National Security Personnel System, 56344-56420 [E8-22483]

Agencies

• Office of Personnel Management
• DEPARTMENT OF DEFENSE

[Federal Register Volume 73, Number 188 (Friday, September 26, 2008)]
[Rules and Regulations]
[Pages 56344-56420]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22483]



[[Page 56343]]

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

Part IV





Department of Defense

Office of Personnel Management





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



5 CFR Part 9901



National Security Personnel System; Final Rule

Federal Register / Vol. 73, No. 188 / Friday, September 26, 2008 / 
Rules and Regulations

[[Page 56344]]


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

DEPARTMENT OF DEFENSE

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 9901

RIN 3206-AL62


National Security Personnel System

AGENCY: Department of Defense; Office of Personnel Management.

ACTION: Final rule.

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

SUMMARY: The Department of Defense (DoD) and the Office of Personnel 
Management are issuing final regulations governing the operation of the 
National Security Personnel System (NSPS), a human resources management 
system for DoD, as originally authorized by the National Defense 
Authorization Act for Fiscal Year 2004 and amended by the National 
Defense Authorization Act for Fiscal Year 2008. This final regulation 
governs compensation, classification and performance management under 
NSPS. 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: November 25, 2008.

FOR FURTHER INFORMATION CONTACT: At DoD, Bradley B. Bunn, (703) 696-
5303; for OPM, Charles D. Grimes III, (202) 418-3163.

SUPPLEMENTARY INFORMATION:

Table of Contents

    This SUPPLEMENTARY INFORMATION section is organized as follows:

I. The Case for Action
II. The Need for Change
III. Significant Changes to the Original Law
IV. Two Years of Operational Experience Under NSPS
    A. Classification
    B. Compensation
    C. Pay Administration
    D. Performance and Pay Pool Management
    E. Other Changes
V. Response to Public Comments
    A. Major Issues
    1. Specificity of the Regulation
    2. Collective Bargaining and Labor Relations
    3. Performance and Pay Pool Management
    4. Influence of Performance Versus Market Factors on Pay
    5. Control Points
    B. General Issues
    C. Issues by Subpart
    1. Subpart A--General Provisions
    2. Subpart B--Classification
    3. Subpart C--Pay and Pay Administration
    4. Subpart D--Performance Management
VI. Next Steps

I. The Case for Action

    The United States needs 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 this philosophy established in 2001, DoD set the direction for 
the transformation of defense strategy and defense management--the way 
DoD achieves its mission. To accomplish this, DoD transformed 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--anticipate the future 
and, where possible, help create it. The Department continues to 
implement new capabilities to meet tomorrow's threats as well as those 
of today.
    The National Security Personnel System (NSPS) is a key pillar in 
the Department of Defense's transformation. NSPS was established to 
provide a flexible and contemporary civilian personnel system that is 
essential to the Department's efforts to create and maintain an 
environment in which the DoD Total Force 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 
complement and support the military around the world in every time 
zone, every day. Just as new threats, new missions, new technologies, 
and new tactics are changing the work of the military, they are 
changing the work of our entire civilian workforce as well. To continue 
to support the interests of the United States in the current national 
security environment--where unpredictability is the norm and greater 
agility the imperative--civilians must be an integrated, flexible, and 
responsive part of the Total Force team.
    The Federal personnel system in use by much of the Department and 
the Federal Government is based on 20th century assumptions about the 
nature of public service and cannot adequately address public service 
requirements in the 21st century national security environment. 
Although this personnel system is based on important core principles, 
the principles are manifested in an inflexible, one-size-fits-all 
system of defining work, hiring staff, managing people, assessing and 
rewarding performance, and advancing personnel. The inherent weaknesses 
of this system make support of DoD's mission complex, costly, and 
ultimately risky. The pay and movement of personnel is linked to 
outdated, narrowly defined work definitions with inadequate means of 
making distinctions in pay between high and low performers.
    Recognizing this, NSPS is designed to provide a more flexible, 
mission-driven system of human resources management that retains core 
principles while providing a more cohesive Total Force. Additionally, 
the Department's 28 years of experience with transformational personnel 
demonstration projects, covering approximately 30,000 DoD employees, 
has demonstrated that fundamental change in personnel management 
results in individual career growth and opportunities, workforce 
responsiveness, and innovation. All of these things multiply mission 
effectiveness.
    The immense challenges facing DoD today support the continuation of 
this civilian workforce transformation. Civilian employees 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. 
The enabling legislation provides the Department with the authority to 
meet this transformation challenge.
    More specifically, the law provides the Department and OPM 
authority to establish a flexible and contemporary civilian human 
resources management system for DoD civilians. The attacks of September 
11 and the continuing war on terrorism make clear that flexibility is 
not a policy preference. It is nothing less than an absolute 
requirement, and it must be the foundation of civilian human resources 
management.
    NSPS promotes a performance culture in which the performance and 
contributions of the DoD civilian workforce are more fully recognized 
and rewarded. The system provides the civilian workforce a contemporary 
pay-banding construct which includes performance-based pay. This allows 
for the establishment of more competitive salaries and the ability to 
adjust salaries based on various factors, to include labor market 
conditions, performance, as well as changes in employee duties.
    In other words, NSPS provides a more flexible HR management system 
to attract skilled, talented, and motivated people, while also 
retaining and improving the skills of the existing workforce. The 
system retains the core values of the civil service while

