Department of Defense Science and Technology Reinvention Laboratory (STRL) Personnel Demonstration (Demo) Project in the U.S. Army Research Institute for the Behavioral and Social Sciences (ARI), 76038-76067 [2020-26165]

Agencies

• DEPARTMENT OF DEFENSE

[Federal Register Volume 85, Number 229 (Friday, November 27, 2020)]
[Notices]
[Pages 76038-76067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26165]


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DEPARTMENT OF DEFENSE


Department of Defense Science and Technology Reinvention 
Laboratory (STRL) Personnel Demonstration (Demo) Project in the U.S. 
Army Research Institute for the Behavioral and Social Sciences (ARI)

AGENCY: Under Secretary of Defense for Research and Engineering 
(USD(R&E)), Department of Defense (DoD).

ACTION: Personnel demonstration project notice.

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SUMMARY: This Federal Register Notice (FRN) serves as notice of the 
adoption by the U.S. Army Research Institute for the Behavioral and 
Social Sciences (ARI) of the personnel demonstration project 
flexibilities implemented by the Combat Capabilities Development 
Command (CCDC) Command, Control, Communications, Computers, Cyber, 
Intelligence, Surveillance, and Reconnaissance (C5ISR) Center 
(previously designated as the U.S. Army Communications--Electronics 
Research, Development and Engineering Center and the U.S. Army 
Communications--Electronics Command, Research, Development and 
Engineering), the CCDC Chemical Biological Center (CBC) (previously 
designated as the Edgewood Chemical Biological Center), and the CCDC 
Soldier Center (SC) (previously designated as the Natick Soldier 
Research, Development and Engineering Center). The majority of 
flexibilities and administrative procedures are adopted without 
changes. However, modifications were made when necessary to address 
ARI's specific

[[Page 76039]]

organizational, management structure, workforce, and approval needs and 
to conform to changes in applicable law and regulations after the 
publication of the adopted personnel demonstration project 
flexibilities. In addition, changes were made based on current law, 
best practices, and administrative guidance.

DATES: Implementation of this demonstration project will begin no 
earlier than November 27, 2020.

FOR FURTHER INFORMATION CONTACT:
     ARI: Dr. Scott Shadrick, 254-288-3800, 
[email protected].
     DoD: Dr. Jagadeesh Pamulapati, Director, Laboratories and 
Personnel Office, 571-372-6372, [email protected]

SUPPLEMENTARY INFORMATION: Section 342(b) of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 1995, Public Law (Pub. 
L.) 103-337, as amended, authorizes the Secretary of Defense (SECDEF), 
through the USD(R&E), to conduct personnel demonstration projects at 
DoD laboratories designated as STRLs.

1. Background

    Since 1966, many studies of DoD laboratories have been conducted on 
laboratory quality and personnel. Most of these studies have 
recommended improvements in civilian personnel policy, organization, 
and management. Pursuant to the authority provided in section 342(b) of 
the NDAA for FY 1995, as amended, a number of DoD STRL personnel 
demonstration projects were approved. These projects are ``generally 
similar in nature'' to the Department of Navy's ``China Lake'' 
Personnel Demonstration Project. The terminology, ``generally similar 
in nature,'' does not imply an emulation of various features, but 
rather implies a similar opportunity and authority to develop personnel 
flexibilities that significantly increase the decision authority of 
laboratory commanders and/or directors.
    ARI conducted a thorough review of the personnel practices of 
existing DoD laboratories designated as STRLs and applicable laws, 
regulations, and guidance to identify potential flexibilities that 
would allow ARI to (1) improve effectiveness through a more flexible, 
responsive personnel system; (2) increase management authority over 
human resources management; (3) recruit, develop, motivate, and retain 
a high quality workforce; and (4) adjust workforce levels to meet 
strategic program and organizational needs.
    This demonstration project involves:
    (1) New appointment authorities;
    (2) Extended probationary periods;
    (3) Supervisory probationary periods;
    (4) Pay banding;
    (5) Streamlined delegated examining;
    (6) Simplified job classification;
    (7) A pay-for-performance based appraisal system;
    (8) A sabbatical program;
    (9) Academic degree and certificate training;
    (10) A Volunteer Emeritus Corps; and
    (11) Senior Scientific Technical Manager (SSTM) positions.
    The demonstration project also involves the use of numerous direct 
hire authorities, as appropriate and in accordance with guidance. Many 
aspects of a demonstration project are experimental. Modifications may 
be made from time to time as we gain experience, analyze results, and 
reach conclusions on how the system is working. The provisions of 
Department of Defense Instruction (``DoDI'') 1400.37, ``Science and 
Technology Reinvention Laboratory (STRL) Personnel Demonstration 
Projects'' (available at https://www.esd.whs.mil/Portals/54/Documents/DD/issuances/dodi/140037p.pdf) (including subsequently issued or 
superseding instructions), will be followed to modify, supplement 
through adoption, or otherwise change this demonstration project plan.

