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

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A99-15984

## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** June 24, 1999
- **Citation:** 64 FR 33970

## Text

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

[[Page 33971]]

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

[[Page 33972]]

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

[[Page 33973]]

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

[[Page 33974]]

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]]

[GRAPHIC] [TIFF OMITTED] TN24JN99.000

BILLING CODE 6325-01-C

[[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

BILLING CODE 6325-01-P

[[Page 33982]]

[GRAPHIC] [TIFF OMITTED] TN24JN99.001

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 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.

BILLING CODE 6325-01-P

[[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).

BILLING CODE 6325-01-P

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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

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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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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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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 ``undercompe

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-15984. Public record. Not legal advice.