[[Page 56345]]

allowing employees to be paid and rewarded based on performance, 
innovation, and results. It also provides employees with greater 
opportunities for career growth and mobility within the Department. DoD 
leadership will ensure that supervisors and employees understand NSPS 
and can function effectively within it.
    The NSPS pay and classification system provides a more flexible 
support structure that helps attract skilled and talented workers, 
retain and appropriately reward current employees, and create 
opportunities for civilians to participate more fully in the total 
integrated workforce. A pay-banding structure replaced the artificial 
limitations created by the previous pay and classification systems. 
With broad pay bands, the Department is able to move employees more 
freely across a range of work opportunities without being bound by 
narrowly described work definitions. The pay structure is more 
responsive to market conditions. The Department is able to adjust rate 
ranges and local market supplements based on variations relating to 
specific occupations, rather than using a one-size-fits-all approach. 
Labor market conditions also are considered when making pay-setting 
decisions. As prescribed in the enabling legislation, NSPS better links 
individual pay to performance using performance rather than time on the 
job to determine pay increases.
    Despite the professionalism and dedication of DoD civilian 
employees, the limitations imposed by the Governmentwide Federal 
personnel system often prevent managers from using civilian employees 
effectively. This causes the Department to sometimes use military 
personnel or contractors when civilian employees are the best choice to 
accomplish the task. The Federal personnel system limits opportunities 
for civilians at a time when the role of DoD's civilian workforce 
includes more significant participation in Total Force effectiveness. 
NSPS generates more opportunities for DoD civilians by providing an 
incentive for managers to turn to them first when certain vital tasks 
need doing. This frees uniformed men and women to focus on matters 
unique to the military.
    A key to the continued success of NSPS is ensuring that the system 
is perceived as being fair, i.e., establishing a trust between 
employees and supervisors. The Department's mission cannot be 
accomplished without the civilian workforce. NSPS recognizes that 
employees more readily exercise personal responsibility and sustain a 
high level of individual performance and teamwork when they perceive 
that the system and their supervisors are fair. The Department and the 
Office of Personnel Management have addressed fairness in NSPS in 
several dimensions: system design; the right to seek review of 
important categories of management decisions; workforce access to 
information about system provisions, processes, and decisions criteria; 
and accountability mechanisms.
    NSPS regulations and implementing issuances include safeguards 
against arbitrary actions. Examples include written performance 
expectations, multi-level reviews of performance plans expectations and 
performance rating and payout decisions, and mandatory within-grade 
increase buy-in for all employees who are moved to NSPS via management-
directed actions. In addition, NSPS continues employees' and labor 
organizations' rights to challenge or seek review of key decisions. For 
example, non-bargaining unit employees will be able to request 
reconsideration of their job objective rating or their rating of record 
through an administrative grievance procedure. Bargaining unit 
employees use a negotiated grievance procedure to challenge matters 
related to their rating of record. Employees must be notified in 
advance of a proposed adverse action, be given time and opportunity for 
reply, and be given a decision notice that includes the reasons for the 
decision in accordance with Governmentwide adverse action and employee 
appeal rules. Labor organization officials may file unfair labor 
practices claims or grievances. Labor organizations may seek collective 
bargaining on NSPS implementation under Governmentwide labor relations 
rules.
    The Department and Components make information about NSPS rules, 
policies, and practices readily available to the workforce in the form 
of published regulations, published implementing issuances, local level 
instructions, training, and other sources.
    The last dimension of accountability for fair decisions and 
practices under NSPS builds on human capital management mechanisms 
beyond NSPS, and on internal NSPS provisions. First, there are human 
resources management accountability reviews within the Department that 
identify and address issues regarding the observance of merit system 
principles and regulatory and policy requirements, including those 
established under NSPS. In addition, the Department monitors the 
outcomes of administrative and negotiated grievances, performance 
rating reconsiderations, equal employment opportunity complaints, and 
whistleblower complaints to correct chronic problems and particular 
failings.
    Second, NSPS program evaluation findings enable the Secretary and 
the OPM Director to determine whether the design of NSPS and the 
pattern of its results meet statutory requirements like fairness and 
equity and the specific performance expectations for a credible and 
trusted system. Section 9901.107 of this rule identifies the 
requirement for an NSPS program evaluation. A robust and long-term NSPS 
program evaluation plan of studies and reviews, transactional data 
analyses opinion surveys, and other evaluative methods has been 
fielded.
    Fairness in NSPS is not a specific thing, but rather an intrinsic 
quality built into the design of a flexible human resources management 
system--one to be accounted for during reviews and evaluations of NSPS 
operations and decisions.

II. The Need for Change

    The Department's experience operating under the current NSPS 
regulations as well as the 28 years of experience with transformational 
personnel demonstration projects, covering nearly 30,000 DoD employees, 
has shown that fundamental change in personnel management has a 
positive impact on individual career growth and opportunities, 
workforce responsiveness, and innovation; all these things enhance 
mission effectiveness.
    Public Law 108-136 amended title 5, United States Code, to provide 
the Department with the authority to meet this transformation challenge 
through development and deployment of NSPS. Public Law 110-181, while 
amending Public Law 108-136, continues to promote a performance culture 
in which the performance and contributions of the DoD civilian 
workforce are linked to strategic mission objectives and are more fully 
recognized and rewarded. It also retains flexibilities to streamline 
the method for classifying positions and to provide a more flexible 
support structure for both pay and classification in order to help 
attract skilled and talented workers; retain and appropriately reward 
current employees; respond to DoD mission requirements; and create 
opportunities for employees to participate more fully in the total 
integrated workforce. The System offers the more than 181,000 currently 
covered employees a contemporary pay banding construct, which includes 
performance-based pay. NSPS allows the Department to be more

[[Page 56346]]

competitive in setting salaries and to adjust salaries based on factors 
such as labor market conditions, performance, and changes in duties. 
The updated HR management system rules more specifically govern how 
retained classification, compensation, and performance management 
flexibilities will be implemented. The greater level of detail reflects 
a continued commitment to greater transparency regarding provisions of 
Pub. L. 110-181 and system improvements in light of operational 
experience with NSPS. The System retains the core values of the civil 
service, including merit system principles and veterans' preference, 
and allows employees to be paid and rewarded based on performance, 
innovation, and results.