2. Overview

    ARI intends to build its demonstration project using flexibilities 
adopted from existing STRL demonstration programs with significant 
overlap with the CCDC C5ISR, CCDC CBC, and CCDC SC.
    As described in 73 FR 73248, December 2, 2008, flexibilities are 
defined as those features described in a STRL FRN; amendments thereto 
published in an FRN; minor changes made within the authorities of a 
demonstration project plan, documented in laboratory internal issuances 
and disseminated to employees; and official laboratory implementing 
issuances that have been distributed.

3. Access to Flexibilities for Other STRLs

    Flexibilities published in this FR will be available for use by all 
STRLs listed enumerated in section 1105(a) of Public Law 111-84, as 
amended, in accordance with DoDI 1400.37 (including revised or 
superseded instructions) and after the fulfillment of any collective 
bargaining obligations.

4. Summary of Comments

    Thirteen commenters provided comments and questions regarding the 
ARI Personnel Demonstration Project, Federal Register, 84 FR 64469, 
dated November 22, 2019. The following is a summary of these written 
questions by topical area and a response to each.

(1) Pay Banding

    Comment: Five commenters expressed concern about allowing all 
positions to advance, ``unconstrained,'' to the top of a given pay 
band. One of the comments referenced language that was included in a 
draft version of the Federal Register Notice that was provided to the 
ARI workforce for review prior to publication. The language stated 
that, ``Not all positions in a given pay band will be able to progress 
to the top of that band if the duties and responsibilities of the 
specific position do not warrant such a progression.'' Another 
commenter recommended adopting a minor modification used by other 
laboratories to provide the STRL Director with the ``authority to 
insert `control points' for any identified position in any demo pay 
band and/or occupational family.'' The commenter suggested that the 
control points would enable the Director to maintain cost discipline 
while ``ensuring salary increases reflect appropriate levels of 
performance and/or responsibility.'' Additionally, one commenter asked 
how control points would impact the midpoint and asked about the 
potential negative impact of control points on the demonstration 
performance system. Finally, one commenter questioned the use of 
linking the top of each pay band the GS Step 10 pay level and not 
raising the pay caps above the GS Step 10 level.
    Response: This Federal Register Notice is revised to provide the 
STRL Director with the ability to insert control points, consistent 
with the minor modification adopted by Combat Capabilities Development 
Command (CCDC) Command, Control, Communications, Computers, Cyber, 
Intelligence, Surveillance, and Reconnaissance (C5ISR) Center, to 
maintain budget control and flexibility in using the pay banding 
system. The flexibility provides a tool for managing organization 
workforce structure and pay and will ensure employees are compensated 
commensurate with their duties and performance. The use of control 
points does not negatively impact the midpoint nor the demonstration 
performance system. The following are examples for use of control 
points. If an ARI employee in the DB-02 pay band (GS-05 to GS-11) is 
required to perform duties at the GS-07 equivalent level, and there is 
no organizational requirement for progressive duties and 
responsibilities in the career series beyond the GS-07

