National Security Personnel System, 7552-7603 [05-2582]

Agencies

• Office of Personnel Management
• DEPARTMENT OF DEFENSE

[Federal Register Volume 70, Number 29 (Monday, February 14, 2005)]
[Proposed Rules]
[Pages 7552-7603]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-2582]



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Part II





Department of Defense

Office of Personnel Management





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5 CFR Chapter XCIX and Part 9901



National Security Personnel System; Proposed Rule

Federal Register / Vol. 70, No. 29 / Monday, February 14, 2005 / 
Proposed Rules

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DEPARTMENT OF DEFENSE

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Chapter XCIX and Part 9901

RIN 3206-AK76/0790-AH82


National Security Personnel System

AGENCY: Department of Defense; Office of Personnel Management.

ACTION: Proposed rule.

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SUMMARY: The Department of Defense (DoD) and the Office of Personnel 
Management (OPM) are issuing proposed regulations to establish the 
National Security Personnel System (NSPS), a human resources management 
system for the DoD, as authorized by the National Defense Authorization 
Act (Pub. L. 108-136, November 24, 2003). NSPS governs basic pay, 
staffing, classification, performance management, labor relations, 
adverse actions, and employee appeals. NSPS aligns DoD's human 
resources management system with the Department's critical mission 
requirements and protects the civil service rights of its employees.

DATES: Comments must be received on or before March 16, 2005.

ADDRESSES: You may submit comments, identified by docket number NSPS-
2005-001 and/or Regulatory Information Number (RIN) 3206-AK76 or 0790-
AH82. Please arrange and identify your comments on the regulatory text 
by subpart and section number; if your comments relate to the 
supplementary information, please refer to the heading and page number. 
There are multiple methods for submitting comments. Please submit only 
one set of comments via one of the methods described.
    Preferred Method for Comments: The preferred method for submitting 
comments is through the NSPS Web site at:
     https://www.cpms.osd.mil/nsps.
    Alternative Methods: If you are unable to submit comments via the 
NSPS Web site, you may submit comments in one of the following ways.
     Federal Rulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail to: Program Executive Office, National Security 
Personnel System, Attn: Bradley B. Bunn, 1400 Key Boulevard, Suite B-
200, Arlington, VA 22209-5144.
     E-mail to: nspscomments@cpms.osd.mil. Please put the 
following in the subject line: ``Comments on Proposed NSPS 
Regulations--RIN 3206-AK76/0790-AH82.''
     Hand delivery/courier to: Program Executive Office, 
National Security Personnel System, Attn: Bradley B. Bunn, 1400 Key 
Boulevard, Suite B-200, Arlington, VA 22209-5144. Delivery must be made 
between 8 a.m. and 5 p.m., Monday through Friday, except Federal 
holidays.
    Instructions: All submissions must include the agency name and 
docket number or RIN for this rulemaking. Mailed or hand-delivered 
comments must be in paper form. No mailed or hand-delivered comments in 
electronic form (CDs, floppy disk, or other media) will be accepted. 
The official Web site (https://www.cpms.osd.mil/nsps) will contain any 
public comments received, without change, as DoD and OPM receive them, 
unless the comment contains security-sensitive material, confidential 
business information, or other information whose public disclosure is 
restricted by statute. If such material is received, we will provide a 
reference to that material in the version of the comment that is placed 
in the docket. The system is an ``anonymous access'' system, which 
means that DoD and OPM will not know your identity, e-mail address, or 
other contact information unless you provide it in the body of your 
comment. Unless a comment is submitted anonymously, the names of all 
commenters will be public information.
    Please ensure your comments are submitted within the specified open 
comment period. Comments received after the close of the comment period 
will be marked ``late,'' and DoD and OPM are not required to consider 
them in formulating a final decision.
    Before acting on this proposal, DoD and OPM will consider all 
comments we receive on or before the closing date for comments. 
Comments filed late will be considered only if it is possible to do so 
without incurring expense or delay. Changes to this proposal may be 
made in light of the comments we receive.

FOR FURTHER INFORMATION CONTACT: For DoD, Bradley B. Bunn, (703) 696-
4664; for OPM, Ronald P. Sanders, (202) 606-6500.

SUPPLEMENTARY INFORMATION: The Department of Defense (DoD or ``the 
Department'') and the Office of Personnel Management (OPM) are 
proposing to establish the National Security Personnel System (NSPS), a 
human resources (HR) management system for DoD under 5 U.S.C. 9902, as 
enacted by section 1101 of the National Defense Authorization Act (Pub. 
L. 108-136, November 24, 2003). The following information is intended 
to provide interested parties with relevant background material about 
(1) the establishment of the National Security Personnel System, (2) 
the process used to design the NSPS, (3) a description of the proposed 
NSPS regulations, and (4) an analysis of the costs and benefits of 
those proposed regulations.

The Case for Action

``* * * a future force that is defined less by size and more by 
mobility and swiftness, one that is easier to deploy and sustain, 
one that relies more heavily on stealth, precision weaponry, and 
information technologies.''

    With that statement on May 25, 2001, President Bush set a new 
direction for defense strategy and defense management--one toward 
transformation. On January 31, 2002, Secretary of Defense Donald 
Rumsfeld echoed the sentiments expressed by President Bush, stating 
that ``All the high-tech weapons in the world will not transform the 
U.S. armed forces unless we also transform the way we think, the way we 
train, the way we exercise, and the way we fight.''
    Transformation is more than acquiring new equipment and embracing 
new technology--it is the process of working and managing creatively to 
achieve real results. To transform the way DoD achieves its mission, it 
must transform the way it leads and manages the people who develop, 
acquire, and maintain our Nation's defense capability. Those 
responsible for defense transformation--including DoD civilian 
employees--must anticipate the future and wherever possible help create 
it. The Department must seek to develop new capabilities to meet 
tomorrow's threats as well as those of today. NSPS is a key pillar in 
the Department of Defense's transformation--a new way to manage its 
civilian workforce. NSPS is essential to the Department's efforts to 
create an environment in which the total force, uniformed personnel and 
civilians, thinks and operates as one cohesive unit.
    DoD civilians are unique in government: they are an integral part 
of an organization that has a military function. DoD civilians must 
complement and support the military around the world in every time 
zone, every day. Just as new threats, new missions, new technology, and 
new tactics are changing the work of the military, they are changing 
the work of our 700,000 civilians. To support the interests of the 
United States in today's national security environment--where 
unpredictability is the norm and greater