III. Significant Changes to the Original Law

    The original NSPS statute was enacted on November 24, 2003, and 
provided the Secretary of Defense, in regulations jointly prescribed 
with the Director of OPM, the authority to establish a flexible and 
contemporary civilian personnel system called the National Security 
Personnel System. This new civilian personnel system was intended to 
cover most of the approximately 700,000 DoD civilian employees, 
including blue-collar employees.
    Among its features, it provided authority to establish a pay-for-
performance system that recognizes and rewards employees based on 
performance and contribution to the mission; a new pay-banding system 
to replace the General Schedule (GS); a simplified job classification 
process and flexible processes to assign new or different work; 
streamlined hiring processes and the ability to offer more competitive, 
market-sensitive compensation; improved workforce shaping procedures 
that reduce disruption with greater emphasis on performance as a factor 
in retention; expedited disciplinary and employee appeals processes for 
faster resolution of workplace issues, while preserving due process 
rights of employees; and a labor-management relations system that 
recognized DoD's critical national security mission and the need to act 
swiftly to execute that mission, while preserving collective bargaining 
rights of employees. The changes to labor relations included the 
ability to negotiate at the national level instead of negotiating with 
more than 1,500 local bargaining units, and the ability to establish a 
new independent third party to resolve labor relations disputes in DoD.
    The National Defense Authorization Act of 2008 (Pub. L. 110-181, 
January 28, 2008) amended 5 U.S.C. 9902, retaining authority for 
performance-based pay and classification and compensation 
flexibilities, but substantially modifying other NSPS authorities. The 
law, among other things--
     Brings NSPS under Governmentwide labor-management 
relations rules.
     Excludes Federal Wage System (blue collar) employees from 
coverage under NSPS.
     Requires DoD to collectively bargain procedures and 
appropriate arrangements for bringing DoD bargaining unit employees 
under NSPS prior to conversion of these employees.
     Brings NSPS under Governmentwide rules for disciplinary 
actions and employee appeals of adverse actions.
     Brings NSPS under Governmentwide rules for workforce 
shaping (reduction in force, furlough, and transfer of function).
     Requires that this regulation be considered a major rule 
for the purposes of section 801 of title 5, United States Code, with 
advance Congressional reporting for OPM/DoD jointly-prescribed NSPS 
regulations.
     Gives these regulations the status of Governmentwide rules 
for the purpose of collective bargaining under chapter 71 when these 
rules are uniformly applicable to all organizational or functional 
units included in NSPS.
     Mandates that all employees with a performance rating 
above ``unacceptable'' or who do not have current performance ratings 
receive no less than sixty percent of the annual Governmentwide General 
Schedule pay increase (with the balance allocated to pay pool funding 
for the purpose of increasing rates of pay on the basis of employee 
performance).
     Limits NSPS conversions to no more than 100,000 employees 
per year and eliminates the requirement for the Secretary of Defense to 
determine if the performance management system meets key parameters 
before increasing NSPS coverage to more than 300,000 employees.
    Based on the changes Public Law 110-181 made to section 9902 of 
title 5, the revised rule deletes subparts E, F, G, H, and I (dealing 
with staffing, workforce shaping, adverse actions, appeals, and labor 
relations, respectively) of the current NSPS regulations.
    Public Law 110-181 also amended section 9902 by modifying the 
authority to conduct national-level bargaining and retains the rights 
of employees to organize, bargain collectively and participate through 
labor organizations of their own choosing in decisions that affect 
them, subject to any exclusion from coverage or limitation on 
negotiability established pursuant to law. It extends and expands 
exclusions from NSPS coverage for certain DoD laboratories through 
October 1, 2011. Some of these laboratories operate under demonstration 
project authorities which provide their own pay-for-performance 
systems.
    In establishing the revised System, only certain provisions of 
title 5, United States Code, may be waived or modified by DoD and OPM:
     Chapter 43 (dealing with performance management);
     Chapter 51 (dealing with General Schedule job 
classification);
     Chapter 53 (dealing with pay for General Schedule 
employees and pay for certain other employees), except for certain 
sections for which waiver or modification is barred by law; and
     Subchapter V of chapter 55 (dealing with premium pay), 
except sections 5544 (dealing with prevailing rate employees) and 5545b 
(dealing with firefighter pay).
    Finally, Public Law 110-181 has a significant effect on the content 
of the current regulations governing NSPS. Previous legislation 
authorizing NSPS permitted the promulgation of regulations outlining a 
framework for NSPS. Implementing issuances provided the detail lacking 
in the regulatory framework. Taken together, the regulations and the 
implementing issuances formed the structure of NSPS. However, Public 
Law 110-181 eliminated the previous legislation's exclusive statutory 
collaboration process for employee representatives to participate in 
design and implementation of NSPS. Public Law 110-181 mandated the 
Governmentwide labor relations system in title 5, chapter 71, for NSPS 
and conferred the status of Governmentwide rule on regulations 
governing NSPS. Given these new provisions, much of the structure of 
NSPS must be established in regulation, rather than through the 
collective bargaining process, for purposes of uniformity and 
consistency of the operation of NSPS, much like the Governmentwide 
regulations that establish the structure of the General Schedule.

IV. Two Years of Operational Experience Under NSPS

    In order to provide consistency and uniformity of application 
throughout the Department, certain NSPS features

[[Page 56347]]

previously described in DoD implementing issuances have been 
incorporated into this regulation. DoD now has more than 2 years of 
experience with these features and has determined that they effectively 
support key performance parameters of NSPS. In addition, the regulation 
includes modifications made to NSPS as a result of operational lessons 
learned over the last two years.

A. Classification

Effective Date of Classification of Position
    The regulation now provides specific details for entitlement to 
retroactive effective date of a classification decision. While the 
prior regulation provided for both a classification reconsideration 
process and a retroactive effective date, more detail has been added to 
provide for a uniform and consistent application.

B. Compensation

    The regulation modifies rules governing the current compensation 
structure by removing the link between increases in the minimum rate of 
the rate range and across-the-board increases. This change enables more 
flexibility in responding to labor market changes that may impact the 
lower end of a pay range for an occupation, but not the middle or upper 
ranges. Also, discretionary authority is now provided to give targeted 
general salary increases to designated occupational series within a pay 
band. This flexibility enables management to adjust pay to recognize 
market forces when the pay band itself is market competitive but, due 
to rapidly changing markets, the current salaries paid to employees in 
certain occupations are not.