[[Page 76040]]

equivalent level, then the employee's salary would not progress beyond 
the appropriate equivalent level control point. If an ARI employee in 
the DE-03 pay band (GS-12 to GS-13) is required to perform duties at 
the GS-12 equivalent level, and ARI has an organizational requirement 
for progressive duties and responsibilities in the career series beyond 
the GS-12 equivalent level, then the employee's salary could progress 
to the appropriate equivalent level control point as performance 
requirements dictate.
    The pay band structure in this personnel demonstration project was 
adopted from the U.S. Army Armament Research, Development, and 
Engineering Center (currently referred to as CCDC Armaments Center). 
The structure links the pay band's lower and upper limits to the GS pay 
scales. As the rates of the GS pay scale increase with annual general 
pay increases, the upper and lower base pay rates of the demonstration 
project's pay bands also will increase. This allows the laboratory to 
more effectively compensate high performance while also maintaining 
necessary cost controls.

(2) Award Timeline

    Comment: One comment was received concerning the timing or timeline 
for payout of awards.
    Response: The post-implementation/regular rating period will be 
from 1 February to 31 January. However, the implementation/initial 
rating period may be shorter to allow for a paced and orderly 
transition from the current DPMAP evaluation system to the 
demonstration project pay for performance system. During the post-
implementation/regular performance rating cycle, employees will submit 
their accomplishments by 31 January of the rating period. Raters will 
then conduct initial ratings and submit those ratings for review during 
reconciliation meetings conducted by the pay pool panel(s). Ratings 
will be finalized and personnel actions submitted for processing at the 
end of March. During April, employees and supervisors will participate 
in performance review discussions. Payouts would be effective in May, 
generally by the first pay period in the month.

(3) Pay for Performance

    Comment: Two comments addressed the use of time off awards as a 
part of the performance payout in lieu of cash bonus. A third comment 
addressed employees at the GS step 10 equivalent pay level.
    Response: Initially, time off awards will not be used as a 
performance payout in the demonstration project but this may change as 
experience is gained. Time-off awards may still be awarded in 
accordance with the Army incentive awards program.
    Employees at the top of the pay band (GS step 10 equivalent level) 
are eligible to receive a pay for performance payout equivalent to the 
combination of any base pay increase and bonus payout, in the form of a 
bonus ONLY.

(4) Performance Management Board and Pay Pool Panel Membership

    Comment: One commenter questioned whether or not ARI's Scientific 
and Professional (ST) position would be required to serve on the 
Performance Management Board (PMB) or Pay Pool Panels in any capacity. 
A second commenter questioned how many individuals would be appointed 
to the PMB, how many ad hoc members would be appointed, what roles 
members perform, and whether there would be term limits. The same 
commenter asked about the full membership of the pay pool panel.
    Response: Performance Management Board (PMB) and Pay Pool Panel 
members will be appointed by the Director, ARI, consistent with 
governing regulations and practices. To ensure confidence in a fair and 
equitable performance management process, appointments will be made in 
a manner that avoids conflicts of interest. There are no term limits or 
a fixed number of members for the PMB. The workforce will be informed 
of the PMB and Pay Pool Panel's composition prior to the start of a new 
rating cycle, and upon any mid-cycle change. Ad hoc PMB members are 
non-voting members and serve in an advisory role regarding functional 
or administrative matters impacting the performance management system.

(5) Personnel Requirements

    Comment: Two commenters asked what additional staffing requirements 
are required to implement the project.
    Response: Currently one ARI employee is assigned responsibility for 
management of ARI's demonstration project. This employee is assisted by 
other ARI employees as needed. Staffing requirements may be adjusted 
over the course of the project as necessary.

