Personnel Demonstration Project; Alternative Personnel Management System for the U.S. Department of Agriculture, Food Safety and Inspection Service, 5044-5070 [E9-1641]

Agencies

• Office of Personnel Management
• Personnel Management Office

[Federal Register Volume 74, Number 17 (Wednesday, January 28, 2009)]
[Notices]
[Pages 5044-5070]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-1641]



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Part II





Office of Personnel Management





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Personnel Demonstration Project; Alternative Personnel Management 
System for the U.S. Department of Agriculture, Food Safety and 
Inspection Service; OMB Final Decisions; Notice

Federal Register / Vol. 74, No. 17 / Wednesday, January 28, 2009 / 
Notices

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 OFFICE OF PERSONNEL MANAGEMENT


Personnel Demonstration Project; Alternative Personnel Management 
System for the U.S. Department of Agriculture, Food Safety and 
Inspection Service

AGENCY: U.S. Office of Personnel Management.

ACTION: Notice of approval of a demonstration project final plan.

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SUMMARY: Chapter 47 of title 5, United States Code, authorizes the U.S. 
Office of Personnel Management (OPM), directly or in agreement with one 
or more agencies, to conduct demonstration projects that experiment 
with new and different human resources management concepts to determine 
whether changes in human resources policy or procedures result in 
improved Federal human resources management. The Food Safety and 
Inspection Service (FSIS), the U.S. Department of Agriculture (USDA), 
and OPM will test a results-based, competency-linked pay-for-
performance system that is combined with a simplified, pay banding 
classification and compensation system. The final project plan has been 
approved by FSIS, USDA, and OPM.

DATES: This demonstration project will be implemented on July 19, 2009.

FOR FURTHER INFORMATION CONTACT: Food Safety and Inspection Service: 
Laurie Lindsay, Director, HR Demonstration Project Staff, (202) 720-
7983, 1400 Independence Avenue, SW., Room 2134 South Building, 
Washington, DC 20250. Office of Personnel Management: Patsy Stevens, 
Systems Innovation Group Manager, (202) 606-1574, U.S. Office of 
Personnel Management, 1900 E Street, NW., Room 7456, Washington, DC 
20415.

SUPPLEMENTARY INFORMATION: 

1. Background

    FSIS is a premier public health regulatory agency that continually 
invests in human capital. In order to continue agency success in 
performing a range of food safety, food defense, and public health 
regulatory missions over the next decade, FSIS requires an innovative 
human resources (HR) system. FSIS has an expanded mission 
responsibility for food defense, biosecurity, and public health science 
and is no longer just limited to the inspection of meat, poultry, and 
processed egg products. FSIS must assure science-based development and 
execution of policy and must also emphasize risk-oriented assessment, 
planning, analysis, inspection, and management activities.
    This growing list of advanced public health functions along with 
the USDA strategic human capital plan and the President's Management 
Agenda requires FSIS to manage human capital in the 21st century very 
aggressively. In the absence of enabling legislation, FSIS made the 
decision in 2005 to pursue the opportunity to propose a demonstration 
project in collaboration with OPM in an effort to address its human 
capital challenges.
    As the Federal Government's workforce as a whole continues to 
experience significant changes, FSIS has been confronted with several 
considerable challenges that are driving the need for this 
demonstration project. FSIS faces critical shortages in the number of 
positions, such as public health veterinarians and other scientists and 
are threatened with the task of replacing an aging workforce. The 
average age of mission-critical employees is between 50 and 53 years 
old. The retirement eligibility within the next ten years is near 50 
percent.
    FSIS also continues to experience shortages and turnover in spite 
of our aggressive use of recruitment and retention incentives (over $1 
million annually), use of direct hire, and a new entry level for public 
health veterinarians. Moreover, almost 375,000 Federal employees 
outside of USDA are covered by alternative performance-based pay 
systems. As more Federal employees transition into new pay systems, 
USDA will be one of the largest executive departments still covered by 
a less performance sensitive pay system which will significantly impede 
its ability to recruit and retain employees.
    Through the demonstration project, FSIS will be able to take a 
proactive role in finding solutions to all of these challenges in order 
to attract the best qualified candidates and to retain and motivate its 
current workforce. It will also simplify the current classification 
system for greater flexibility in classifying work and paying 
employees; improve hiring by allowing FSIS to compete more effectively 
for high quality employees through the judicious use of higher entry 
salaries; reaffirm the performance management and rewards system for 
improving individual and organizational performance; eliminate 
automatic pay increases (i.e., annual adjustments that normally take 
effect the first pay period beginning on or after January 1) by making 
pay increases performance sensitive, so that only Fully Successful and 
higher performers will receive payouts and the best performers will 
receive the largest payouts; test the effectiveness of multi-grade pay 
bands in recruiting, advancing, and retaining employees; and improve 
the retention of high-performing employees in developmental positions 
by testing the use of developmental pay increases to recognize the 
faster progression that can occur in these positions.
    By implementing a modern human resources management system that 
supports and protects this critical role in public health, food safety, 
and food security, FSIS will be better prepared in serving the general 
public by ensuring the nation's commercial supply of meat, poultry, and 
processed egg products are safe, wholesome, and correctly labeled and 
packaged.

2. Overview

    The FSIS Demonstration Project proposal was approved by OPM and 
publicized in the Federal Register on May 9, 2008. Prior to 
publication, the agency's program managers were briefed on the various 
management and mission implications of the project. There was a 30-day 
public comment period immediately following publication of the proposed 
demonstration project plan in the Federal Register, culminating in a 
public hearing on June 26, 2008, held at USDA Headquarters in 
Washington, DC. A total of 44 individuals, mostly FSIS employees, and 1 
employee organization submitted written comments and questions. Six 
individuals and the employee organization provided comments and asked 
questions at the public hearing. Many of the commenters offered 
multiple comments and questions. A total of 154 different comments and 
questions were received, with several of them duplicative. Comments 
covered a number of different management and HR topical areas, and in 
some cases, pertained to more than one topic. The topics that received 
the largest number of comments and questions related to management 
accountability (41), pay and pay pools (27) and staffing (24). Other 
topical issues receiving numerous comments/questions related to 
performance management (21), employee relations (8), and labor 
relations (7). There were seven comments on career paths and pay bands 
and two comments on project evaluation. An additional 17 comments and 
questions did not fall into one of the above topical areas. Every 
comment and question received was extremely important, as each helped 
to focus on an examination of the project plan and better understand 
the long-term management and employee implications of the project. 
Public comments and

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questions often served as the catalyst to raising additional questions 
on the part of top management. As a result of public comments received, 
FSIS has made some refinements to its plan and a few clarifying 
editorial and textual changes as well.