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agility the imperative--civilians must be an integrated, flexible, and 
responsive part of the team.
    At best, the current personnel system is based on 20th century 
assumptions about the nature of public service and cannot adequately 
address the 21st century national security environment. Although the 
current Federal personnel management system is based on important core 
principles, those principles are operationalized in an inflexible, one-
size-fits-all system of defining work, hiring staff, managing people, 
assessing and rewarding performance, and advancing personnel. These 
inherent weaknesses make support of DoD's mission complex, costly, and 
ultimately, risky. Currently, pay and the movement of personnel are 
pegged to outdated, narrowly defined work definitions, hiring processes 
are cumbersome, high performers and low performers are paid alike, and 
the labor system encourages a dispute-oriented, adversarial 
relationship between management and labor. These systemic 
inefficiencies detract from the potential effectiveness of the total 
force. A more flexible, mission-driven system of human resources 
management that retains those core principles will provide a more 
cohesive total force. The Department's 20 years of experience with 
transformational personnel demonstration projects, covering nearly 
30,000 DoD employees, has shown that fundamental change in personnel 
management has positive results on individual career growth and 
opportunities, workforce responsiveness, and innovation; all these 
things multiply mission effectiveness.
    The immense challenges facing DoD today require a civilian 
workforce transformation: civilians are being asked to assume new and 
different responsibilities, take more risk, and be more innovative, 
agile, and accountable than ever before. It is critical that DoD 
supports the entire civilian workforce with modern systems; 
particularly a human resources management system that supports and 
protects their critical role in DoD's total force effectiveness. Public 
Law 108-136 provides the Department of Defense with the authority to 
meet this transformation challenge through development and deployment 
of the NSPS.
    More specifically, the law provides the Department and OPM--in 
collaboration with employee representatives--authority to establish a 
flexible and contemporary system of civilian human resources management 
for DoD civilians. The attacks of September 11 made it clear that 
flexibility is not a policy preference. It is nothing less than an 
absolute requirement and it must become the foundation of DoD civilian 
human resources management.
    NSPS is designed to promote a performance culture in which the 
performance and contributions of the DoD civilian workforce are more 
fully recognized and rewarded. The system will offer the civilian 
workforce a contemporary pay banding construct, which will include 
performance-based pay. As the Department moves away from the General 
Schedule system, it will become more competitive in setting salaries 
and it will be able to adjust salaries based on various factors, 
including labor market conditions, performance, and changes in duties. 
The HR management system will be the foundation for a leaner, more 
flexible support structure and will help attract skilled, talented, and 
motivated people, while also retaining and improving the skills of the 
existing workforce.
    Despite the professionalism and dedication of DoD civilian 
employees, the limitations imposed by the current personnel system 
often prevent managers from using civilian employees effectively. The 
Department sometimes uses military personnel or contractors when 
civilian employees could have and should have been the right answer. 
The current system limits opportunities for civilians at a time when 
the role of DoD's civilian workforce is expanding to include more 
significant participation in total force effectiveness. NSPS will 
generate more opportunities for DoD civilians by easing the 
administrative burden routinely required by the current system and 
providing an incentive for managers to turn to them first when certain 
vital tasks need doing. This will free uniformed men and women to focus 
on matters unique to the military.
    The law requires the Department to establish a contemporary and 
flexible system of human resources management. DoD and OPM are crafting 
NSPS through a collaborative process involving management, employees, 
and employee representatives, and are inviting comments from a broader 
community of other interested parties. DoD leadership will ensure that 
supervisors and employees understand the new system and can function 
effectively within it. The system will retain the core values of the 
civil service and allow employees to be paid and rewarded based on 
performance, innovation, and results. In addition, the system will 
provide employees with greater opportunities for career growth and 
mobility within the Department.

Relationship to the Department of Homeland Security

    In developing the National Security Personnel System, the 
Department of Defense has benefited greatly from the efforts of the 
Department of Homeland Security (DHS). After more than 2 years of work, 
DHS and OPM have recently issued final regulations establishing 
Homeland Security's new human resources (HR) system, and the Secretary 
and the Director were extensively informed by the DHS experience, in 
terms of both process and results, in designing, developing, and 
drafting these proposed regulations. In this regard, the DHS 
regulations were analyzed by staff-level working groups, as well as 
senior leadership, and where it made sense--that is, where it was 
consistent with and supported DoD's national security mission, 
operations, and statutory authorities--we adopted many of the concepts 
and approaches, and even much of the specific language set forth in the 
DHS regulations. For example, both regulations provide flexibilities in 
pay, performance management, labor relations, adverse actions, and 
appeals, while preserving the important core merit principles required 
by law. Similarly, both regulations provide essential management 
flexibilities to respond to mission and operational exigencies. At the 
same time, where there are differences between DHS and DoD--in terms of 
scope, mission, organizational culture, and human capital challenges, 
as well as the statutes that authorize the respective HR systems--DoD 
and OPM have broken new ground, and these proposed regulations are 
intended to stand on their own in that regard. Accordingly, this 
proposed regulation should not be viewed (or judged) in comparison to 
DHS, but rather as an independent effort, informed by the DHS 
experience, yet focused on DoD's mission and requirements.

Authority To Establish a New HR System

    The authority for NSPS is 5 U.S.C. 9902(a) through (h) and (k) 
through (m), which provide authority to establish a new human resources 
management system, appeals system, and labor relations system for the 
Department of Defense. NSPS allows the Department of Defense to 
establish a more flexible civilian personnel management system that is 
consistent with its overall human capital management strategy. NSPS 
will make the Department a more competitive and progressive employer at 
a time when the country's national security demands a highly responsive