C. Pay Administration

    Several changes have been made in the area of pay administration. 
Pay-setting flexibilities have been expanded to permit discretionary 
within-grade increase buy-ins when employees from outside of NSPS move 
to an NSPS position. Safeguards have been incorporated for employees 
who are moved to NSPS via management-directed actions. In these cases, 
the regulation now specifies a required within-grade increase buy-in. A 
significant level of detail has been added to describe how pay is 
administered upon promotion, reassignment, reduction in band and 
appointment to the Federal service. Most of this detail reflects the 
pay-setting rules that have proven effective during the past 2 years in 
the operation of NSPS.
    The regulation retains management's flexibility to set pay within a 
given range, but provides safeguards by placing limitations on the 
factors management may use in exercising its discretion as well as 
establishing pay increase limits that cannot be exceeded without 
higher-level review. There have also been some modifications to pay-
setting practices based on DoD's experience with the System. Most 
significantly, pay-setting rules for employees moving into NSPS from 
other systems or moving from NSPS positions covered by targeted local 
market supplements have been revised. Pay for these employees was 
previously set using ``base salary.'' Pay will now be set using 
``adjusted salary'' (includes base salary plus any applicable locality 
pay, special rate supplement, or other equivalent supplement) and any 
physicians' comparability allowance payable for the position held prior 
to the reassignment. In these cases, when the new position is in a 
different location, a geographic pay conversion will be processed. 
These rules allow management to set pay more competitively and 
equitably compensate employees by permitting pay to be set in a manner 
that prevents a loss in adjusted salary in certain circumstances. 
Further changes in NSPS pay-setting rules include the discretion to 
adjust the rate of pay of a teacher moving into NSPS up to 20 percent 
to take into account the shorter work year incorporated in the annual 
rate of a teacher paid under 20 U.S.C. 901.
Pay Retention
    Pay retention rules have been modified to provide a ``grandfather'' 
clause for employees who are covered by General Schedule grade and pay 
retention rules at the time they are converted into NSPS. These 
employees will not be subject to the 104-week limit on pay retention. 
They will be entitled to pay retention indefinitely, subject to 
specifically identified pay retention termination events. Much detail 
has been added in the area of pay retention to identify circumstances 
for which pay retention is mandatory, eligibility requirements for 
optional pay retention, and events leading to termination of pay 
retention. These rules reflect current practices under NSPS.
Accelerated Compensation for Developmental Positions (ACDP)
    ``Treatment of Developmental Positions'' (Sec.  9901.345) has been 
modified to specify criteria for Accelerated Compensation for 
Developmental Positions (ACDP) increases, identify the range of pay 
increases that are permitted under this discretionary authority, and to 
expand the discretionary use of ACDP to employees in developmental or 
trainee level positions assigned to the lowest pay band of a 
nonsupervisory pay schedule and trainee level positions or positions 
assigned to the Student Career Experience Program. To date, this 
authority has been available only to employees in developmental or 
trainee level positions in professional and analytical occupations. The 
change provides additional flexibility in recognition of pay 
progression patterns in other occupations.
Premium Pay
    A critical feature of NSPS compensation is the ability to modify 
premium pay in response to current and future needs. This flexibility 
facilitates the Department's ability to accomplish its diverse mission. 
The revised regulation incorporates rules governing NSPS premium pay. 
Premium pay includes pay such as overtime pay, compensatory time off, 
holiday, Sunday, and standby pay. Among the premium pay features unique 
to NSPS are on-call premium pay for health care personnel in specified 
circumstances, pay for weekend duty for health care personnel, and 
foreign language proficiency pay. For the most part, the regulations 
reflect current premium pay policies under NSPS, which include certain 
modifications to the standard title 5 premium pay laws and regulations 
to address unique DoD mission requirements and differences in the NSPS 
classification and pay structure.
Conversion/Movement Out of NSPS
    Regulations have been added to provide a process for converting 
employees out of NSPS when their position is removed from coverage 
under the System and to provide a ``virtual GS grade'' to employees who 
leave their NSPS position to accept employment in a General Schedule 
position. These rules promote more equitable pay setting upon moves to 
the General Schedule pay system.

D. Performance and Pay Pool Management

Higher Level Review
    The revised regulation more specifically outlines safeguards to 
ensure the NSPS performance and pay pool management system is fair and 
equitable based on employee performance. For example, under subpart D, 
the revised regulation now

[[Page 56348]]

provides for a higher level review of performance expectations and 
recommendations for ratings of record, share assignment, and payout 
distribution. This review helps ensure that assigned employee 
objectives are reviewed for appropriateness and consistency within and 
across the organization and/or pay pool as well as employee ratings, 
share assignments, and payout distribution. These safeguards help 
ensure equity in performance payouts.
Calculating Annual Payout
    Rating levels, share assignment ranges, and rounding rules for 
conversion of raw performance scores are also specified in the revised 
regulation, as well as formulas for share values and calculation of 
performance payouts. The language also clarifies the intended 
application of a common share value (expressed as a percent of pay) 
throughout an entire pay pool, to include all sub pay pools. This 
further preserves equity across a pay pool.
Flexibility in Extending Performance Appraisal Periods
    The authority to extend individual performance appraisal periods to 
enable employees to complete minimum periods is specified as well as 
limitations on this authority. By specifically providing for extension 
of individual rating cycles, valued performers and higher-performing 
employees moving to NSPS positions can more quickly benefit from the 
NSPS performance-based pay features.
Pay Pools
    The pay pool concept has also been further defined in this 
regulation by providing parameters for pay pool composition and 
specifying the roles of pay pool officials within the pay pool process.
    Much thought was given to achieving the ``right'' balance between 
safeguards and management flexibility. For example, although pay pool 
share ranges have been specified for each rating level, management 
still has the flexibility to determine assignment of shares within that 
range. System safeguards were added to ensure fairness, equity, and a 
performance focus by expressly stating and limiting the factors which 
may be used in the determination of share assignment. Similarly, 
management still retains the flexibility and authority to determine the 
distribution of a performance payout between base salary increase and 
bonus or a combination thereof. However, to ensure safeguards within 
the system, the factors management may use in exercising this authority 
have also been expressly defined and limited to ensure fairness, 
equity, and a performance focus. While pay pool funding is still 
determined by management, higher-level reviews have been required to 
provide internal controls. Additional safeguards added include a 
uniform approach to handling performance payouts for employees who 
leave a pay pool after the end of the performance period, but before 
the date of the payout. Finally, to promote transparency of the pay 
pool process, a requirement has been added for organizations to share 
with employees the average rating, ratings distribution, share value 
(or average share value), and average payout (expressed as a percentage 
of base salary) at the completion of the performance payout process.
Reconsideration Process
    Employee performance reconsideration opportunities have been 
expanded to permit reconsideration of individual performance objective 
ratings in addition to the overall rating of record. This change 
recognizes that many pay pools use raw performance scores as a guide in 
determining how many shares to assign to employees. Since raw 
performance scores may be impacted by individual performance objective 
ratings, the ability to request review of individual performance 
objectives enables employees to seek redress on all performance rating 
decisions affecting their pay.