3. Summary of Comments and Responses

    Comments are arranged into nine broad topical areas (including a 
miscellaneous ``other'' category) that correspond to the topics 
identified in the previous section and are presented not in an order 
dictated by the number of comments received, but in an order that 
reflects the logic of the project's design scheme and contents (i.e., 
in a topical order beginning with pay banding and classification, and 
devolving through pay, staffing, management accountability, performance 
management, employee relations, labor relations, and project 
evaluation). FSIS' responses are generic summaries relative to major 
issues raised by comments and questions rather than point-by-point 
responses.

(a) Career Paths and Pay Bands

    There were several comments about the proposed career paths and pay 
band structure including a question about the occupational series 
covered by the Administrative, Professional and Scientific Career Path 
and comments that pay bands have an adverse impact on career 
development and on supervisors.
(1) Career Paths
    Comments: A question was raised concerning the occupational series 
coverage for the Administrative, Professional, and Scientific Career 
Path. There was a perception that General Schedule (GS) Compliance 
Investigator positions (GS-1801) were not covered by this career path 
since this occupation does not have a positive education requirement 
and a path is needed to include investigators. There was also a comment 
questioning the placement of employees whose jobs do not require higher 
educational credentials or a positive education requirement in the same 
band with employees whose jobs do require credentials and a positive 
education.
    Response: In designing the proposed career paths, FSIS wanted to 
take the broadest approach that made sense given the nature of the work 
performed and the nature of the occupations requiring this work. The 
broader the design approach, the more employees are treated alike and 
the simpler it is to administer pay banding. Employee equity and 
systemic simplification are key goals of this project. In deciding on 
the original career path proposal, FSIS opted to essentially build its 
career paths using OPM's white-collar ``PATCO'' categories. The PATCO 
scheme encompasses extremely broad groupings of white-collar 
occupational categories, largely based on differences in the nature of 
work and the essential job knowledge required to successfully perform 
the work (for instance, whether work accomplishment requires certain 
educational attainments, or analytical ability, or subject-matter 
competencies, and so on). OPM defines each distinct occupational job 
series according to whether work is professional (``P''), 
administrative (``A''), technical (``T''), clerical (``C''), or falls 
into a miscellaneous others (``O'') category. The Administrative, 
Professional, and Scientific Career Path includes all jobs that have a 
2-grade interval career progression (e.g., GS-5, 7, 9, 11, 12, 13, 14, 
15, or any combination of these grades). This career path includes 
professional positions with a positive education requirement as well as 
administrative positions without a positive education requirement like 
GS-1801 Compliance Investigators. Using one career path for these 2 
categories of positions ensures the greatest flexibility in pay setting 
and pay progression. The decision to include professional and 
administrative jobs in the same career paths was based on a review of 
the current classification and pay progression for most jobs in FSIS. 
Educational credentials are important for many of FSIS' occupations and 
will continue to be used to make minimum qualifications determinations, 
where needed, upon appointment. For jobs where education can be 
substituted for experience, it may also positively impact the pay band 
a candidate is ultimately placed in at appointment. In FSIS, jobs that 
are either ``administrative'' or ``professional'' have very similar 
grade level progressions under the GS system, irrespective of the 
educational requirements of the job. Therefore, it was determined that 
these positions would be appropriately placed together in the 
Administrative, Professional, and Scientific Career Path which includes 
all jobs that have a 2-grade interval progression (e.g., GS-5, 7, 9, 
11, etc.) in order to facilitate system simplification without 
compromising classification principles.
(2) Pay Band Structure
    Comments: Several comments were made regarding the pay band 
structure that FSIS has established. There was a question as to whether 
FSIS plans to include non-supervisory employees and supervisory 
employees within the same bands. There was also a comment that banding 
grades together such as GS-12 and 13, or GS-13 and 14, without 
competition would be similar to a demotion for employees currently 
classified at the higher of the two grades. There was a question 
regarding why senior executives were not covered under the project and 
a comment that eligibility to the Senior Executive Service Candidate 
Development Program (SESCDP) could be compromised because of the 
proposed supervisory pay band structure. One commenter also stated that 
employees with disabilities, especially those with targeted 
disabilities, tended to be in the lower pay bands in other Federal pay-
for-performance programs and that the elimination of within-grade 
increases and implementation of pay banding would adversely impact pay 
progression for employees with disabilities.
    Response: FSIS reviewed the proposed pay band structure and 
determined that no changes are needed. With respect to placing 
supervisory and non-supervisory employees in the same band, FSIS notes 
that the proposed project did not originally include supervisors in the 
same band as non-supervisory employees unless the non-supervisory 
technical work of the position is at a higher level than the 
supervisory work. This occurs principally with the GS-701 Supervisory 
Public Health Veterinarian working in a plant where the supervisory 
work is at a lower level than the nonsupervisory veterinary work 
performed. Therefore, they are placed in the non-supervisory Pay Band 4 
of the Administrative, Professional, and Scientific Pay Band. The FSIS 
Demonstration Project Policies and Procedures Handbook will provide 
guidance to further clarify the bands and career paths.
    FSIS disagrees with the comment that combining two or more grades 
in one band is similar to a demotion as several gradations of work are 
possible within a given pay band. In essence, pay banding assumes that 
different employees in the same career path, job series, and pay band 
of a properly classified position can operate at differing levels--
within reason--due to variations in incumbent maturity (seasoning) and 
performance. In this circumstance, equal pay for equal work is not 
compromised even though one employee may be earning higher pay than 
another employee in the same pay band. In a fundamental respect, this 
is no different than disparities in pay that occur between employees in 
the same