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civilian workforce. The NSPS is a transformation lever to enhance the 
Department's ability to execute its national security mission.
    Subsection (a) of section 9902 provides that the Secretary of 
Defense may establish a human resources management system, known as the 
``National Security Personnel System'' (NSPS), in regulations jointly 
prescribed with the Director of OPM. The system established under 
subsection (a) may differ from the traditional civil service system 
established under title 5, U.S. Code, in certain respects. It is also 
subject to certain requirements and limitations that are specified in 
subsections (b) through (h) and (l) of section 9902. For example, NSPS 
must be flexible, contemporary, and consistent with statutory merit 
system principles and prohibitions against prohibited personnel 
practices (in 5 U.S.C. 2301 and 2302, respectively). The system must 
ensure that employees may organize and bargain collectively, subject to 
the provisions of chapter 99 of title 5 and other statutory 
requirements. The system must include a performance management system 
that incorporates certain elements listed in the law. Also, in 
establishing the system, only certain provisions of title 5 may be 
waived or modified by DoD and OPM:
     Chapter 31, 33, and 35 (dealing with staffing, employment, 
and workforce shaping, as authorized by 5 U.S.C. 9902(k));
     Chapter 43 (dealing with performance appraisal systems);
     Chapter 51 (dealing with General Schedule job 
classification);
     Chapter 53 (dealing with pay for General Schedule 
employees, pay and job grading for Federal Wage System employees, and 
pay for certain other employees);
     Subchapter V of chapter 55 (dealing with premium pay), 
except section 5545b (dealing with firefighter pay);
     Chapter 75 (dealing with adverse actions); and
     Chapter 77 (dealing with appeal of adverse actions and 
certain other actions).
    In planning, developing, implementing, and adjusting NSPS 
established under subsection (a), DoD and OPM must use procedures that 
provide employee representatives with an opportunity to participate and 
collaborate in the process. This collaboration requirement is set forth 
in subsection (f) and is further described later in this Supplementary 
Information. The law provides that the collaboration procedures in 
subsection (f) are the ``exclusive procedures'' for the participation 
of employee representatives, provided in lieu of any collective 
bargaining requirements.
    Subsection (h) of section 9902 provides authority to establish an 
appeals process for DoD employees covered by NSPS. This process must 
ensure that all affected DoD employees are afforded the protection of 
due process. Subsection (h) authorizes new standards and procedures for 
personnel actions based on either misconduct or performance that fails 
to meet expectations. The procedures may include a revised process for 
hearing appeals of adverse actions. Finally, subsection (h) provides 
that an employee against whom an adverse action is taken may seek 
review of the record of the case by the Merit Systems Protection Board. 
The Board may dismiss cases that do not raise substantial questions of 
fact or law. The Board may only order corrective action if it 
determines that the DoD decision was--
     Arbitrary, capricious, an abuse of discretion, or 
otherwise not in accordance with law;
     Obtained without procedures required by law, rule or 
regulation having been followed; or
     Unsupported by substantial evidence.
    Subsection (k) of section 9902 provides that, in establishing and 
implementing the NSPS under subsection (a), DoD and OPM are not limited 
by any provision of title 5 or implementing regulations relating to--
     The methods of establishing qualification requirements 
for, recruitment for, and appointments to positions;
     The methods of assigning, reassigning, detailing, 
transferring, or promoting employees; and
     The methods of reducing overall agency staff and grade 
levels, except that performance, veterans' preference, tenure of 
employment, length of service, and such other factors as the Secretary 
considers necessary and appropriate must be considered in decisions to 
realign or reorganize the Department's workforce.
    Thus, subsection (k) authorizes the modification of chapters 31, 
33, and 35 of title 5, U.S. Code (dealing with staffing, employment, 
and workforce shaping). However, in implementing subsection (k), DoD 
must comply with veterans' preference requirements in 5 U.S.C. 
2302(b)(11).
    Subsection (m) provides a separate authority (independent of 
subsection (a) and notwithstanding subsection (d)) for the Secretary of 
Defense and the Director of OPM to establish a DoD labor relations 
system Subsection (m) establishes collaboration requirements to give 
employee representatives the opportunity to participate in developing, 
implementing, and adjusting the labor relations system. Subsection (m) 
provides authority to modify chapter 71. By law, the subsection (m) 
authority may not be used to expand the scope of bargaining. Also, by 
law, the DoD labor relations system supersedes all collective 
bargaining agreements for covered DoD bargaining units, except as 
otherwise determined by the Secretary. Finally, the law provides that 
the DoD labor relations system established under subsection (m) will 
expire 6 years after the date of enactment (i.e., November 24, 2009), 
unless extended by statute. If subsection (m) expires, the provisions 
of chapter 71 of title 5, U.S. Code, would again apply.
    Subsections (i) and (j) in section 9902 establish separate 
authorities that are not held jointly with OPM and are not addressed in 
these proposed regulations.

Process

Leadership

    In April 2004, senior DoD leadership approved the collaborative 
process that the Department is using to design and implement NSPS. This 
process was crafted over a period of about 3 weeks by a group of 25 to 
30 senior experts representing various elements within DoD, OPM, and 
the Office of Management and Budget. The senior leaders used the 
Defense Acquisition Management model as a way to establish the 
requirements for the design and implementation of NSPS. The senior 
leaders recommended Guiding Principles and Key Performance Parameters 
(KPPs), which defined the minimum requirements for NSPS. They also 
recommended establishing a Senior Executive and Program Executive 
Office (PEO), modeled after the Department's acquisition process. 
Subsequently, the Honorable Gordon England, was appointed by the 
Secretary of Defense as the NSPS Senior Executive, in addition to his 
duties as Secretary of the Navy, to design, develop, establish, 
implement, and adjust the NSPS on his behalf. As the NSPS Senior 
Executive, Secretary England established the NSPS PEO as the central 
DoD policy and program office to conduct the design, planning and 
development, deployment, assessment, and full implementation of NSPS. 
The PEO provides direction to and oversight of the Component program 
managers who

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are dual-hatted under their parent Component and the PEO.
    At OPM, the Director designated the Senior Advisor on the 
Department of Defense to lead agency activities in the joint 
development of the NSPS. The Director received frequent and regular 
briefings on the progress of NSPS and on the status of key policy 
options across the spectrum of authorities granted in the NSPS statute. 
Subsequently, in periodic reviews the Director exercised policy 
options, thereby providing guidance to the OPM team. Policy and 
regulatory development for NSPS are specifically vested in the Division 
for Strategic Human Resources Policy, and OPM's work teams and 
leadership cadres were drawn largely from this Division. In addition, a 
Senior Level Review Group reviewed NSPS decision documents to ensure 
consistency with the Director's priorities.
    An integrated executive management team composed of senior DoD and 
OPM leaders provides overall policy and strategic advice to the PEO and 
serves as staff to the Senior Executive. The PEO meets with and 
consults with this team, the Overarching Integrated Product Team 
(OIPT), 8 to 10 times a month. The Senior Executive convenes meetings 
with the PEO and OIPT at least twice a month to monitor and direct the 
process.