(6) Details and Temporary Promotions

    Comment: Two commenters asked multiple questions concerning details 
and temporary promotions. The series of comments and questions 
requested clarification on pay setting, travel, and pay for details and 
temporary promotions. Comments also addressed the ability to 
temporarily promote an employee to a different pay band.
    Response: This Federal Register Notice has been revised to include 
additional provisions regarding details and temporary promotions. An 
employee may be detailed or temporarily promoted to a position in a pay 
band with a higher maximum salary. A base pay increase may be granted 
for details and temporary promotions when the position significantly 
increases the complexity, responsibility, or authority of the 
employee's work, or for other compelling reasons. The PMB will 
establish guidelines regarding pay increases associated with details 
and temporary promotions. Details and temporary promotions may be 
determined by a competitive or a non-competitive process. The Federal 
Register Notice allows ARI, to the extent required, to extend the 
length of details and temporary promotions for a period up to two 
years. Existing laws and regulations pertaining to temporary duty 
status, travel, and tax requirements remain applicable. Eligibility for 
details or temporary promotions will be documented in ARI's internal 
operating procedures or business rules.

(7) Occupational Series and Occupational Families

    Comment: One commenter questioned the occupational series included 
in the Engineering & Science (E&S) occupational family.
    Response: ARI's current table of distribution and allowances has 
two occupational series that qualify for the E&S family. Therefore, 
only those two occupational series (psychologist and statisticians) 
were included. As noted in Appendix B, additional occupational series 
may be added in the future, as needed, to support mission requirements.

(8) Classification

    Comment: One commenter asked about the appropriate level of 
delegated classification authority and necessary qualifications. They 
also asked how individuals with delegated classification authority will 
interact with the Director.
    Response: Classification authority will be delegated to the ARI 
Director, but it is not anticipated that classification authority will 
be further delegated in the near-term. Unless otherwise delegated, ARI 
will rely on classification specialists at the Civilian Human Resources 
Agency (or other supporting human resources entity) to perform 
classification functions. Any delegated authority will require 
demonstrated competence in the

[[Page 76041]]

technical principles, policies, and standards for classifying positions 
based on the duties and responsibilities assigned and the 
qualifications required to do the work. Any individual with delegated 
classification authority will be required to complete training prior to 
any classification activities and will be responsible to the Director.

(9) Pay Pools Compositions

    Comment: One commenter asked for more specificity on the 
composition of the pay pool panels in the Federal Register Notice. Two 
commenters discussed the size of ARI and suggested that the pay pool 
panels would be too small to allow for a fair and equitable system.
    Response: As noted in the initial Federal Register Notice (page 
64471, section G, paragraph 2), the Performance Management Board will 
determine the composition of the pay-for-performance pay pools in 
accordance with the guidelines of the IOP (Internal Operating 
Procedures). Additionally, the names of the pay pool manager and pay 
pool members will be published prior to each new performance rating 
period. When necessary, changes to pay pools may be made based on 
organizational structure, the number of employees and their 
occupational composition, work levels and work categories, and the size 
and manageability of pay pools.
    Pay pools will generally be between 25 and 75 employees; however, 
smaller or larger pay pools may be appropriate where organization and 
mission dictate.

(10) Significant Accomplishment Rule

    Comment: Two comments were related to the significant 
accomplishment rule. One comment requested that the rule be eliminated 
and a second suggested that non-E&S employees would not fare well under 
the system due, for example, to the Significant Accomplishment/
Contribution Rule.
    Response: The significant accomplishment rule is designed to ensure 
a high level of performance to advance within the high end of the pay 
band for E&S occupations in the DB-03 band given the number of 
employees assigned to that particular pay band. Consistent with other 
labs utilizing the significant accomplishment rule, it will be 
appropriately used to maintain pay-for-performance cost/pay discipline 
within the pay band. The rule prevents DB-03 employees from progressing 
to the highest salary in the band without performing at increased 
levels of performance or responsibility. The rule does not apply to 
non-E&S employees.

(11) Grievances

    Comment: One commenter suggested, ``It was previously agreed that a 
grievance would be to someone above the Director'' and wanted to know 
why that was not included in the notice.
    Response: Grievances filed by individuals who are not rated by the 
Director will be acted on by the Director because the Director is not 
involved in the rating of those employees. Grievances filed by 
individuals who are rated by the Director will be acted on by a higher 
authority. For bargaining unit employees, the negotiated grievance 
procedure (NGP) will be followed.