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properly classified GS-13 position where one employee is earning a GS-
13, step 2, rate and another is earning a GS-13, step 9, rate. In 
addition, it is felt that the new pay band structure is actually more 
consistent with the manner in which most positions operate. For 
example, the main difference between two grades may simply be that 
supervisory controls are closer and/or guidelines are more defined at 
the lower grade. Oftentimes, classifiers use ``statements of 
difference'' which indicate that the position performs the same work at 
both grades but supervisory controls are closer and guidelines are more 
defined. Combining two grades into a single pay band, for example, 
shifts the focus of the employee pay advancement from position 
classification and merit promotion criteria to performance-based pay 
criteria, one of the chief goals of the demonstration project. This 
shift in pre-eminence from classification and promotion criteria to 
performance also occurs in the examples of other pay bands in other 
occupational career paths, and serves in the aggregate to underscore 
how pay-banding intrinsically enhances the potential effectiveness of a 
performance-based pay system. As the demonstration project is reviewed 
and evaluated over time, OPM and FSIS will make decisions on whether an 
adjustment to the band structure is warranted.
    With respect to the comment that eligibility for the SESCDP may be 
compromised by the proposed pay band placement structure, FSIS 
disagrees and does not believe the band structure will adversely impact 
an employee's eligibility for the program. The USDA SESCDP program is 
open to those who are at the GS-14 or 15 grade level or equivalent who 
are interested in applying and meet the qualifications requirements for 
the program. The proposed pay band 5S and 6S in the Administrative, 
Professional, and Scientific Career Path is considered equivalent to 
the GS-13/14 and GS-15 under the General Schedule, respectively. FSIS 
applicants who convert into the project at Band 5S or 6S and later 
apply to the SESCDP should not be adversely impacted by being in either 
pay band. Ultimately, as with any competitive process, the quality of 
the employee's application package which includes job experience will 
weigh most heavily in the final selection decision. It is also noted 
that Senior Executive Service employees are not participating in the 
project as they are already covered under a pay-for-performance system.
    In response to the comment that employees with disabilities tend to 
be at the lower pay bands in Federal pay-for-performance programs and 
will be adversely impacted by pay banding and the elimination of 
within-grade increases, FSIS noted that employees in lower pay bands 
will be entitled to the same benefits and opportunities for performance 
payouts made available to employees in the highest pay bands. Although 
there was no reference cited for the data source that employees with 
disabilities tend to be at lower pay bands in other pay-for-performance 
systems, a review of the FSIS workforce data shows that as of September 
2008, 71 percent of FSIS employees with disabilities are at the GS-12 
through GS-15 grade levels. Therefore, with a substantive number of 
FSIS employees with disabilities converting into the project at the 
highest pay bands, the comment is not substantiated for FSIS. It is 
noted that although within-grade increases will no longer be in effect, 
pay increases will be provided to all employees who perform at the 
``Fully Successful'' level or higher, including employees with targeted 
disabilities. The demonstration project will uphold the enduring values 
and principles upon which the Civil Service was founded and protect 
employee's fundamental rights and due process. While the demonstration 
project provides broad discretion in managing and compensating 
employees, actions taken by supervisors and managers must be based on 
legitimate, non-discriminatory reasons and protections against 
Prohibited Personnel Practices remain. Plans are being made to 
distribute a handout outlining the Merit System Principles, Prohibited 
Personnel Practices, and protections against employment discrimination 
on the bias of national origin, religion, color, race, age, sex, sexual 
harassment, and mental or physical disability. Finally, individuals who 
believe they have been discriminated against will have the same legal 
rights and protections under the demonstration project as were afforded 
to them prior to conversion.

(b) Pay and Pay Pools

    Comments: Several commenters posed questions seeking further 
clarification on how FSIS plans to establish, manage, and fund the pay 
pools. For instance, there were comments and questions relating to the 
size of the pay pools, composition of the pools, and share 
distribution. Concern was also raised regarding the adequacy of pay 
pool funding and the possible disparity of funds in the pools of 
differing sizes. There was a concern that there is a potential for 
employees in different pools with the same rating receiving different 
pay increases.
    Comments were also received about the merits of denying a pay 
increase to employees who receive a performance rating of less than 
``Fully Successful.'' Commenters also expressed the opinion that a 
``cost of living'' increase should not be dependent upon performance; 
therefore, employees should be entitled to receive the increases 
associated with the annual general increase and locality pay increase 
regardless of performance. One commenter inquired whether a lump sum is 
given to employees receiving an ``Outstanding'' rating who are at the 
top of the band or if the money and shares are returned to the pay pool 
for recalculation and distribution. Another commenter provided a 
recommendation for handling pay when the employee is at the maximum 
rate of the pay band by suggesting that FSIS provide an option for 
either issuing a monetary award or diverting the pay into the 
employee's retirement account.
    Some commenters had concerns that loyalty or longevity or seniority 
would no longer be factors in determining pay, and the security that 
longevity afforded employees would be jeopardized under the 
demonstration project.
    Response: A significant component of the demonstration project is 
the performance pay pool which will be used to distribute performance 
pay increases. The pay pool helps ensure that ratings, shares, and 
performance payouts are distributed consistently and fairly among those 
who are in the pool. Once a pay pool is established, employees in the 
pay pool who receive a performance rating of ``Fully Successful'' or 
higher are eligible for a performance payout. Employees in the pay pool 
whose performance ratings are below ``Fully Successful'' will not be 
eligible to receive an increase.
    In designing the pay pools, several factors will be taken into 
consideration. While there is no formula in place to determine the size 
and composition of a pay pool, there are some general guidelines and 
benchmarks that FSIS considered in determining the best approach for 
the agency to take when designing pay pools. A pay pool that is too 
large can be cumbersome to manage. FSIS will provide guidance on the 
structure and administration of the pay pools in the FSIS Demonstration 
Project Policies and Procedures Handbook.
    In terms of funding the pay pools, funds that would otherwise have 
been paid to demonstration project employees for the annual GS pay 
adjustment, within-grade increases, and quality step increases will be 
used to