Guiding Principles and Key Performance Parameters

    In setting up the process for the design of the system, senior 
leadership adopted a set of Guiding Principles as a compass to direct 
efforts throughout all phases of NSPS development. They translate and 
communicate the broad requirements and priorities outlined in the 
legislation into concise, understandable requirements that underscore 
the Department's purpose and intent in creating NSPS. The Guiding 
Principles are:
     Put mission first--support National Security goals and 
strategic objectives;
     Respect the individual--protect rights guaranteed by law;
     Value talent, performance, leadership and commitment to 
public service;
     Be flexible, understandable, credible, responsive, and 
executable;
     Ensure accountability at all levels;
     Balance HR interoperability with unique mission 
requirements; and
     Be competitive and cost effective.
    In addition, senior leadership approved a set of Key Performance 
Parameters (KPPs), which define the minimum requirements and/or 
attributes of the system. Those KPPs are summarized below:
     High Performing: Employees/supervisors are compensated/
retained based on performance/contribution to mission;
     Agile and Responsive: Workforce can be easily sized, 
shaped, and deployed to meet changing mission requirements;
     Credible and Trusted: System assures openness, clarity, 
accountability and merit principles;
     Fiscally Sound: Aggregate increases in civilian payroll, 
at the appropriations level, will conform to OMB fiscal guidance, and 
managers will have flexibility to manage to budget;
     Supporting Infrastructure: Information technology support 
and training and change management plans are available and funded; and
     Schedule: NSPS will be operational and demonstrate success 
prior to November 2009.

Working Groups

    In July 2004, the PEO established Working Groups to begin the NSPS 
design process. Over 120 employees representing the Military 
Departments (Army, Navy, Air Force), the other DoD Components, and OPM 
began the process of identifying and developing options and 
alternatives for consideration in the design of NSPS. The Working Group 
members included representatives from the DoD human resources 
community, DoD military and civilian line managers, representatives 
from OPM, the legal community, and subject matter experts in equal 
employment opportunity, information technology, and financial 
management. In addition, other subject matter experts participated.
    The Working Groups were functionally aligned to cover the following 
human resources program areas: (1) Compensation (classification and pay 
banding); (2) performance management; (3) hiring, assignment, pay 
setting, and workforce shaping; (4) employee engagement; (5) adverse 
action and appeals; and (6) labor relations. Each group was co-chaired 
by an OPM and DoD subject matter expert. The Working Groups' review and 
analysis included a compilation of pertinent laws, rules, regulations, 
and other related documents that were forwarded to them for advance 
preparation. Working Groups were also provided with available 
information and input from NSPS focus groups and town hall sessions 
held at strategic locations worldwide, union consultation meetings, 
data review and analysis from alternative personnel systems and 
laboratory and acquisition demonstration projects, the NSPS statute, 
Guiding Principles, as well as a review of earlier studies and working 
groups. In addition, subject matter experts briefed the Working Groups 
on a variety of topics, such as pay-for-performance systems, 
alternative personnel systems, pay pool management, and market 
sensitive compensation systems.

Option Development Process

    In developing options for the NSPS, the Working Groups benefited 
from the Government's experience under demonstration project 
authorities and alternative personnel systems, the DoD ``Best 
Practices'' initiative (68 FR 16120, April 2, 2003), and the 
compilation of research materials from the Department of Homeland 
Security HR Systems Design process. The Working Groups also received 
and considered input from employees and their representatives. The 
resulting product was a set of options that covered a broad range of 
variations on the six areas of focus. Each option was evaluated against 
the Guiding Principles and Key Performance Parameters (KPPs).
    To ensure that the options reflected the wide range of views and 
concerns expressed by various entities, the NSPS Working Groups did not 
attempt to reach consensus regarding the merits of the options. 
Consequently, none of the options necessarily represented a consensus 
view of the Working Groups. Some of the options integrate approaches to 
developing new HR systems across two or more of the six subject matter 
areas under consideration. This is especially true of the compensation 
architecture and pay-for-performance options, which were intended to 
illustrate how various classification, compensation, and performance 
system elements might work in combination. The performance and 
compensation/classification options also tended to cluster around 
several distinct themes, such as ``function/occupation-focused,'' 
``performance-focused,'' and ``contribution/ mission-focused.'' The 
initial draft options were reviewed by the PEO and Senior Advisory 
Group (SAG) to capture feedback prior to finalizing them for submission 
to the Overarching Integrated Product Team (OIPT) for review.

Outreach

    A comprehensive outreach and communications strategy is essential 
for designing and implementing a new HR system. Outreach facilitates 
employee awareness and understanding of NSPS;

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it's the primary strategy for sharing the NSPS vision. In April 2004, 
the PEO developed and implemented a communications strategy. The 
objectives of DoD's communications strategy are to (1) demonstrate the 
rationale for and benefits of NSPS; (2) demonstrate openness and 
transparency in the design and process of converting to NSPS; (3) 
express DoD's commitment to ensuring NSPS is applied fairly and 
equitably; and (4) address potential criticism of NSPS.
    The PEO identified channels for disseminating relevant, timely, and 
consistent information, including a wide variety of print and 
electronic media, e-mail, town hall meetings, focus groups, speeches, 
and briefings, and developed an action plan for communicating with each 
stakeholder. The PEO also developed key messages to include in 
stakeholder communications to reinforce the Guiding Principles of the 
NSPS HR systems design process. A website was developed and launched to 
serve as a primary, two-way communications tool for the workforce, 
other stakeholders, and the general public. PEO updates the website 
regularly with new information concerning the design, development, and 
implementation of NSPS. Further, the website includes the capability 
for visitors to submit questions and comments. To date, PEO has 
responded to thousands of questions and comments.

Outreach to Employee Representatives

    Beginning in the spring of 2004 and continuing over the course of 
several months, the PEO sponsored a series of meetings with union 
leadership to discuss design elements of NSPS. Officials from DoD and 
OPM met throughout the summer and fall with union officials 
representing many of the DoD civilians who are bargaining unit 
employees. These sessions provided the opportunity to discuss the 
design elements, options, and proposals under consideration for NSPS 
and solicit union feedback.
    To date, DoD and OPM have conducted 10 joint meetings with 
officials of the 41 unions that represent DoD employees, including the 
9 unions that currently have national consultation rights. These union 
officials represent some 1,500 separate bargaining units covering about 
445,000 employees. These meetings involved as many as 80 union leaders 
from the national and local level at any one time, and addressed a 
variety of topics, including: the reasons change is needed and the 
Department's interests; the results of Department-wide focus group 
sessions held with a broad cross-section of DoD employees; the proposed 
NSPS implementation schedule; employee communications; and proposed 
design options in the areas of labor relations and collective 
bargaining, adverse actions and appeals, and pay and performance 
management.

