	The Administration’s Draft Proposed “Working for America Act”

The draft proposed “Working for America Act” is intended to ensure that  agencies are equipped to better manage, develop, and reward employees to  better serve the American people. Importantly, the draft  proposal, as we understand it, incorporates many of the key practices of  more market-based and performance-oriented pay systems and requires  that OPM certify that each agency’s pay for performance system meet  prescribed criteria. Under the draft proposal, OPM is to design a new core classification and  pay system and agencies, in coordination with OPM, are to establish  performance appraisal systems to promote high performance. OPM Certification

As I noted, before implementing any human capital reforms, executive  branch agencies should follow a phased approach that meets a “show me”  test. That is, each agency should be authorized to implement a reform only  after it has shown it has met certain requirements, including an assessment  of its institutional infrastructure and an independent certification by OPM  of the existence of this infrastructure. Going forward, I believe that OPM should define in regulation what it will  take in terms of fact-based and data-driven analyses for agencies to  demonstrate that they are ready to receive this certification. OPM’s Roles and Responsibilities

OPM should play a key leadership and oversight role in helping individual  agencies and the government as a whole work towards overcoming a broad  range of human capital challenges. However, it is unclear  whether OPM has the current capacity to discharge its new responsibilities. Labor Management Relations and Adverse Actions and Appeals

The Administration’s draft proposal would amend some provisions of Title  5 of the U.S. Code covering labor management relations and adverse  actions and appeals. Selected federal agencies have been implementing  more market-based and performance-oriented pay for some time—some  organizations for well over a decade—and thus they have built a body of  experience and knowledge about what works well and what does not that  allows the sharing of lessons learned. On the other hand, the federal  government has had far less experience in changes regarding labor  management relations and adverse actions and appeals. Congress granted  DHS and DOD related new authorities in these areas and may wish to  monitor the implementation of those authorities, including lessons learned,  before moving forward for the rest of the federal government. Next Steps for Human Capital Reform

Moving forward with human capital reform, in the short term, Congress  should consider selected and targeted actions to continue to accelerate the  momentum to make strategic human capital management the centerpiece  of the government’s overall transformation effort. Highlights of Selected GAO Reports

The federal government must have  the capacity to plan more  strategically, react more  expeditiously, and focus on  achieving results. Critical to the  success of this transformation are  the federal government’s people— its human capital. A key question is how to update the  federal government’s compensation  system to be market-based and  more performance-oriented. Market-based and more performance-oriented pay cannot be simply  overlaid on most organizations’ existing performance management  systems. While implementing market-based and more performance-oriented pay  systems is both doable and desirable, organizations’ experiences show that  the shift to market-based and more performance-oriented pay must be part  of a broader strategy of change management and performance improvement  initiatives. To begin  to make this change, organizations need to build up their basic management  capacity at every level of the organization.
Why GAO Did This Study

The federal government must have the capacity to plan more strategically, react more expeditiously, and focus on achieving results. Critical to the success of this transformation are the federal government's people--its human capital. We have commended the progress that has been made in addressing human capital challenges in the last few years. Still, significant opportunities exist to improve strategic human capital management to respond to current and emerging 21st century challenges. A key question, for example, is how to update the federal government's classification and compensation systems to be more market-based and performance-oriented. The Administration's draft proposed "Working for America Act" is intended to ensure that agencies are equipped to better manage, develop, and reward their employees. Under this proposal, the Office of Personnel Management (OPM) is to design a new core classification and pay system, among other things. In addition, the draft proposal amends some provisions of Title 5 covering labor management relations and adverse actions and appeals. This testimony presents preliminary observations on the draft proposal; presents the principles, criteria, and processes for human capital reform; and suggests next steps for selected and targeted actions.

What GAO Found

GAO supports moving forward with appropriate human capital reforms and believes that implementing more market-based and performance-oriented pay systems is both doable and desirable. Importantly, broad-based human capital reform must be part of a broader strategy of change management and performance improvement initiatives and cannot be simply overlaid on existing ineffective performance management systems. In addition, organizations need to build up their basic management capacity and must have adequate resources to properly design and effectively implement more market-based and performance-oriented systems. Before implementing dramatic human capital reforms, executive branch agencies should follow a phased approach that meets a "show me" test. That is, each agency should be authorized to implement a reform only after it has shown it has met certain conditions, including an assessment of its related institutional infrastructure and an independent certification by OPM that such infrastructure meets specified statutory standards. In any event, OPM's and agencies' related efforts should be monitored by Congress. Given the above, GAO has the following observations on the draft proposal. Congress should make pay and performance management reforms the first step in government-wide reforms. The draft proposal incorporates many of the key principles of more market-based and performance-oriented pay systems and requires that OPM certify that each agency's pay for performance system meets prescribed criteria. Going forward, OPM should define in regulation what it will take in terms of fact-based and data-driven analyses for agencies to demonstrate that they are ready to receive this certification and implement new authorities. OPM should play a key leadership and oversight role in helping individual agencies and the government as a whole work towards overcoming a broad range of human capital challenges. OPM's role would be expanded in several areas under the draft proposal. It is unclear whether OPM has the current capacity to discharge these new responsibilities. Congress should move more cautiously in connection with labor management relations and adverse actions and appeals reforms. Selected federal agencies have been implementing more market-based and performance-oriented pay systems for some time and thus they have built a body of experience and knowledge about what works well and what does not that allows the sharing of lessons learned. On the other hand, the federal government has had far less experience in changes regarding labor management relations and adverse actions and appeals. Congress may wish to monitor the Departments of Homeland Security's and Defense's implementation of related authorities, including lessons learned, before moving forward in these areas for the rest of the federal government.