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fund the pay pools. Since FSIS historically allocates monies to the 
salary budget on an annual basis for each of these increases, it is 
anticipated that FSIS will have sufficient funds for the pay pools. 
Since these increases have been historically paid to FSIS employees, 
the funding for these increases will continue under the demonstration 
project; however, the funds will be distributed differently in the form 
of performance pay increases.
    With respect to the concern regarding the possible disparity of 
funds in the pools of differing sizes and the potential for employees 
to be inequitably rewarded, FSIS notes that it will use the same 
percentage factor for all pay pools. Thus, the pay increase is a 
function of the rating and the share distribution within the pool. The 
higher the rating, the more shares an employee will receive. For 
example, those rated ``Outstanding'' receive 9 shares, ``Superior'' 
receive 6 shares, and ``Fully Successful'' receive 4 shares. No shares 
are given to those with less than a ``Fully Successful'' rating. 
However, this does not imply a forced distribution of ratings, which is 
not allowed under this project. To help facilitate a fair rating 
distribution under a pay-for-performance system, it will be extremely 
important for ratings to be well-supported by documentation and 
specific results, and for standards to be clear and measure what is 
important in the job and what it takes to exceed a performance element. 
Ensuring ratings are fair and consistent across program areas and that 
the agency is able to support meaningful levels of performance payouts 
to its top performers is a key tenet of the demonstration project. FSIS 
will run mock pay pools and provide training and the required tools to 
managers and employees detailing their responsibilities in this 
process.
    FSIS recognizes that clarification on locality pay is required in 
response to the points raised by commenters on how locality pay 
increases are handled for employees receiving a less than ``Fully 
Successful'' performance rating. Locality pay is added to the 
employee's base pay and serves as a means to equalize pay between the 
Federal and the private sector markets in a given area. It is not a 
cost of living increase (COLA) as some may perceive. FSIS believes that 
in order to fully test a pay-for-performance system and promote a 
performance culture, all pay increases should be tied to performance 
and that employees who fail to meet the basic requirements of their job 
and receive a Level 2 (Marginal) or Level 1 (Unacceptable) rating 
should not receive a pay increase, including a pay increase resulting 
from a locality pay increase. Employees will not lose pay but rather 
will not receive a pay increase. That is, the employee's base salary 
will be reduced to offset any locality pay increase. However, it is 
recognized that employees may improve their performance before the end 
of the next appraisal period as a result of the successful completion 
of a formal improvement plan. Therefore, if performance improves to the 
``Fully Successful'' or higher level, the employee is entitled to the 
same percentage of basic pay increase resulting from the annual general 
pay increase that the employee would have been guaranteed to receive if 
rated ``Fully Successful'' at the time the performance payout was 
denied. This pay increase will be applied prospectively. FSIS has 
clarified the language in this Federal Register Notice to emphasize 
that the employee is not eligible for a performance payout based on 
share distribution until the next January and the adjustment is not 
retroactive.
    With respect to how pay will be handled for employees who are at 
the maximum rate of the pay band, FSIS considered various options. 
Since a pay increase is most advantageous to the employee, it was 
decided these increases would be reserved for those employees who 
receive an ``Outstanding'' rating. The plan has a provision which 
extends the maximum rate of a pay band up to 5 percent for employees 
rated ``Outstanding'' so that the top performers who are at the normal 
maximum rate of the band may receive a performance pay increase. Those 
employees rated ``Superior'' or ``Fully Successful'' who are at the 
normal maximum rate of the band will receive the performance payout as 
a lump-sum payment. (Employees rated ``Outstanding who are at the 
maximum rate of the 5 percent band extension also will receive the 
performance payout as a lump-sum payment.) Therefore, funds will not be 
reallocated within the pay pool as one commenter questioned, and all 
pay pool funds will be distributed based on the shares allocated to 
those with performance ratings of ``Fully Successful'' or higher.
    FSIS did not adopt the suggestion to provide the option for 
diverting additional employee earnings into a retirement account. This 
can already be initiated by an employee through contributions to the 
Thrift Savings Plan, in addition to the automatic biweekly 
contributions made to their retirement account.
    In response to concerns that there is a need to recognize seniority 
and time spent on the job with automatic increases, FSIS believes that 
length of service is not as critical as the employee's performance and 
their contribution to the mission of the agency. FSIS wants to 
encourage a performance culture and a high performing organization that 
recognizes and compensates employees for their accomplishments rather 
than how long they have been in a position. Certainly with longevity 
comes valuable experience and institutional knowledge. FSIS 
acknowledges that it has many experienced employees who have made 
significant contributions over many years with the agency. The 
demonstration project is designed to recognize and retain these 
experienced high performers by providing more meaningful increases. 
Under a pay-for-performance system, FSIS does not believe that pay 
increases should be based solely on seniority nor should they be 
automatic or equivalent, particularly if an employee is performing at a 
less than ``Fully Successful'' level. This is contrary to the goals of 
the project.
    It should be noted that in some instances those long-term employees 
who are good performers and are currently at higher steps in their GS 
grades will actually see greater benefits under the demonstration 
project. The demonstration project eliminates the GS system requirement 
of waiting periods for receiving a pay increase. Specifically, under 
the demonstration project, employees who receive a rating of ``Fully 
Successful'' or higher will receive an annual performance pay increase 
until they reach the applicable maximum rate. In essence, employees 
with longevity may receive pay increases sooner than they would under 
the GS system with-grade increase waiting period requirements. In 
addition, employees who receive an ``Outstanding'' rating and are at 
the band maximum may have the top of the pay band extended by up to 5 
percent in order to receive a pay increase above the normal band 
maximum. In the GS system, employees at step 10 of their grade are no 
longer able to receive further pay increases at their grade level. FSIS 
wants to attract and retain a strong workforce and improve workforce 
performance.

(c) Staffing

    Comments: Most of staffing comments concerned the impact of 
employee conversion to pay banding on pre-existing promotion potential 
as a result of having successfully competed for a