Outreach to Employees

    In keeping with DoD's commitment to provide employees and managers 
an opportunity to participate in the development of NSPS, the PEO 
sponsored a number of Focus Group sessions and town hall meetings at 
various sites across DoD. Focus Group sessions began in mid-July 2004, 
and continued for approximately 3 weeks. A total of 106 focus groups 
were held throughout DoD, including overseas locations. Separate focus 
groups were held for employees, civilian and military supervisors, and 
managers and practitioners from HR, legal and EEO communities. 
Bargaining unit employees and union leaders were invited to 
participate. Each focus group was conducted by a trained facilitator. 
For the major system design elements, focus group participants were 
asked what they thought worked well in the current HR systems and what 
they thought should be changed. Over 10,000 comments, ideas and 
suggestions received during the Focus Group sessions were summarized 
and provided to NSPS Working Groups for use in developing options for 
the labor relations, appeals, adverse actions, and human resources 
design elements of NSPS.
    In addition, town hall meetings were held in DoD facilities around 
the world during the summer of 2004, providing an opportunity to 
communicate with the workforce, provide the status of the design and 
development of NSPS, and solicit thoughts and ideas. The NSPS Senior 
Executive, Secretary Gordon England, conducted the first town hall 
meeting at the Pentagon on July 7, 2004. The format for town hall 
meetings included an introductory presentation by a senior leader 
followed by a question and answer session where anyone in the audience 
was free to ask a question or make a comment. Some of the town hall 
meetings were broadcast live, as well as videotaped and rebroadcast on 
military television channels and Web sites to facilitate the widest 
possible dissemination.
    The focus group sessions and town hall meetings, as well as the 
Working Groups and union consultation sessions, underscore the 
Department's commitment to ensuring an open, transparent design 
process. The sessions assured that civilian employees, managers, 
supervisors, union leadership, and other key stakeholders were involved 
in the design and implementation of NSPS and had ample opportunity to 
provide input.

Outreach to Other Stakeholders

    In addition to reaching out to DoD employees and labor 
organizations, DoD and OPM met with other groups who were thought to be 
interested in the design of a new HR system for DoD. DoD and OPM 
invited selected stakeholders to participate in briefings held at OPM 
in August and September 2004.
    The first stakeholder briefing was for public interest groups, such 
as the National Association of Public Administrators (NAPA), Coalition 
for Effective Change, and Partnership for Public Service. The second 
stakeholder briefing was for veterans' service organizations. A third 
stakeholder briefing was conducted with non-union employee advocacy 
groups. Attendees at all three briefings received background 
information about NSPS, an update on the PEO work plan, an overview of 
the NSPS Guiding Principles, and updates on the activities of the team, 
including town hall meetings and focus groups. Attendees were afforded 
an opportunity to participate in a question-and-answer session 
following these presentations.
    Both before and after these three stakeholder briefings, DoD and 
OPM responded to dozens of requests for special briefings. DoD and OPM 
also met with the Government Accountability Office, Office of 
Management and Budget, and Department of Homeland Security to keep them 
up to date on the team's activities.

General Provisions--Subpart A

    Subpart A of the proposed regulations provides the purpose and the 
establishment of the general provisions governing coverage under the 
new DoD HR system, and defines terms that are used throughout the new 
part 9901. Part 9901 applies to employees in DoD organizational and 
functional units identified under the regulations as eligible for 
coverage and who are approved for coverage, as of a specified date, by 
the Secretary of Defense. This enables DoD to phase in coverage of 
particular groups of employees or Components of the Department. Subpart 
A also allows DoD to prescribe internal Departmental issuances that 
further define the design characteristics of the new HR system. (See 
the ``Next Steps'' section at the end of this SUPPLEMENTARY 
INFORMATION.) Finally,

[[Page 7557]]

subpart A clarifies the relationship of the regulations in part 9901 to 
other provisions of law and regulations outside those that are being 
waived with respect to DoD.

Purpose

    The purpose of the proposed regulations is to establish a system 
designed to meet the statutory requirements, the NSPS KPPs and Guiding 
Principles.

Eligibility and Coverage

    All DoD employees currently covered by the classification and pay 
systems established under chapter 51 or 53 of title 5, U.S. Code, are 
eligible for coverage under one or more of subparts B through I of this 
part, except to the extent specifically prohibited by law (e.g., 
Executive Schedule officials, who, by law, remain covered by subchapter 
II of chapter 53). DoD will transition to the NSPS human resources 
system beginning with its General Schedule (GS) employees (and 
equivalent). Other categories of employees, including those covered by 
other systems outside of title 5, will be phased in as appropriate. SES 
members and certain other similar types of DoD employees will be 
eligible for coverage under the new DoD pay system. However, the 
proposed regulations provide that any new pay system covering SES 
members must be consistent with the performance-based features of the 
new Governmentwide SES pay-for-performance system authorized by section 
1125 of the National Defense Authorization Act (Pub. L. 108-136, 
November 24, 2003). If DoD wishes to establish an SES pay system that 
varies substantially from the new Governmentwide SES pay-for-
performance system, DoD and OPM will issue joint authorizing 
regulations consistent with all of the requirements of the National 
Security Personnel System, as set forth in 5 U.S.C. 9902. In addition, 
DoD and OPM will involve SES members and other interested parties in 
the design and implementation of any new pay system for SES members 
employed by DoD.

Scope of Authority

    Subject to the requirements and limitations in 5 U.S.C. 9902, the 
provisions in the following chapters of title 5, U.S. Code, and any 
related regulations, may be waived or modified:
     The rules governing staffing, employment, and workforce 
shaping (as permitted by 5 U.S.C. 9902(k)) established under chapters 
31, 33, and 35;
     The rules governing performance appraisal systems 
established under chapter 43;
     The General Schedule classification system established 
under chapter 51;
     The pay systems for General Schedule employees, pay and 
job grading for Federal Wage System employees, and pay for certain 
other employees, as set forth in chapter 53;
     The premium pay system for employees, as set forth in 
chapter 55, subsection V, except section 5545(b) relating to pay for 
firefighters;
     The labor relations system (as authorized by 5 U.S.C. 
9902(m)) established under chapter 71;
     The rules governing adverse actions and certain other 
actions taken under chapter 75; and
     The rules governing the appeal of adverse actions and 
certain other actions under chapter 77.