(12) Direct Hires

    Comment: One commenter asked why scientists and engineers were the 
only group listed for direct hire. The commenter noted that Business 
and Technical and General Support are equally as important and should 
be included in the direct hire.
    Response: The designation of career series eligible for direct hire 
authority does not diminish the importance and value of each career 
series in the organization's mission success. In this instance, use of 
the direct hire authority is limited to the flexibilities afforded by 
Congress in various National Defense Authorization Acts (NDAA). The 
direct hire authorities listed in the notice are those that STRLs are 
authorized by Congress to utilize; and are currently allowed for (1) 
candidates with advanced degrees to scientific and engineering 
positions; (2) candidates with bachelor's degrees to scientific and 
engineering positions; (3) veteran candidates to scientific, technical, 
engineering, and mathematics positions (STEM); and (4) student 
candidates enrolled in a program of instruction leading to a bachelors 
or advanced degree in a STEM discipline.

(13) Supervisory Probationary Periods and Performance Improvement Plans

    Comment: One commenter asked for clarification on probationary 
periods for supervisors new to the government and performance 
improvement plans for supervisors.
    Response: Supervisors new to the government must complete a three-
year new employee probationary period. Supervisors who have previously 
completed a new employee probationary period in a government position 
must complete a two-year supervisory probationary period as a 
supervisor. Supervisors, as with any employee, can be placed on a 
performance improvement plan when appropriate, to include during the 
probationary period.

(14) Demotions to a Lower Pay Band

    Comment: One commenter suggested that demotions for reason other 
than cause should not be allowed and asked about recourse or grievance 
procedures employees might have.
    Response: Demotions to a lower pay band are a necessary element of 
the pay-for-performance system. Demotions for reasons other than cause 
can occur due to erosion of duties, reclassification of duties to a 
lower pay band, an employee's request, or for other reasons to preserve 
equity in pay and/or job requirements. Employees retain the ability to 
request reconsideration and/or file an appeal with the U.S. Merit 
Systems Protection Board. Employees will be provided notice and an 
opportunity to respond prior to such action being taken.
    Identical or nearly identical provisions are found in other Federal 
Register Notices, including (organizations as designated in the 
original Federal Register Notice): Tank Automotive Research, 
Development and Engineering Center (76 FR 12508); Communications-
Electronics Research, Development, and Engineering Center (66 FR 
54872); Edgewood Chemical Biological Center (74 FR 68936); Natick 
Soldier Research, Development and Engineering Center (74 FR 68448); 
Army Research Laboratory (63 FR 10680), and non-Army laboratories such 
as: Naval Air System Command, Naval Air Warfare Center, Aircraft 
Division (76 FR 8530), and Naval Air Warfare Center, Weapons Division 
(76 FR 8529). These same flexibilities have been utilized in multiple 
laboratories without issue and are another tool the Director could 
utilize as the situation and organizational requirements merit.

(15) Exceptions to Competitive Procedures for Assignment to a Position

    Comment: One commenter questioned whether or not one of the 
exceptions to competitive assignment procedures, promotion due to the 
reclassification of a position based on accretion of duties, could be 
used to circumvent competitive hiring.
    Response: Permitting exceptions to competitive procedures for 
assignment to a higher position within a pay band aligns with ARI's 
workforce and organizational structure. Most positions in ARI have a 
natural progression. For example, a majority of the research personnel 
are in the DB-03 pay band and perform similar work. Those at the high 
end of the band who perform more complex work requiring high levels of 
expertise or who have substantively greater workload move toward the 
top of

[[Page 76042]]

their band as their performance dictates. Generally, movement to a 
vacant position in a pay band would require use of competitive 
procedures. The same is true of a promotion from one pay band to 
another. However, there may be situations where accretion of duties 
resulting from new requirements may be appropriate for newly 
reclassified positions. In those instances, the Director must have the 
ability to take appropriate action.

(16) Evaluation

    Comment: Three commenters asked questions about the STRL evaluation 
requirement concerning who will gather evaluation data, how the unit 
climate and professional work environment will be assessed, and whether 
the results will be shared with the workforce?
    Response: ARI will evaluate the project within five years of 
implementation of the project in accordance with Chapter 47 of 5 U.S.C. 
Data will be collected internally and externally based on standards and 
guidelines currently being developed by the USD(R&E). Additionally, ARI 
will collect climate survey data throughout the life of the project. 
Results of evaluation data will be provided to the USD(R&E) and the ARI 
workforce, as appropriate.

