administrative Specialist and

Professional Career Track will convert to the GS-13 level.

2. Pay Setting

Pay conversion will be done before any geographic movement or other

pay-related action that coincides with the employee's movement or

conversion out of the demonstration project. The employee's pay within

the converted GS grade is set by converting the employee's

demonstration project rate of pay to a GS rate of pay as follows:

a. The employee's demonstration project adjusted rate of pay

(including locality) is converted to a rate on the highest applicable

adjusted rate range for the converted GS grade. For example, if the

highest applicable GS rate range for the employee is a special salary

rate range, the applicable special rate salary table is used to convert

the employee's pay.

b. When converting an employee's pay, if the rate of pay falls

between two steps of the conversion grade, the rate must be set at the

higher step.

c. Employees whose basic pay exceeds the maximum basic pay of the

highest GS grade for their career level will be converted to the

highest grade in their career level. NRL will coordinate with OPM to

prescribe a procedure for determining the GS-equivalent pay rate for

employees whose rate of pay exceeds the maximum rate of basic pay for

their converted grade.

3. ARSAE

Employees in Career Level V of the S&E Professional Career Track

will convert to the GS-15 grade level. NRL will develop a procedure to

ensure that

[[Page 34005]]

S&E employees entering Career Level V understand that if they leave the

demonstration project and their adjusted pay exceeds the GS-15, step 10

rate, there is no entitlement to retained pay. Their GS-equivalent rate

will be deemed to be the rate for GS-15, step 10. For those Career

Level V employees paid below the adjusted GS-15, step 10 rate, the

post-conversion rates will be set using the converted rates in applying

the highest previous rate rule.

4. Determining Date of Last Equivalent Increase

The last equivalent increase will be the date the employee received

a CCS pay increase, was eligible to receive a CCS pay increase, or

received a promotion, whichever occurred last.

VII. Demonstration Project Duration

A. General

Section 342 of the National Defense Authorization Act for fiscal

year 1995 (Public Law 103-337) does not require a mandatory expiration

date for this demonstration project. The project evaluation plan

addresses how each intervention will be comprehensively evaluated for

at least the first 5 years of the demonstration project. Major changes

and modifications to the interventions can be made through another

announcement in the Federal Register and would be made if formal

evaluation data warrant a change.

B. 5-Year Reexamination

At the 5-year point, the entire demonstration will be reexamined

for either: (a) permanent implementation, (b) modification and another

test period, or (c) termination of the project.

VIII. Demonstration Project Evaluation Plan

A. Overview

Chapter 47 of 5 U.S.C. requires that an evaluation be performed to

measure the effectiveness of the proposed laboratory demonstration

project, and its impact on improving public management. A comprehensive

evaluation plan for the entire laboratory demonstration program,

originally covering 24 DoD laboratories, was developed by a joint OPM/

DoD Evaluation Committee in 1995. This plan was submitted to the Office

of Defense Research & Engineering and was subsequently approved (see

Proposed Plan for Evaluation of the Department of Defense S&T

Laboratory Demonstration Program, Office of Merit Systems Oversight and

Effectiveness, June 1995). The main purpose of the evaluation is to

determine whether the waivers granted result in a more effective

personnel system and improvements in ultimate outcomes (i.e.,

laboratory effectiveness, mission accomplishment, and customer

satisfaction). In March 1996, the Director of Defense Research &

Engineering (DDR&E), who is responsible for laboratory management,

entered into an agr

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