Coordination Between DoD and OPM

    In implementing the intent of Congress that the Secretary and the 
Director jointly prescribe regulations for NSPS, DoD and OPM recognize 
that both agencies have significant legitimate interests that must be 
taken into account. DoD requires an agile and responsive civilian 
personnel system to support its Total Force and execute its national 
security mission. At the same time, OPM is responsible for providing 
guidance and assistance to DoD in developing a new human resources 
management system while simultaneously protecting Governmentwide 
institutional interests regarding the civil service system.
    Section 9901.105 of the proposed regulations provides that the 
Secretary will advise and/or coordinate with OPM in advance, as 
applicable, regarding the proposed promulgation of certain DoD 
implementing issuances and certain other actions related to the ongoing 
operation of the NSPS where such actions could have a significant 
impact on other Federal agencies and the Federal civil service as a 
whole. The Secretary and the Director fully expect their staffs to work 
closely together on the matters specified in this section, before such 
matters are submitted for official OPM coordination and DoD decision, 
so as to maximize the opportunity for consensus and agreement before an 
issue is so submitted.
    When a matter requiring OPM coordination pursuant to the 
coordination requirements established in these regulations, is to be 
submitted to the Secretary for decision, the Director will be provided 
an opportunity, as part of the Department's normal coordination 
process, to review and comment on the recommendations and officially 
concur or nonconcur with all or part of them. The Secretary will take 
the Director's comments and concurrence/nonconcurrence into account, 
advise the Director of his or her determination, and provide the 
Director with reasonable advance notice of its effective date. 
Thereafter, the Secretary and the Director may take such action(s) as 
they deem appropriate, consistent with their respective statutory 
authorities and responsibilities.

Continuing Collaboration

    The NSPS law requires that the implementation of a new HR system 
for DoD will be carried out with the participation of, and in 
collaboration with, employee representatives. The law spells out the 
specific process for involvement of employee representatives in the 
establishment of the system, known generally as the ``30/30/30'' 
process. These proposed regulations will be subject to that statutory 
process, which includes a comment period of 30 days, a minimum of 30 
days for DoD and OPM to ``meet and confer'' with employee 
representatives on their recommendations, and a final 30 days for 
congressional notification prior to implementation.
    The NSPS law also provides that the Secretary and the Director 
develop a process to involve employee representatives in the further 
planning, development, and/or adjustment of the system. To that end, 
Sec.  9901.106 establishes a process by which employee representatives 
will be provided an opportunity to review, comment, and participate in 
discussions regarding proposals for further adjustments to the system, 
including DoD implementing issuances. This process is called 
``continuing collaboration'' and is a separate and distinct process 
from the provisions found in subpart I, Labor-Management Relations. 
While the proposed NSPS regulations establish the overall NSPS human 
resources management system, there are several areas that will require 
DoD to promulgate implementing directives, instructions, manuals, and 
other issuances that provide the detailed procedures needed to 
implement the system. For example, the proposed regulations provide for 
an administrative process in which employees may seek reconsideration 
of their performance ratings; this is to ensure transparency in the 
performance management system. The specific procedures for that 
reconsideration process are not spelled out in these

[[Page 7558]]

proposed regulations; rather, they will be established in internal DoD 
issuances. In order to ensure that the views and concerns of employee 
representatives are considered in the development of those procedures, 
DoD will engage in the ``continuing collaboration'' process.
    Under continuing collaboration, employee representatives (for those 
employees affected by the proposed issuance) will be provided a draft 
proposal and given a timeframe to review and submit written comments on 
the proposal, and they will be afforded the opportunity to discuss 
their views and concerns with DoD officials prior to finalization of 
the issuance. At the Secretary's discretion, this collaboration may 
also be initiated prior to the drafting of proposed issuances (e.g., at 
the conceptual stage of the process). The proposed regulations 
guarantee that any written comments submitted within the timeframes 
will become part of the official record and be considered before final 
decisions are made. While this process does not affect the right of the 
Secretary to make the final determination as to the content of 
implementing issuances, it offers the opportunity for employee 
representatives to participate meaningfully in the process and 
influence the further development and refinement of NSPS.

Relationship to Other Provisions of the Law

    Paragraph (a)(2) of Sec.  9901.107 establishes a rule of 
construction requiring all provisions of this part be interpreted in a 
way that recognizes the critical national security mission of the 
Department. Each provision must be construed to promote the swift, 
flexible, and effective day-to-day accomplishment of that mission, as 
defined by the Secretary. DoD's and OPM's interpretation of these 
regulations must be accorded great deference.
    Paragraph (b) of Sec.  9901.107 describes the relationship between 
the proposed part 9901 and laws that are not waivable or modifiable 
under the NSPS law. For the purpose of applying other provisions of law 
or Governmentwide regulations that reference provisions under the 
waivable or modifiable chapters (i.e., chapters 31, 33, 35, 43, 51, 53, 
55 (subchapter V only), 71, 75, and 77 of title 5, U.S. Code), the 
referenced provisions are not waived but are modified consistent with 
the corresponding regulations in part 9901, except as otherwise 
provided in that part or in DoD implementing issuances. For example, 
physicians' comparability allowances under 5 U.S.C. 5948 are limited to 
physicians in certain listed pay systems, including the General 
Schedule. To ensure that DoD physicians continue to be eligible for 
physicians' comparability allowances when they convert from the General 
Schedule to the NSPS pay system, they will be deemed to be covered by 
the General Schedule for the purpose of applying section 5948. In 
addition, in applying the back pay law in 5 U.S.C. 5596 to DoD 
employees covered by subpart H of these proposed regulations (dealing 
with appeals), the reference in section 5596(b)(1)(A)(ii) to 5 U.S.C. 
7701(g) (dealing with attorney fees) is considered to be a reference to 
a modified section 7701(g) that is consistent with Sec.  9901.807(h).