(17) Performance Elements

    Comment: One commenter recommended removing training from the 
technical rigor performance element and recommended making unspecified 
changes to the Driving Organization Results element.
    Response: Technical rigor is a critical element required for high-
performing organizations. A high level of technical rigor in individual 
performance is critical to achieving many of the goals of the 
demonstration performance project outlined in section II (C). Those 
goals include: Increased quality of the workforce, and resultant 
research products and outcomes; more effective, efficient, and 
adaptable organizational systems required to respond to Army needs; 
increased retention of excellent performers; and increased workforce 
satisfaction with the personnel management system. Additionally, it is 
important to retain training as a legitimate component of the technical 
rigor element in developing and advancing the technical competence of 
employees and the organization at large.
    ARI will conduct a data-driven review of the performance elements 
after implementation. The PMB will review the performance elements 
annually and make any necessary changes prior to the start of a new 
rating period; and as stated in the FRN, performance elements may 
evolve over time to ensure individual and organizational success.

(18) Performance Management System and Supervisor Ratings

    Comment: One commenter made a positive statement about the 
performance management system but noted that the system would not work 
any better than TAPES or DPMAP if supervisors fail to accurately 
evaluate performance. Another commenter questioned the objectivity of 
the performance system. Another commenter suggested that a summary of 
accomplishments, provided by the employee, should not be mandatory. One 
commenter asked if midterm reviews were formal, documented reviews.
    Response: Supervisors will receive training on the performance 
management system and rating processes to support an accurate 
evaluation of performance. Additionally, the performance management 
system's use of benchmark performance criteria establishes a common set 
of standards for evaluating performance and assigning ratings. The 
benchmark performance criteria will be published annually and whenever 
changes are made. Finally, the use of a pay pool panel and 
reconciliation process provides additional objectivity to the 
evaluation process.
    Midterm reviews are mandatory documented reviews. The midterm 
reviews are not meant to be time-consuming, but are intended to be 
productive performance meetings used to address any concerns the 
employee or supervisor might have prior to the end of the rating 
period.
    To support the rating process, employees are encouraged, but not 
required, to provide input on their accomplishments during the 
performance period. Employee input allows the employee to describe 
their accomplishments and any unique circumstances regarding their 
performance. Employee input should provide the rater and pay pool panel 
with a clear, concise, and accurate picture of their performance during 
the rating cycle. Ratings for employees who do not provide input on 
their accomplishments will be based on the supervisor's observations of 
employee performance.

(19) Internal Operating Procedures (IOP)

    Comment: One commenter asked when the IOP would be available for 
employees.
    Response: Once the final Federal Register Notice is published, and 
before implementation of the demonstration project, the IOP will be 
distributed to the workforce.

(20) Mid-Point Rule

    Comment: Two commenters asked about the mid-point rule and whether 
the initial score of 30 would need to be changed.
    Response: The purpose of the mid-point rule is to help provide cost 
discipline to the personnel system. The mid-point rule stipulates that 
an employee must receive a performance score of 30 or higher for his/
her base pay to cross the mid-point of the pay band. The performance 
score of 30 also has been established as the initial, minimum score to 
be eligible for promotion opportunities.
    With respect to the mid-point rule, setting a performance score too 
high or low can have a negative impact on the workforce and the 
laboratory. A score of 30 has been established initially for the mid-
point rule because it represents successful performance and is 
comparable to what other laboratories have used. However, future 
assessments of the personnel demonstration project may indicate a 
different performance evaluation score is more appropriate for applying 
the mid-point rule within ARI. For example, if it is determined that 
the performance evaluation system consistently results in performance 
ratings that are lower than anticipated across the laboratory, then it 
may be necessary to establish a lower performance score for applying 
the mid-point rule. This would ensure the laboratory maintains a system 
that allows some employees to advance beyond the mid-point of the pay 
band or to be eligible for promotion opportunities. Conversely, if the 
score used to apply the midpoint rule is too low relative to the 
typical evaluation score received by employees, then it will be 
difficult for the laboratory to maintain appropriate cost controls. 
Having the ability to adjust the minimum score associated with the mid-
point rule will allow the PMB to achieve the goals of providing 
appropriate payment and promotion opportunities for employees, 
increasing laboratory performance, and providing cost discipline to the 
system.