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``career ladder'' position. Commenters also expressed concerns that 
employees who convert into the demonstration project and have already 
served a period of time in their grade might have to begin a new 52-
week waiting period to qualify for a band promotion.
    There were also questions about being confined to a band with 
little room for advancement and promotion within or to a higher band. 
Some believe that the move to a demonstration project will not have a 
benefit on recruitment or retention of employees. One commenter 
expressed the opinion that the demonstration project, particularly with 
its recruitment features, will be a discriminatory system toward 
current employees if new hires are placed at a higher salary than 
current employees. In addition, an employee group commented that the 
demonstration project should be patterned after the U.S. Department of 
Veterans Affairs (VA) title 38 pay system, which incorporates longevity 
pay and special pay for public health medical professionals.
    There was a question concerning whether the demonstration project 
would cover intermittent veterinary medical officers since they do not 
receive performance ratings. Other comments concerned pay setting upon 
conversion back to the GS in the event that the demonstration project 
is not made permanent. It was suggested that FSIS track employee 
salaries and set GS pay based on what employees would have received if 
they had remained under the GS.
    Response: Clearly, the feature of the plan that generated a high 
number of comments concerned career ladders and promotions, warranting 
some clarification to those sections of the notice. There will continue 
to be ``career ladders'' under FSIS' pay banding system, although 
instead of grade intervals, there will be band intervals. A 
``laddered'' position is simply a position advertised during 
recruitment at a certain level of full performance that is filled 
through selection and appointment at a lower pay band.
    Under the demonstration project plan, FSIS will have authority to 
``grandfather'' employees who become covered by the demonstration 
project at the time it initially takes effect and who have not reached 
their full promotion potential at that time. On an annual basis (until 
full promotion potential is reached), FSIS will compare each 
``grandfathered'' employee's base rate entitlement under the 
demonstration project to the projected base rate they would have 
received under the GS system (taking into account general increases, 
regular within-grade increases, and career-ladder promotion increases). 
If the projected GS base rate is higher than the base rate determined 
under the normal demonstration project rules, and if the employee meets 
any additional required conditions established by FSIS, the employee 
will receive a special pay adjustment so that his or her payable base 
rate does not fall below the projected GS base rate. In other words, 
the projected GS base rate that would have been in effect on the 
specified annual date (as determined by FSIS) acts as a floor rate for 
the next 12 months. Even though the floor rate may be the payable rate, 
FSIS will continue to maintain the employee's normal base rate 
entitlement under the demonstration project as an alternative 
entitlement. While the ``grandfathering'' benefit is in effect, the 
normal base rate entitlement will be determined without regard to any 
GS floor rate that may be payable--that is, the GS floor rate is not 
used in applying pay adjustments under the demonstration project but is 
simply a separate entitlement or minimum guarantee for qualified 
employees. The ``grandfathered'' employee's normal base rate 
entitlement under the demonstration project will become payable if it 
exceeds the GS floor rate. This ``grandfathering'' benefit will cease 
to be applicable when the employee reaches his or her full promotion 
potential (as further described in the following paragraph). At that 
point, if the base rate established under this ``grandfathering'' 
authority is higher than the normal base rate established under the 
demonstration project, the base rate under the ``grandfathering'' 
authority will be converted into the employee's official base rate 
under the demonstration project.
    ``Full promotion potential'' is a traditional position 
classification and personnel staffing concept that will continue to 
have validity under FSIS' demonstration project, and it means the 
highest grade, or pay band, of a career-ladder position for which an 
incumbent previously competed under the Government's Merit System 
Principles and an agency's merit promotion plan. Once an FSIS employee 
who converted to pay banding under this demonstration project receives 
an in-band pay increase or promotion that takes him or her to a pay 
level equivalent to the highest GS grade in the formerly applicable 
career ladder, the employee will be considered to have reached his or 
her full performance potential and the ``grandfather'' provision will 
cease to apply. Future in-band pay increases for such an employee would 
then be based solely on performance, consistent with other employees. 
Of course, just as a GS employee is not guaranteed a career-ladder 
promotion without the supervisor's certification, the promotions and 
special ``grandfathered'' in-band increases for demonstration project 
employees will not be guaranteed, and they will be issued new 
performance plans with each pay increase. Additional terms and 
conditions of this ``grandfathering'' benefit will be published in the 
FSIS Demonstration Project Policies and Procedures Handbook that will 
implement this project plan.
    In terms of meeting the proposed 52-week time in band requirement 
for promotion to the next higher band, FSIS has reevaluated this 
provision in light of the final rule issued on November 7, 2008, which 
eliminated the time-in-grade requirements. Promotions to the next 
higher band will be determined based on meeting the qualifications 
requirements for promotion to the next higher band and will not require 
employees to serve 52 weeks in the band if qualifications are met. 
Policies will be further defined in the FSIS Demonstration Project 
Policies and Procedures Handbook to ensure fair and consistent 
promotion decisions throughout FSIS.
    FSIS disagrees with the comment that being placed into a pay band 
provides little room for advancement and promotion. Pay bands replace 
grades and in most cases simply provide a broader range of pay than a 
single grade currently does. As with grades, employees are not confined 
to one band and being in a band does not prevent employees from 
applying for promotional opportunities to a higher band or to a 
different career path with higher band potential. Promotions will 
continue to exist under the demonstration project. Bands offer greater 
pay potential to employees and are not designed to limit career 
advancement. Promotions will continue to be based on performance and 
promotional criteria that are established for the position. FSIS will 
continue to uphold Merit System Principles (and other personnel 
authorities) and will work to avoid Prohibited Personnel Practices as 
it currently does under the GS system. That will not change.
    Recruitment and retention of a skilled workforce is important to 
FSIS and was one of the reasons FSIS decided to pursue a demonstration 
project to test a pay-for-performance system. The demonstration project 
better positions FSIS to be more competitive with other Federal 
Government agencies and the

[[Page 5049]]

private sector when recruiting new hires. Pay setting flexibilities 
allow FSIS to bring new hires to the agency at any point within the pay 
band based on the credentials and experience they bring to the agency. 
Pay for performance will also provide managers with the ability to 
fairly compensate current employees based on their performance and also 
help to align agency salaries with those in the more competitive labor 
markets. Employees who are rated at higher levels will receive larger 
payouts than employees rated at lower levels. Higher pay increases 
based on performance facilitates a performance culture and produces a 
high performing organization that achieves results. When designing the 
demonstration project, the recruitment and retention of employees in 
the FSIS public health veterinary occupation, which has experienced 
shortages in the last eight to ten years, was of particular concern. 
With respect to implementing a system which includes provisions for 
special pay and longevity pay, FSIS closely studied the features of the 
VA system. Because the focus of the demonstration project is to test 
pay-for-performance in a public health environment, FSIS is moving away 
from the current system's focus on longevity as the basis for all pay 
increases. FSIS felt that instituting longevity pay would be contrary 
to the purpose of the project. In terms of special pay, FSIS is 
exploring several options, including the use of retention incentives 
that are already in existence under title 5. For example, a group 
retention incentive could be authorized for public health veterinarians 
who have certain board certifications that are of significant value to 
the FSIS mission when such veterinarians are likely to leave the 
Federal service because the board certifications improve their 
marketability in the private sector. Over the life of the project, FSIS 
also may request that OPM establish a new staffing supplement for a 
category of FSIS employees for which there are staffing difficulties.
    FSIS does not agree with the suggestion that employees' salaries 
should be tracked in order to set GS pay based on what employees would 
have received if they had remained under the GS. The project plan gives 
FSIS authority to establish the rules governing pay setting for 
employees who convert out of the demonstration project and move to a GS 
position. Those technical conversion-out rules will be provided in the 
FSIS Demonstration Project Policies and Procedures Handbook and will be 
forwarded to other Federal agencies should an FSIS employee move to a 
GS position in another agency. In general, demonstration project 
employees moving to a GS position, whether during the project or at its 
conclusion, will be converted to a GS-equivalent grade and rate before 
they leave the demonstration project and thus will be treated as GS 
employees under GS pay administration rules when setting pay in their 
new GS position. Employees will not lose pay upon conversion to the GS 
system should the demonstration project end. Employees may actually 
progress faster than they would have under the GS system because under 
a pay banding system rate ranges are generally broader, performance pay 
increases may be earned each year, pay increases may be given above the 
pay band maximum for Outstanding performers, and pay setting 
flexibilities may provide for higher entry rates.
    With respect to the question regarding whether intermittent 
veterinary medical officers will participate in the demonstration 
project, FSIS decided to exclude these employees from the project 
because they are excluded from the performance management plan and do 
not have regular performance appraisals.