E. Other Changes

    Other changes reflected in this regulation include language 
providing salary increases for employees who did not meet the minimum 
period of performance due to an approved paid leave status or 
performance of labor activities on ``official time.'' These pay 
adjustments will be based on the modal rating of a pay pool. Likewise, 
provisions have been made to adjust the pay of employees returning from 
temporary assignments outside of NSPS or returning from long-term 
training for which no NSPS performance plan was assigned. These changes 
ensure that employee pay is not harmed by the inability to meet a 
minimum performance period or inability to rate performance while 
employees either exercise statutory leave entitlements or fulfill other 
roles important to the organization.
    Finally, the regulations in subpart D (dealing with performance 
management) permit limited coverage under NSPS pay-setting and 
classification flexibilities for employees who are appointed for less 
than 90 days. Providing access to NSPS pay-setting flexibilities for 
these positions enhances DoD's competitive position in the labor market 
when hiring temporary employees for 90 days or less.

V. Response to Public Comments

A. Major Issues

    The proposed rule was published in the Federal Register on May 22, 
2008. The public comment period concluded June 23, 2008. In response to 
the proposed rule, the Department received 526 comment submissions 
during the 30-day public comment period. In reviewing the comment 
submissions, we discerned several recurring themes that spanned 
multiple sections of the proposed regulation. Major issues identified 
included: (1) Specificity of the regulation; (2) collective bargaining 
and labor relations; (3) performance and pay pool management; (4) the 
influence of performance versus market factors on pay; and (5) control 
points. Because these issues are critical to understanding the 
objectives of NSPS, as well as its implementation, we have given them 
particular attention in the following sections of this Supplementary 
Information.
1. Specificity of the Regulation
    A significant issue raised in the public comments concerned the 
level of specificity in the proposed regulation. Some commenters, 
pointing to a lack of detail regarding specific issues, such as 
performance management, sought more specificity in the proposed 
regulation itself as opposed to the Department providing future 
direction in implementing issuances, which are not open to public 
comment. However, many of the commenters who weighed in on this issue 
argued that the proposed regulation is too specific. Commenters 
suggested that the increased level of detail was written into the 
proposed regulation not to improve the clarity of the regulation, but 
to preclude negotiation with labor organizations. Labor organization 
representatives argued that because DoD, under the National Defense 
Authorization Act for Fiscal Year 2008 (NDAA 2008), no longer has 
authority to establish a labor relations system under its control, the 
Department is attempting to write regulations as narrowly as possible 
to avoid the collective bargaining process.
    Interestingly, during the public comment period for the 2005 
regulation, a large number of commenters recommended that the 
regulation include far greater specificity, with

[[Page 56349]]

numerous commenters stating that they were unable to provide 
substantive comments without more information. Some additional 
specificity was written into the final 2005 regulation in response to 
these comments, but it retained its original goal of establishing a 
general policy framework to be supplemented by detailed implementing 
issuances.
    This regulation of necessity includes more specificity than the 
2005 regulation in order to preserve uniformity and consistency of 
application of NSPS in the changed statutory environment created by 
Public Law 110-181. The uniform and consistent application of NSPS is 
important to ensure equitable treatment of all employees, whether 
bargaining unit or non-bargaining unit; for ease of movement of 
employees across components and organizations; and to achieve 
efficiencies in support systems such as automated performance 
management tools and training. Public Law 110-181 restored the 
Governmentwide labor relations coverage of title 5, chapter 71, to NSPS 
employees and conferred the status of Governmentwide rule upon this 
NSPS regulation. It also removed the statutory collaboration process 
which ensured uniformity and consistency and was the exclusive process 
for employee representative involvement in the design and 
implementation of NSPS. Given those provisions, OPM and DoD concluded 
the 2005 regulatory framework and detailed implementing issuance 
construct created unwarranted risk to the goal of uniform and 
consistent application of NSPS to both bargaining unit and non-
bargaining unit employees. With much of the operational core of NSPS in 
its implementing issuances subject to collective bargaining, we 
concluded the likely outcome of bargaining over the various components 
of NSPS would be multiple versions of NSPS for bargaining unit 
employees (there are more than 1,500 local bargaining units in DoD) and 
one NSPS for non-bargaining unit employees. Therefore, OPM and DoD 
chose to incorporate sufficient detail in this regulation, under the 
legislative grant of Governmentwide regulation status, to preserve the 
uniformity and consistency of a single NSPS. The regulation provides a 
standardized, yet flexible, DoD NSPS environment that promotes the 
growth of all employees and improves management's ability to manage the 
workforce. Labor organizations still retain collective bargaining 
rights regarding NSPS under title 5, chapter 71. In fact, labor 
organizations may seek to collectively bargain implementation of NSPS 
prior to implementation for bargaining unit employees to the same 
extent bargaining occurs on implementation of other Governmentwide 
regulations across the Federal Government.
2. Collective Bargaining and Labor Relations
    In addition to their concerns on how the specificity of the 
regulations affects the collective bargaining rights, labor 
organizations made numerous comments in each subpart that various 
matters should be subject to collective bargaining under 5 U.S.C. 
chapter 71. In some cases these matters are not subject to collective 
bargaining today for bargaining unit employees outside NSPS as such 
matters are covered by law. In other cases, these matters are limited 
in collective bargaining because they are covered by Governmentwide 
regulations encompassing these employees. There were also various 
suggestions to include language throughout the regulations that 
collective bargaining rights exist on certain specified matters, even 
where the scope of collective bargaining rights is actually more 
limited than what is suggested by the labor organizations.
    DoD is committed to fulfilling its obligation to bargain in good 
faith consistent with Governmentwide labor relations rules under 5 
U.S.C. chapter 71 and the requirements of 5 U.S.C. 9902 and section 
1106(b) of Public Law 110-181. However, it is appropriate that the 
Department seek uniformity and consistency in its NSPS employment 
practices through issuance of regulations. We do not believe it is 
necessary to repeat throughout the regulations a statement regarding 
any statutory collective bargaining rights and have not adopted the 
suggestion. This does not occur today in other Governmentwide 
regulations or agency policies. However, we have added a clarifying 
general statement in subpart A regarding collective bargaining 
obligations prior to converting bargaining unit employees to NSPS.
3. Performance and Pay Pool Management
Background
    The Department designed NSPS to be a robust performance management 
system in recognition of the increased importance of performance in 
making pay and retention decisions. NSPS uses a multi-level appraisal 
system that makes distinctions in levels of employee performance and 
links employee achievements, contributions, knowledge, and skills to 
organization results. NSPS also allows the Department to better 
recognize and support team contributions and accomplishments. The 
System ensures that performance expectations are clearly communicated 
to employees and are linked to the organization's strategic goals and 
objectives. This provides the ability to recognize valid distinctions 
in performance and reward employees based on those distinctions, which 
will foster a high-performance culture within the Department.
    NSPS modifies the way DoD employees are paid. NSPS bases individual 
pay increases on performance instead of primarily on tenure and time-
in-grade, i.e., the emphasis is on quality of results achieved as 
opposed to length of experience. In addition, this system is far more 
market-sensitive. Both of these goals are met through the changes in 
the classification, pay, and performance management systems.
    We believe the Department's pay-for-performance system is essential 
to DoD's ability to attract skilled and talented workers; retain and 
appropriately reward current employees; respond to DoD mission 
requirements; and create opportunities for employees to participate 
more fully in the total integrated workforce.
    Performance and pay pool management inspired a large number of 
comments during the public comment period. In fact, many commenters 
raised issues that related to both subparts C and D, since pay 
administration and performance management are so closely aligned. In 
reviewing the comments that addressed aspects of performance management 
under the proposed regulation, we identified seven recurring issues. 
These issues are addressed in the following paragraphs.
Fairness
    Many commenters expressed concerns about fairness in operation of 
the NSPS performance management system. Whether they characterized 
their concern as ``favoritism,'' ``cronyism,'' ``nepotism,'' or the 
euphemism ``good ol' boy'' system, commenters expressed concerns that 
NSPS could or would present opportunities for unfairness within the 
performance appraisal and overall performance management system. These 
commenters feared supervisors and Pay Pool Managers would assign 
ratings based on personal preferences and relationships unrelated to 
performance.
    From the beginning, NSPS was designed to be consistent with 
specific