Classification--Subpart B

    Subpart B provides DoD with the authority to replace the current GS 
and FWS classification and qualifications systems and other current 
classification systems with a new method of evaluating and classifying 
jobs by grouping them into occupational categories and levels of work 
for pay and other related purposes. Under this new system, DoD (in 
coordination with OPM) will have the authority to establish 
qualifications for positions and to assign occupations and positions to 
broad occupational career groups and pay bands (or levels).
    DoD (in coordination with OPM) will establish broad occupational 
career groups by grouping occupations and positions that are similar in 
types of work, mission, developmental/career paths, and/or 
competencies. The occupational career groups will serve as the basic 
framework for the NSPS classification and pay system. Within career 
groups, DoD may establish pay schedules that apply to subgroupings of 
related occupations. Within each pay schedule, DoD (in coordination 
with OPM) will establish broad salary ranges, commonly referred to as 
pay bands. The pay bands within a pay schedule represent progressively 
higher levels of work with correspondingly higher pay ranges.
    DoD may elect to phase in the coverage of specific categories of 
employees or occupations under the new classification and pay system 
established under these proposed regulations. DoD may use OPM-approved 
occupational series and titles to identify and assign positions to a 
particular career group and pay schedule. Pay schedules typically will 
include most or all of the following levels of work:
     Entry/developmental work that involves a combination of 
formal training and/or on-the-job experience designed to provide the 
employee with the competencies needed to perform successfully at the 
full performance level.
     Work that involves nonsupervisory duties and 
responsibilities at the full performance level of the occupation.
     Nonsupervisory expert work that involves a high level of 
specialized knowledge or technical expertise clearly beyond the 
requirements for work at the full performance level upon which the 
employing organization relies for the accomplishment of critical 
mission goals and objectives.
     Work that involves the supervision of employees at the 
full performance or expert level.
     Managerial work whose primary purpose is to direct key 
DoD/Component scientific, medical, legal, administrative, or other 
programs.
    Career groups, pay schedules, and pay bands provide clearly defined 
career paths for occupations. Table 1 illustrates the career group 
structure concept.

[[Page 7559]]

[GRAPHIC] [TIFF OMITTED] TP14FE05.000

    The new classification system for DoD will result in a streamlined 
method of classifying positions that no longer relies on lengthy 
classification standards and position descriptions. The new system does 
not require artificial distinctions between closely related levels of 
work, as currently required under the GS and Federal Wage System (FWS) 
classification systems. This more fully supports the merit system 
principle 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 * * * for excellence in performance.'' Employees will be 
permitted to request reconsideration of the classification (career 
group, pay schedule, occupational series, or pay band) of their 
official positions of record at any time with DoD and/or OPM, as they 
can today under the GS system. The system described here, together with 
the new pay system described below, will provide DoD with greater 
flexibility to adapt the Department's job and pay structure to meet 
present and future mission requirements.

Pay and Pay Administration--Subpart C

    This subpart contains proposed regulations establishing pay 
structures and pay administration rules for covered DoD employees to 
replace the pay structures and pay administration rules established 
under 5 U.S.C. chapter 53 and 5 U.S.C. chapter 55, subchapter V. This 
new system links pay to employees' performance ratings and is designed 
to promote a high-performance culture within DoD.

National Security Compensation Comparability

    In accordance with the NSPS law, to the maximum extent practicable, 
for fiscal years 2004 through 2008, the aggregate amount allocated for 
compensation of DoD civilian employees under NSPS will not be less than 
if they had not been converted to the NSPS. This takes into account 
potential step increases and rates of promotion had employees remained 
in their previous pay schedule.
    In addition, NSPS implementing issuances will provide a formula for 
calculating the aggregate compensation amount, for fiscal years after 
fiscal year 2008. The formula will ensure that, to the maximum extent 
practicable, in the aggregate, employees are not disadvantaged in the 
overall amount of pay available as a result of conversion to the NSPS, 
while providing flexibility to accommodate changes in the function of 
the organization, changes in the mix of employees performing those 
functions, and other changed circumstances that might impact pay 
levels.

Setting and Adjusting Rate Ranges

    Setting Rate Ranges and Local Market Supplements: The proposed 
regulations establish a pay system that governs the setting and 
adjusting of covered employees' rates of pay. The system will have a 
rate range, with a minimum and maximum rate, for each band in each 
career group based on factors such as labor market rates, recruitment 
and retention information, mission requirements, operational needs, and 
overall budgetary constraints. The bands will have open pay ranges, 
with no fixed step rates. DoD will also set local market supplements (a 
supplement to basic pay in lieu of locality pay) for rate ranges based 
on geographic and occupational factors. DoD will coordinate setting and 
adjusting rate ranges and local market supplements with OPM.
    Adjusting Rate Ranges and Local Market Supplements: DoD will

[[Page 7560]]

determine the rate range adjustments and local market supplements 
considering mission requirements, labor market conditions, availability 
of funds, pay adjustments received by employees in other Federal 
agencies, allowances and differentials under 5 U.S.C. chapter 59, and 
other relevant factors. Rate range adjustments and local market 
supplements may differ by career group, pay schedule, or pay band. The 
minimum and maximum of a range may be adjusted at different rates. DoD 
may determine local market areas as well as the timing of these pay 
adjustments.
    The proposed regulations provide that employees may receive pay 
adjustments as a result of a rate range adjustment. Generally, 
employees will receive an adjustment equal to any increase to the 
minimum rate of their band and will receive any applicable local market 
supplement. In keeping with the desire of the Secretary and the 
Director to achieve and sustain a culture of high performance, the 
proposed regulations provide that these pay adjustments will not be 
provided to employees with an unacceptable performance rating.

Performance-Based Pay

    The NSPS pay system will be a performance-based pay system that 
will result in a distribution of pay raises and bonuses based upon 
individual performance, individual contribution, organizational 
performance, team performance, or a combination of those elements. The 
NSPS system will use pay pools to manage, control, and distribute 
performance-based pay increases and bonuses. Under the proposed 
regulations, the term ``pay pool'' means the organizational elements/
units or other categories of employees that are combined for the 
purpose of determining performance payouts or the dollar value of the 
funds set aside for performance payouts for employees covered by a pay 
pool. The performance payout is a function of the amount of money in 
the performance pay pool and the number of shares assigned to 
individual employees.
    Annual Performance-based Payouts: Employees will receive annual 
performance-based payouts based on their rating of record and assigned 
shares. Each rating level will have a share or range of shares 
associated with it.
    Rating Methodology: DoD implementing issuances will define the 
specific methodologies and practices that will be used in the 
Department. DoD expects to use a methodology that includes at least 
three rating levels and identifies a range of performance shares that 
can be assigned for rating levels. An example of a possible rating 
methodology is provided by Table 2. This example illustrates a five-
level rating methodology with associated share ranges in which level 
five signifies the highest level of performance. The rater will prepare 
and recommend the rating, number of shares, and the distribution of the 
payout between basic pay increase and bonus, as applicable, for each 
employee. These recommendations will then be reviewed by the pay pool 
panel to ensure equitable rating criteria and methodology have been 
applied to all pay pool employees. The final determination of the 
rating, number of shares, and payout distribution will be a function of 
the pay pool panel process and will be approved by the pay pool 
manager. The criteria used to determine the number of shares to assign 
an employee may include assessment of the employee's contribution to 
the mission, the employee's type and level of work, consideration of 
specific achievements, or other job-related significant accomplishments 
or contributions.