(d) Management Accountability

    Comments: Perhaps no other topic generated so many comments as the 
topic of supervisory accountability. Most of the comments concerned the 
objectivity and consistency of performance appraisals and the recourse 
employees will have should they desire to appeal their performance 
ratings. A number of commenters expressed concern over fairness of 
performance ratings and supervisory caprice or favoritism in appraising 
employee performance. Some concerns were raised about performance 
appraisals not being completed on time during a rating cycle and the 
level of paperwork required by supervisors when an employee receives a 
``Superior'' or ``Outstanding'' rating. A suggestion was made to add a 
provision to the regulation to permit employees to rate their 
supervisors.
    Response: FSIS agrees with commenters that the performance 
management rating system must be fair and equitable. FSIS also agrees 
with commenters who state that employees should be rewarded based on 
their performance. The demonstration project has developed a series of 
safeguards and checks and balances to help ensure that the process is 
fair and consistent within organizational units.
    One of the safeguards is the way the pay pool process has been 
structured which provides an added level of accountability and checks 
and balances to ensure that the ratings and supporting documentation 
are consistent across the pay pool. Employee accomplishment reports 
prepared by the employee, and supervisory rating justifications 
prepared by the rating supervisor, play a significant part in ensuring 
a fair and equitable performance management rating system. An 
accomplishment report will serve as a critical document in describing 
the employee's performance in accomplishing the agency's mission during 
the rating cycle. Employee ratings will be based on performance 
standards that have been established for the employee's position. 
Ratings will not compare one employee against another employee.
    The demonstration project has been designed with a series of 
reviews to ensure employees are rated according to their level of 
performance. A first-level supervisor reviews an employee's 
accomplishment report and performance standards, in conjunction with 
other performance criteria, and provides a rating for an employee. 
Supervisors will be held accountable for the ratings they recommend for 
employees. The rating will be reviewed by a second-level supervisor and 
then the rating will be presented to the pay pool panel, consisting of 
FSIS management officials, who will evaluate and reconcile, if 
necessary, an organization's performance ratings. The pay pool panel 
will make the final decision on the performance ratings.
    Employees who receive a rating of ``Fully Successful'' or higher 
are entitled to a performance payout. Employees whose performance is 
less than ``Fully Successful'' are not and will receive written 
notification, as well as have the right to request reconsideration of 
the rating. To support fairness and transparency for the program, 
employees have an opportunity to request reconsideration of rating by a 
management official other than the rating official.
    Supervisors will also be under the demonstration project and will 
be held accountable for meeting the supervisory requirements of their 
position. One such requirement is the completion of performance 
appraisals within the designated timeframe for their employees and all 
associated paperwork that accompanies the appraisal. Disciplinary 
action can be taken if supervisors fail to meet the requirements of 
their positions, which includes performance management. FSIS did not 
add a provision to the project notice to permit employees to rate their 
supervisors. Under present

[[Page 5050]]

guidelines, feedback can be obtained in a variety of ways, to include 
employee feedback, surveys, etc.; therefore, a change is not necessary. 
FSIS encourages utilizing various feedback mechanisms available to 
assess management performance.