[[Page 56350]]

guiding principles. Among the principles emphasized in the performance 
management process are fairness, credibility, and transparency, as well 
as adherence to merit system principles. The regulation establishes 
many safeguards--or checks and balances--specifically designed to guard 
against favoritism, cronyism, and unfair practices.
    First and foremost, the performance management system design 
features uniform performance criteria across NSPS (see SC 1940 of NSPS 
implementing issuances). By using uniform criteria, NSPS ensures 
employees performing similar categories of work are evaluated using the 
same tools of measurement. To ensure that the measurement tools are 
interpreted consistently across the organization and in a manner free 
from favoritism, cronyism, or other inappropriate consideration, NSPS 
provides multiple-level reviews of recommended ratings, share 
assignments, and payout distribution determinations. Not only does the 
supervisor/rating official offer a recommended rating of record based 
on an overall assessment of the employee's accomplishments (Sec.  
9901.412(b)), but these recommended ratings receive a higher-level 
review--a requirement identified and added to the revised regulation in 
Sec.  9901.412(c) and made effective via implementing issuances. 
Following the higher-level review, a panel of senior leaders (i.e., the 
Pay Pool Panel) reviews and reconciles ratings within a pay pool (Sec.  
9901.412(f)). In reconciling ratings, share assignments and payout 
distribution recommendations, the panel compares the employee's 
accomplishments (via supervisory assessments and optional employee self 
assessments) to job objectives and standard rating criteria to ensure 
that the same understanding of performance criteria has been applied to 
employees across a pay pool. The Pay Pool Panel considerations do not 
include a pre-established distribution of ratings as a factor in 
determining the rating of record. This is because NSPS regulations also 
prohibit forced distribution of ratings (Sec.  9901.412(a)). As opposed 
to a forced alignment of employee ratings against a particular 
distribution pattern, employee performance reflects a measurement of 
``what'' an employee accomplished (and ``how'') against standardized 
performance measurements. The employee also has a voice in how his or 
her work is viewed via the opportunity to write a self-assessment of 
what was accomplished by the employee and in what manner objectives 
were achieved during the performance cycle. Such assessments become 
part of the record that is forwarded to the higher-level reviewer and 
Pay Pool Panel. Checks and balances such as those described above form 
the safeguards for fairness and equity built into the regulation and 
the performance management system.
    As with the multi-level review for employee ratings of record, NSPS 
also provides for reviewing performance plans at multiple levels. 
First, supervisors are responsible for making sure that performance 
objectives accurately reflect an employee's work and for engaging 
employees in that determination (Sec.  9901.406). Employees participate 
in the development of performance expectations via conversations and 
written communication with their supervisors (Sec.  9901.406(g)). 
Second, there is a review of performance expectations at a higher level 
to ensure that assigned employee objectives are consistent and 
equitable with similar positions within and across the organization 
(Sec.  9901.406(h)).
    In addition to the checks and balances outlined in the preceding 
paragraphs, NSPS contains four other important features intended to 
contribute to the sustainment of a fair, credible, and transparent 
system. First, supervisors and managers will be held accountable in a 
specific job objective for effectively managing the performance of 
employees under their supervision and will be assessed and measured on 
their performance against this objective (Sec.  9901.406(d)). There is 
a connection between administration of the performance management 
system and supervisory performance ratings and, consequently, a 
supervisor's pay. Second, DoD is committed to extensive training, both 
initial and ongoing, for supervisors, managers, and employees so that 
they understand the requirements of the performance management system. 
For supervisors and managers, in particular, training is focused on how 
to establish and communicate performance expectations, how to assess 
employee performance, and how to appropriately translate that 
assessment into pay adjustments. Third, there are various review and 
evaluation processes designed to monitor the implementation of NSPS and 
identify inconsistent, unfair treatment of employees so that these 
situations, if they occur, can be remedied in a timely manner. As a 
final check and balance, employees may also request reconsideration of 
ratings of record as well as ratings for individual job objectives 
under Sec.  9901.413.
    To ensure that employees are treated fairly, there are rules to 
guard against arbitrary actions, enable employees to challenge or seek 
review of key decisions, and for setting up accountability mechanisms. 
All of these safeguards and checks and balances are monitored during 
regular and recurring reviews and evaluations of NSPS at multiple 
levels within the Department.
Uniformity and Consistency
    Some commenters questioned whether performance would be measured 
uniformly and consistently among pay bands, occupational areas, and 
Components. While there is opportunity for some aspects of 
implementation of NSPS performance management to be handled flexibly to 
accommodate different circumstances, NSPS is designed to ensure 
uniformity and consistency in the most important core features of 
performance management. For example, the regulation mandates a uniform 
summary rating level pattern (Sec.  9901.405(b)(5)) and share 
assignment range for each rating level (Sec.  9901.342(f)), and it 
provides common formulas for determining the share factor value and 
payout within each pay pool (Sec.  9901.342(g)).
    The NSPS implementing issuances and NSPS performance tools further 
institutionalize uniformity and consistency via the establishment of 
standardized NSPS performance measures applied across NSPS. For 
example, NSPS uses standardized performance criteria, which evaluate 
``what'' was accomplished (also known as performance indicators), as 
well as standardized contributing factors and benchmark descriptors, 
which serve to measure ``how'' an objective was accomplished (SC 1940). 
The use of standardized criteria and rules helps to ensure consistency 
across NSPS.
Transparency
    Several commenters expressed concern that ratings and performance 
payout determinations are made ``behind closed doors,'' and commenters 
questioned whether the NSPS system meets its stated goal of 
transparency. While it is true that Pay Pool Panels deliberate in 
private, this is necessary to protect the privacy of employees as 
individuals as well as to provide an atmosphere for robust performance 
management discussion. Nevertheless, there are a number of requirements 
in the system that helps preserve transparency outside of the pay pool 
deliberation. The regulation adds language to specify requirements for 
sharing of pay pool information to NSPS