                   Table 2.--Sample Rating Methodology
------------------------------------------------------------------------
               Rating level                         Share range
------------------------------------------------------------------------
5........................................  6-8
4........................................  3-6
3........................................  1-2
2........................................  0
1........................................  N/A
------------------------------------------------------------------------

    Performance Pay Pools: Performance pay pools will be established by 
combining organizational elements, functional groupings, or other 
categories of employees. Distinctions may also be made using criteria 
such as location or mission. Each pay pool will be managed by a pay 
pool manager in concert with appropriate management officials. The pay 
pool manager is the individual charged with the overall responsibility 
for rating determinations and distribution of the payout funds in a 
given pay pool. The funding of a performance pay pool consists of the 
money allocated for performance-based payouts for a defined group of 
employees. The amount of money available within a pay pool is normally 
based on the money that would have been available for within-grade 
increases, quality step increases, promotions between grades that have 
been banded in the NSPS pay system, and applicable across-the-board pay 
increases. Funds previously used for end-of-rating cycle performance 
awards or incentive awards may also be used to fund the pay pool. Note 
that the provisions of 5 U.S.C. chapter 45, ``Incentive Awards,'' 
remain in place and provide a valuable means to recognize employee 
achievements throughout the rating cycle.
    Performance Payout: The performance payout is composed of an 
increase to basic pay, a bonus, or a combination of these. A bonus is a 
one-time lump-sum payment that is not paid as basic pay. Subject to DoD 
guidelines, pay pool managers will have the discretion to determine the 
proportion of an employee's total performance payout paid as an 
increase to basic pay or as a bonus. Increases to basic pay may not 
cause the basic pay of an employee to exceed the maximum of his or her 
pay band. In such situations, the amount of the payout that exceeds the 
maximum of the pay band will be paid in the form of a bonus.
    Example: If the maximum of a pay band is $30,000, and an employee 
earning $28,750 is awarded a payout of $3,000, then the employee may 
receive an increase in basic pay of not more than $1,250 ($28,750 + 
$1,250 = $30,000) with the remainder (at least $1,750) paid as a bonus.
    In addition, the proposed regulations allow DoD to establish 
``control points'' or other mechanisms within a band, beyond which 
basic pay increases may be granted only for meeting criteria 
established by DoD. An example of such a control point is a requirement 
for the employee to have achieved the highest performance rating.
    Other Performance Payouts: Extraordinary pay increases (EPI), 
organizational achievement recognition, or other special payments may 
be paid to employees in accordance with implementing issuances. The 
amount of such payments may not cause the employee's basic pay to 
exceed the maximum rate of the employee's assigned pay band.
     Extraordinary Pay Increase: An extraordinary pay increase 
(EPI) is a basic pay increase to reward employees when the payout 
formula does not adequately compensate them for their extraordinary 
performance. It is to be used sparingly and only to reward 
exceptionally high-performing employees whose performance and 
contributions to the organization are of an exceedingly high value. The 
performance must be expected to continue at an extraordinarily high 
level in the future.
     Organizational Achievement Recognition: This type of 
recognition may take the form of additional compensation paid to 
employees of a team, unit, branch, or organization

[[Page 7561]]

whose performance and contributions have successfully and directly 
advanced organizational goal(s).
    Developmental Positions: Employees in developmental positions may 
receive pay adjustments as they acquire the competencies, skills, and 
knowledge necessary to advance to the full performance level.

Pay Administration

    The new DoD pay system provides the Department with an enhanced 
ability to establish and adjust overall pay levels in keeping with 
changes in national and local labor markets. It is designed to adjust 
individual pay levels based on the acquisition and assessment of 
competencies, skills, and knowledge and on the basis of performance or 
contributions to mission. The new system is capable of adapting to 
changing circumstances and mission requirements.
    Initial Conversion: Upon implementation of the new system, 
employees will be converted based on their official position of record. 
Initial entry into NSPS will ensure that each employee is placed in the 
appropriate pay band without loss of pay.
    New Appointments/Reinstatements: When an employee is newly 
appointed or reinstated to a position in NSPS, management may establish 
pay at any rate up to the maximum of the pay band in accordance with 
implementing issuances. The hiring official will determine starting pay 
based on available labor market considerations; specific qualification 
requirements; scarcity of qualified applicants; program needs; 
education or experience of the candidate; and other criteria as 
appropriate. When an employee moves to a pay band with a higher earning 
potential, pay will be set in accordance with implementing issuances.
    Temporary Promotion: Employees on temporary promotions will be 
returned to their official position of record prior to conversion. GS 
employees will be converted at their current rate of basic pay, 
including any locality payment, adjusted on a one-time, pro-rata basis, 
for the time spent towards their next within-grade increase.
    Career-ladder Positions: Employees in career-ladder positions below 
the full performance level will be placed in the appropriate career 
group, pay schedule, and entry or developmental band.
    Promotion: Promotion pay increases (from a lower band to a higher 
band in the same cluster or to a higher band in a different cluster) 
generally will be a fixed percent of the employee's rate of basic pay 
or the amount necessary to reach the minimum rate of the higher band, 
whichever is greater. This amount is roughly equivalent to the value of 
a promotion to a higher grade within the GS system.
    Reassignment: An employee who moves to a position in a comparable 
pay band will have pay set depending on whether the move is voluntary 
or involuntary as a result of unacceptable performance and/or conduct. 
If the move is voluntary or involuntary and not due to unacceptable 
performance and/or conduct, pay will generally be set at the existing 
rate of pay; however, pay may be set at a higher rate within 
limitations specified in DoD implementing issuances. If the move is 
involuntary due to unacceptable performance and/or conduct, there may 
be a reduction in basic pay of up to 10 percent as provided in these 
proposed regulations and in DoD implementing issuances. Pay may not be 
set lower than the minimum of the pay band level or exceed the maximum 
of the pay band level.
    Reduction in Band: When an employee moves to a lower pay band, pay 
will be set depending on whether the move is voluntary or involuntary. 
If the move is voluntary, pay may generally be set anywhere within the 
pay band within limits specified in the implementing issuances. If the 
move is involuntary due to an adverse action based on unacceptable 
performance and/or conduct, there may be a reduction in basic pay 
within the limits specified in these proposed regulations and in DoD 
implementing issuances (not to exceed 10 percent, unless a larger 
reduction