(e) Performance Management

    Comments: Most of the comments received on performance management 
concerned the establishment of clear, measurable, and realistic 
performance standards to which employees would be rated. Most who 
commented felt that without good standards, a pay-for-performance 
system that is fair and equitable would be difficult to achieve. One 
commenter stated that FSIS had not met OPM-established performance 
management system requirements (i.e., objective and measurable 
performance standards) and therefore questioned FSIS readiness for the 
demonstration project. Some commenters stated morale and teamwork will 
suffer and there will be a disincentive for employees to work together 
as teams because there may be competition among staff members for a 
limited amount of funds that are in the pay pool. Commenters expressed 
concern that employees rated against each other would create situations 
to improve individual performance at the expense of others. There were 
a couple of commenters who welcomed the pay-for-performance system as a 
means to be compensated for their high level of performance.
    One commenter stated that a method, the In-Plant Performance System 
(IPPS), is not being used to measure performance. Commenters also 
expressed the importance of ensuring the availability of comprehensive 
and adequate training for employees, supervisors, and managers on all 
the various components of the demonstration project.
    Response: FSIS agrees that clear, measurable performance standards 
are critical to the success of the demonstration project and has 
steadily worked on the requirements of the President's Management 
Agenda Scorecard and met OPM's requirements for an improved performance 
management system. During 2006, FSIS completed OPM's Performance 
Appraisal Assessment Tool (PAAT), covering ten major areas of focus on 
performance management, and was the first to receive a passing score 
within USDA. FSIS, more recently, completed a partial PAAT assessment 
and demonstrated that employee performance plans were strategically 
aligned, contained balanced credible measures, were results focused, 
and adequately distinguished between levels of performance. In this 
assessment, FSIS received a perfect score. FSIS continues to be a USDA 
and Federal agency leader in making improvements to the performance 
management system, similar to its leadership role in pursuit of 
additional human resources authorities. FSIS feels it is well-
positioned to move forward with the demonstration project and, in fact, 
has met the requirements to do so.
    Other important efforts also underway involve training. As outlined 
in the May 9, 2008 Federal Register Notice, FSIS is providing training 
to all participating employees, supervisors, and managers before the 
project is implemented and throughout the five-year life of the 
project. Supervisors and managers continue to receive extensive 
training in setting and communicating performance expectations, 
monitoring performance, and providing timely feedback. They will also 
receive training on the mechanics of the performance management system. 
Supervisors and managers will be held accountable for the effective 
management of the performance of the employees they supervise through 
performance expectations and appraisals of their own performance in 
this regard.
    FSIS is also providing training in effective accomplishment writing 
for all employees before and throughout the life of the demonstration 
project. Classroom workshops, desk guides, CDs, and net conferencing 
tools will be utilized to provide employees with multiple training 
methods to reach out to the agency's physically dispersed workforce.
    Performance management training has been and will continue to be 
offered to employees and supervisors. Employees are encouraged to ask 
questions about the standards and to ensure that the standards that 
have been established are compatible with their responsibilities.
    Perhaps the biggest challenge the agency faces is earning and 
keeping the trust of its employees during this time of profound change, 
while ensuring that the demonstration project is not perceived as a 
disincentive. The demonstration project is not designed to pit 
employees against each other. Employees will be evaluated against their 
established performance standards and will not be evaluated and 
compared against the performance of other employees in the work unit. 
The effectiveness of every employee is enhanced by his or her ability 
to work effectively with others which in turn can ultimately impact his 
or her level of performance. There are generic elements identified in 
FSIS' Performance Management Plan that are used to evaluate an 
employee's interpersonal skills, including Customer Service, Teamwork, 
and a mandatory Personal Contacts element which can be used to promote 
teamwork and evaluate an employee's effectiveness in working with 
others. Certainly, FSIS will monitor and evaluate the performance 
management process throughout the project to ensure there is no adverse 
impact of this nature.
    Supervisors need to evaluate an employee's performance based on the 
standards that have been established and must take into consideration 
all aspects of the individual's performance. There are several methods 
that are to be used to monitor and evaluate employee performance to 
include a review of work products and other supporting documentation 
and input related to work accomplishment, internal/external customer 
feedback, direct observation of performance, the employee's assessment 
of their own performance, etc. The IPPS is another tool used by 
supervisors to assess the employee's knowledge of his or her job 
requirements. IPPS applies to non-supervisory in-plant occupations. It 
is designed to provide supervisors with a structured process to look at 
specific elements of the job to identify, address, and correct areas 
where there is a need for improvement in performance and provide 
feedback to employees. According to FSIS Directive 4430.3 which 
outlines the policy on the IPPS system, supervisors should use IPPS 
data with other data and information about an employee's performance to 
determine the performance rating.

(f) Employee Relations

    Comments: A few comments in this topical area concerned whether 
employees have the right to appeal or grieve their performance rating. 
Commenters expressed the point that the administrative grievance 
procedure is ineffective as there is a reluctance of managers to 
overturn decisions made by supervisors. Some felt that there needs to 
be a credible system of appeal that is apart from the current 
administrative grievance process. Commenters also expressed concern 
that FSIS already has many grievances and questioned FSIS' 
consideration of the impact the demonstration project would have on 
inspectors in districts where the grievance filings are already rather 
high.
    Response: Under the demonstration project, there will be a 
reconsideration process that is separate from other appeal processes 
like the administrative grievance process. Employees will have the 
right to request reconsideration of their performance rating. These

[[Page 5051]]

procedures will be outlined in the FSIS Demonstration Project Policies 
and Procedures Handbook and will address how the process will work. In 
addition to the reconsideration process, employees who believe they 
have been treated unfairly have the same legal rights and protections 
under the demonstration project as under the GS system and also have 
the right to file a formal Equal Employment Opportunity (EEO) 
complaint.
    With respect to the comment on grievances and their impact on 
inspection personnel, a decision was made to exclude the bargaining 
unit. Therefore, the demonstration project will have no effect on 
inspectors.

(g) Labor Relations

    Comments: There were a few comments related to labor management to 
include a comment concerning the involvement of employee groups in the 
planning, development, and implementation of this demonstration 
project. There was also a comment that FSIS did not communicate the 
right of employees to unionize or give them the option to do so. Some 
members of the bargaining unit commented that it is hard to receive a 
higher rating because of the nature of their job where they work on the 
line. One commenter noted that the majority of the workforce, which 
primarily includes the bargaining unit employees, were not included. 
The commenter questioned how FSIS can exempt the majority of the 
workforce from the project.
    Response: In the initial design of the system, FSIS formed a 
workgroup that was comprised of employees from all levels of the 
organization, several of whom were members of the employee groups. The 
draft Federal Register Notice issued on May 9, 2008, allowed for input 
and comment from employee groups. One group submitted both written and 
oral comments. FSIS values the opinions of its employees and welcomes 
input from its employee groups. Briefings and subsequent discussions 
were held with the leadership of the National Association of Federal 
Veterinarians and the Association of Technical and Supervisory 
Personnel employee groups to solicit questions and concerns during the 
comment period. With respect to the comment on communicating 
information on or providing employees with the option to unionize, FSIS 
notes that employees have the right to unionize, but it is not a 
management responsibility to communicate information on how to do so. 
As noted in other parts of this notice, the decision to exclude the 
bargaining unit was made in part due to the fact that no more than 
5,000 employees may participate in a demonstration project. Since the 
bargaining unit comprises over 6,000 employees, FSIS decided to exclude 
this group. Therefore, the demonstration project will have no effect on 
the performance ratings, pay, or other incentives for bargaining unit 
employees.