[[Page 56351]]

employees (Sec.  9901.342(g)(10)). In addition, through implementing 
issuances (SC 1940), NSPS requires notice to employees of additional 
pay pool related information. This information may include the 
membership and composition of the pay pool to which the employee 
belongs; projected pay pool funding amounts; rules for making share 
assignment and payout distribution determinations; percentage of pay 
pool funding to be applied to bonuses versus increases to base salary; 
criteria for Organizational Achievement Recognition (OAR) awards; 
identity of Pay Pool Manager, Pay Pool Panel members, and Performance 
Review Authority; and performance indicators and contributing factors. 
The regulation also specifies that performance expectations (e.g., job 
objectives) must be communicated to employees in writing (Sec.  
9901.406(b)). Performance measurement criteria are available to all 
employees through Web sites (e.g., https://www.cpms.osd.mil/nsps) and 
agency implementing issuances. The regulation adds greater detail to 
performance and pay pool management (such as specifying number of 
rating levels (Sec.  9901.405(b)(5)), rounding rules for raw 
performance scores (Sec.  9901.405(b)(6)), share ranges (Sec.  
9901.342(f)), factors that may be considered in making a share 
assignment or payout distribution determination (Sec.  9901.342(g)), 
share value and payout formulas (Sec.  9901.342(g)), minimum criteria 
for eligibility for a performance payout (Sec.  9901.342), as well as 
identification of and procedures for performance payouts for specially 
situated employees not previously covered in the regulation (Sec.  
9901.342(i)-(l)).
Premium on Good Appraisal Writing Skills
    A few commenters expressed concern that the NSPS system rewards 
those who can write well, not necessarily those who perform best. 
Commenters believe that employees who have difficulty communicating 
their accomplishments in a self-assessment will be at a disadvantage in 
comparison to good writers, even if their performance level actually 
exceeds that of the good writers. Another commenter expressed concern 
that employees are required to write their own appraisals. The written 
employee self-assessment is optional and is just one of many components 
of the NSPS performance management system. Another component of the 
performance management system is that each rating official also 
prepares a written assessment of employee performance. One of the 
system safeguards that helps ensure employees are not adversely 
affected by the ``written word'' is the requirement that Pay Pool 
Panels afford a rating official the opportunity to provide further 
justification before the panel changes a recommended rating of record 
(Sec.  9901.412(f)). This requirement provides an opportunity for 
further explanation as well as that presented in writing. Additionally, 
to assist both employees and rating officials in the development of 
written assessments, DoD has developed and made available both 
classroom and Web-based writing classes (see ``iSuccess'' training at 
https://www.cpms.osd.mil/nsps/training.html). Also, DoD has made 
available guidance in the form of writing tips and ``lessons learned'' 
by other organizations that have implemented NSPS to help employees and 
rating officials write effective self-assessments, performance plans, 
and performance assessments.
    Finally, mock pay pool exercises offer both employees and rating 
officials the opportunity to practice their writing skills. A mock pay 
pool exercise is a way for organizations to understand the pay pool 
process. During the exercise, employees may submit written self-
assessments and rating officials may submit supervisory assessments for 
consideration by the pay pool panel. Pay pool panels can communicate 
back to both rating officials and employees the value of those 
assessments to the appraisal process and make suggestions on how to 
write such assessments more effectively. Also through mock pay pools, 
organizations identify ways to improve their process to achieve greater 
consistency and ensure fairness in ratings and payouts. Past experience 
has shown that these exercises improve not only participants' 
familiarity with the process, their understanding of the various 
aspects of the pay-for-performance system, and the quality of their 
decisions, but also their writing skills in the context of the 
performance management system.
Differences Between Grade-Based Systems and NSPS in Rewarding 
Performance
    Commenters noted that the proposed regulation allows organizations 
with wage grade workers and NSPS employees to reward performance 
differently, which could result in inequities. We assert differences do 
not necessarily result in inequities. Without doubt, there are 
differences between the design of the NSPS personnel and performance 
award system and the Federal Wage System (FWS) personnel and 
performance management systems. These differences with the FWS existed 
even when NSPS positions were still covered by the General Schedule 
(GS). They are a result of overall differences in the compensation 
systems. For example, GS grades have 10 steps, with waiting periods 
from one to three years between steps. Each step represents 
approximately a 3 percent increase in base pay awarded primarily based 
on seniority. The FWS has only five steps, but much shorter waiting 
periods (six months to two years) and larger increases (approximately 4 
percent increase in base pay). Like the GS, the FWS also awards steps 
primarily based on seniority. The basis for pay progression under both 
GS and FWS systems is primarily a combination of seniority-based pay 
progression in the form of step increases, promotions, and cost of 
labor (e.g., locality pay). Performance pay, when awarded, is typically 
paid out via bonuses. In contrast, the design of the NSPS compensation 
and classification architecture has no step increases and fewer 
promotions. The express purpose of this design decision is to redirect 
pay, formerly paid out based, in part, on seniority, toward rewarding 
and encouraging performance (i.e., performance-based pay). Therefore, 
under NSPS, pay progression primarily occurs via performance-based 
increases. In the absence of step increases and promotions to grades 
that no longer exist, NSPS applies civilian pay increase dollars that 
would have been expended on those pay progression methods to 
performance-based increases and Accelerated Compensation for 
Developmental Positions (ACDP). In redirecting the seniority-based and 
promotion-based pay increases under the General Schedule to performance 
pay, it is appropriate that performance awards under NSPS be greater 
than performance awards under systems that do not redirect step 
increases and promotions associated with more defined levels of work to 
performance. The differences between NSPS and grade-structured systems 
are simply differences rather than inequities. Therefore, we made no 
attempt to align NSPS performance rewards to those of other personnel 
systems. In so doing, we reiterate the belief that Congress and the 
American people expect their public employees to be paid according to 
how well they perform, rather than how long they have been on the job.
    Another commenter expressed an equity concern that NSPS employees 
may be disadvantaged over General Schedule employees where there is 
internal competition for reassignment