(h) Evaluation

    Comments: A few commenters noted the importance of evaluating the 
demonstration project in their comments concerning other topical areas. 
A couple of commenters, however, specifically addressed the topic of 
evaluation. One commenter pointed out that an evaluation of the GS 
system against the demonstration project, conducted by non-agency 
officials, would provide a fair and accurate assessment of the results. 
Another commenter expressed concern that the objectives of the 
demonstration project are not being met under the proposed structure. 
One commenter stated that FSIS is presenting the positive points and 
none of the adverse issues relating to the demonstration project.
    Response: FSIS agrees that the evaluation portion of the Public 
Health Human Resources System (PHHRS) is a critical means of 
determining the impact on improving human resources management. 
Evaluation, a legal requirement of a demonstration project, will take 
place throughout the five-year demonstration project period. It will be 
conducted by an independent evaluator to assess whether the 
flexibilities of the proposed system will help FSIS better attract and 
retain employees, or whether FSIS would realize the same results had a 
change from the GS system to PHHRS not been made.
    Over the five-year period, surveys, focus groups, and structured 
interviews with FSIS employees will be conducted as part of the 
evaluation process. FSIS will work with OPM to address issues that 
arise, especially any adverse impact issues that are identified during 
the evaluation period, and will apprise employees of any warranted 
changes or revisions. To ensure the goals and objectives of the 
demonstration project are being realized, FSIS has made some changes to 
its initial proposal of the demonstration project which can be found in 
section 4, ``Changes to Demonstration Project Plan,'' of this notice.

(i) Other

    Comments: There were some general comments and observations that do 
not specifically relate to the FSIS demonstration project and therefore 
are not covered in this section. The comments in this category relate 
to a variety of topics that do not specifically fall under any of the 
other topical areas. These comments relate to timing of implementation 
especially during the election year; communication efforts and the lack 
of specificity in operational and implementation procedures; 
administrative burden; workload distribution; the option of employees 
voting to participate in the project; and the impact on retirement.
    Response: All of these comments warrant a response. FSIS does not 
see the benefit of waiting to implement the demonstration project. By 
design, the demonstration project is an experiment and needs to be 
tried and tested over a five-year period of time. Delaying the project 
would not yield any benefits. Many things are supposed and anticipated, 
but few things are known for sure in advance. They need to be tried and 
tested.
    It is understandable that some commenters found FSIS' proposed 
project plan vague and unclear in parts. FSIS' demonstration project 
plan, in both its proposed and final incarnations, is designed to 
mainly answer the ``what'' of a matter, not the ``how.'' This is why 
there have been many references in these responses, as well as in the 
text of the project plan, to the FSIS Demonstration Project Policies 
and Procedures Handbook, which will contain more details about the 
project's operating procedures. But this response is not to dodge the 
issues. Most of the comments received during the public comment period 
have been invaluable in guiding FSIS' development of its companion 
policies and procedures. By design, a demonstration project is an 
experiment. There is more than one way to execute and effect almost any 
feature of this experiment, and though modeling previous successful 
experiments and viable alternative personnel systems can be extremely 
useful, there are still mechanical subtleties and finer points of 
interpretation in matters of pay banding, staffing, and pay with which 
FSIS must come to terms. Having said this, it can be said that after 
many months of rigorous development and refinement, FSIS has gained 
competence and sureness about how to effectively execute the 
innumerable features and applications of this project. FSIS is 
developing guidelines and conducting training to aid managers, 
employees, and the human resources office in implementing the 
operational features of the project. It will be some time

[[Page 5052]]

following project implementation and employee conversion before FSIS is 
proficient in most demonstration project matters, though FSIS is taking 
great pains and care to ensure that start up and transition are 
implemented as smoothly as possible.
    For a period of time beginning prior to the publication of the 
Federal Register Notice on May 9, 2008, to present, FSIS has followed a 
process of informing employees of the demonstration project through the 
employee newsletters and e-mails. A 30-day comment period followed the 
publication of the Notice, and OPM held a public hearing at the USDA 
Headquarters in June 2008 where individuals could comment on the 
system. FSIS has set up a mailbox on its intranet site for employees to 
submit questions and comments. In addition, agency publications, both 
in written and electronic format, have been regularly used to apprise 
employees of the status of the demonstration project and to provide 
answers to commonly asked questions and other pertinent information. 
Presentations were conducted for employees at headquarter and field 
locations and at various agency meetings and conferences. Throughout 
the life of the project, FSIS will continue to regularly inform 
employees of the status of the project and provide opportunities for 
employee comments.
    FSIS does not intend to increase staff to handle the administrative 
workload under the demonstration project. Automation of several 
administration processes associated with the features of the project is 
being considered.
    With respect to workload burden for supervisors, the 
responsibilities for managing employee performance are leadership 
responsibilities inherent in all managerial and supervisory jobs. These 
responsibilities are the same whether under a demonstration project or 
the current system. By setting goals and expectations for employees up 
front through the performance management process and communicating 
throughout the year, organizational performance can be improved and 
workload less burdensome. FSIS recognizes that for pay pool managers 
and others participating in that process, there will be additional 
responsibilities. However, with automated processes and training, FSIS 
will work diligently to prepare for a smooth transition which should 
facilitate the process.
    FSIS does not agree that employees should vote on participating in 
the demonstration project. Because FSIS is experimenting with a pay 
banding and pay for performance system that, were it to be successful, 
would replace entire segments of the GS workforce, allowing employees 
to vote would be impractical, and more compelling, not in the best 
interest of efficient Government.
    FSIS is not proposing to experiment with retirement benefits and 
laws, which cannot be waived under the demonstration project authority. 
Therefore, we disagree that the demonstration project will adversely 
impact employees under the Federal Employees Retirement System. 
Employment rules are often changed during the average career of a 
Federal employee to include provisions for additional flexibilities and 
modernization of the Civil Service system.

4. Changes to Demonstration Project Plan

    What follows is a list enumerating the changes to FSIS' 
demonstration project and textual changes to the project plan. The 
changes are clarifying in nature and are not substantial or major. The 
page numbers referenced are those found in the May 9, 2008, Federal 
Register Notice. Some of the changes have been described in the 
preceding responses to specific comments. Other changes provide 
additional detail and clarification or correct technical problems.
    (1) Page 26437: The Table of Contents is revised to reflect the 
addition of four new sections--VIII.A., Overview; VIII.B., Evaluation 
Models; VIII.C., Evaluation; and VIII.D., Method of Data Collection.
    (2) Page 26437: Section I, Executive Summary, is rewritten to 
reflect FSIS' final project goals.
    (3) Page 26438: Section II.A., Purpose, is revised to ensure 
consistency with the Executive Summary.
    (4) Page 26439: Section II.D., Participating Organizations, is 
revised to exclude intermittent veterinary medical officers and to 
reflect a name change from Technical Service Center to Policy 
Development Division.
    (5) Page 26439: Section II.E., Participating Employees, is revised 
to exclude intermittent veterinary medical officers.
    (6) Page 26440: January 2