[[Page 56352]]

and promotion to other positions. In particular, the commenter 
expressed a belief that the NSPS performance appraisal system creates 
an impression that an employee with a ``3'' as his or her last rating 
of record is inferior to a GS employee with all Level 9's. Despite 
inconsistencies in rating scales across the government (to include 
pass/fail, NSPS, and 3 and 4 level rating systems, etc.), the 
employee's record of accomplishment along with appropriate employment 
references and a copy of the aggregate NSPS rating distribution 
(available via NSPS web site) should serve to inform prospective 
employers of the value of a NSPS Level 3 rating of record.
Communication of Performance Expectations
    Commenters also noted that the proposed regulation does not place 
enough accountability on supervisors to communicate performance 
expectations. One commenter noted that the proposed regulation does not 
explicitly require the supervisor to notify the employee of performance 
expectations. Yet Sec.  9901.406 of the proposed regulation very 
explicitly states the requirement to communicate performance 
expectations to employees prior to holding the employee accountable for 
them (``Performance expectations will be communicated to the employee 
in writing, prior to holding the employee accountable for them.''). 
That section further states: ``Performance expectations that comprise a 
performance plan are considered to be approved when the supervisor has 
communicated the performance plan to the employee in writing.'' In 
addition to the employee requirements stated in Sec.  9901.406(c), 
Sec.  9901.406(d) states that performance expectations of supervisors 
and managers additionally will include assessment and measurement of 
how well supervisors and managers plan, monitor, develop, correct, and 
assess subordinate employees' performance. Inasmuch as the ``planning'' 
phase of performance management is considered to incorporate 
development and implementation of subordinate employees' performance 
plans and those plans, per the regulation, are only considered approved 
once communicated to the employee in writing, the regulation does in 
fact hold supervisors and managers accountable for communicating 
performance expectations.
Perceived Administrative Burden
    Some commenters objected to the amount of time and resources needed 
to administer NSPS, particularly the performance management component. 
Commenters cited the amount of paperwork required under NSPS and the 
limitations of the NSPS Performance Appraisal Application (PAA) tool. 
We agree that the design of NSPS and the safeguards built into the 
system result in increased time demands, especially during the start-up 
years. However, DoD's experience with Personnel Demonstration Projects 
indicates that the amount of time required for the same tasks levels 
off and even decreases as the organization gains experience with the 
pay pool process. Additionally, as experience and efficiency increase, 
organizations tend to parlay the process of reviewing individual 
performance into an examination and driver of overall organizational 
performance, thus increasing the return on their investment of time. 
Consequently, we have not altered the requirements, believing that the 
end result is fairness and consistency--key objectives of NSPS--and the 
ability to further individual as well as organizational performance. 
Another commenter indicated that there are an insufficient number of 
characters available in the PAA to adequately provide self assessment 
information. We continuously evaluate the PAA tool to improve it to 
better meet user needs. We have addressed many of the initial 
limitations of the system and are currently reviewing changes to other 
features such as the limitation on the number of characters that users 
can enter into various fields.
4. Performance Versus the Influence of Market Factors on Pay
    While a number of commenters supported the idea of a performance-
based pay system, some commenters were less supportive of the 
consideration of non-performance-related factors when setting pay. 
These commenters objected to the weight given to factors other than 
performance. For example, one commenter stated: ``The factors used in 
determining if [employees] get a raise or a bonus are * * * complicated 
and * * * have nothing to do with performance. Employees have no 
control over many of these factors, which include attrition rates, 
shortages of skills, and labor market. Obviously, this really isn't a 
true pay-for-performance system.'' In response to this comment--and the 
many commenters who expressed similar concerns about the use of factors 
other than ``performance'' in setting pay--we acknowledge that it is a 
misperception that compensation under NSPS is based solely on 
performance. From its inception, NSPS was designed to emphasize both 
performance pay and compensating employees based on market factors. In 
the Supplementary Information for the 2005 regulation we said the 
following about the new system: ``The pay structure will be much more 
responsive to market conditions'' and ``Labor market conditions will 
also be considered when making pay-setting decisions. As prescribed in 
the enabling legislation, the new compensation system will better link 
individual pay to performance * * * ''. We also said: ``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 NSPS compensation system, first described in the 2005 NSPS 
regulation, is designed to fundamentally change the way employees in 
the Department are paid. First, it allows DoD, after coordination with 
OPM, to define occupational career groups and levels of work within 
each career group that are tailored to the Department's missions and 
components. Second, it gives DoD considerable discretion, after 
coordination with OPM, to set and adjust the minimum and maximum rates 
of pay for each of the pay schedules and pay bands within those career 
groups based on national and local labor market factors and other 
conditions. Instead of ``one size fits all'' pay rates and adjustments, 
NSPS allows DoD to customize those adjustments and optimize valuable 
but limited resources. This kind of flexibility, which is lacking under 
the GS and FWS pay systems, enables DoD to allocate payroll dollars to 
the occupations and locations where they are most needed to carry out 
the Depa