(21) Additional Comments

    Comment: One commenter recommended a minor word change from 
``Center'' to ``laboratory.'' The change was appropriate and was made 
in the notice. Another commenter asked

[[Page 76043]]

if employees would be queried during exit interviews.
    Response: While not a part of the demonstration project, the 
Director has used exit interviews to collect information to address 
organizational concerns. It is expected that the Director, to the 
extent possible, will continue to conduct exit interviews.

Table of Contents

I. Executive Summary
II. Introduction
    A. Purpose
    B. Problems With the Present System
    C. Changes Required/Expected Benefits
    D. Participating Organizations
    E. Participating Employees and Union Representation
    F. Project Design
    G. Personnel Management Board
    H. Organizational Structure and Design
    I. Funding Levels
III. Personnel System Changes
    A. Pay Banding
    B. Classification
    C. Pay for Performance
    D. Hiring Authority
    E. Internal Placement
    F. Pay Setting
    G. Employee Development
IV. Implementation Training
V. Conversion
    A. Conversion to the Demonstration Project
    B. Converstion or Movement From a Project Position to a General 
Schedule Position
    C. Personnel Administration
    D. Automation
    E. Revision
VI. Project Duration
VII. Evaluation Plan
    A. Overview
    B. Method of Data Collection
VIII. Demonstration Project Costs
    A. Cost Discipline
    B. Developmental Costs
IX. Required Waivers to Law and Regulation
    A. Waivers to Title 5, United States Code (U.S.C.)
    B. Waivers to Title 5, Code of Federal Regulations (CFR)
    Appendix A: ARI Employees by Duty Location
    Appendix B: Occupational Series by Occupational Family
    Appendix C: Performance Elements

I. Executive Summary

    ARI operates as a Field Activity of the Deputy Chief of Staff, G-1. 
As a Science and Technology (S&T) lab, ARI has the core mission of 
inventing for the future while maintaining an organizational culture of 
action in support of emerging Army needs. ARI's S&T program is focused 
on developing innovative measures and methods to optimize the Soldier 
lifecycle and talent management, developing theories and investigating 
new domains in the behavioral and social sciences, conducting 
scientific assessments, providing behavioral and social science advice 
to human resource authorities and informing human resource policies.
    To sustain these unique capabilities, ARI must be able to hire, 
retain, and continuously motivate enthusiastic, innovative, and highly-
educated scientists, supported by skilled business management and 
administrative professionals, as well as a skilled administrative and 
technical support staff.
    The goal of the current project is to enhance the quality and 
professionalism of the ARI workforce through improvements in the 
efficiency and effectiveness of the human resource system. The project 
interventions will strive to achieve the best workforce for the ARI 
mission, adjust the workforce for change, and improve workforce 
satisfaction. This demonstration project extends the CCDC C5ISR/CCDC 
CBC/CCDC SC demonstration projects to ARI. The CCDC C5ISR/CCDC CBC/CCDC 
SC projects built on the concepts, and use much of the same language, 
as the demonstration projects developed by the CCDC Army Research 
Laboratory (ARL) (previously designated as the ARL); the CCDC Aviation 
and Missile Center (previously designated as the Aviation and Missile 
Research, Development, and Engineering Center); the Navy's ``China 
Lake;'' as well as other laboratories designated as an STRL. The 
results of this project will be evaluated by ARI within five years of 
implementation.

II. Introduction

A. Purpose

    The purpose of the project is to demonstrate that the effectiveness 
of DoD STRLs can be enhanced by expanding opportunities available to 
employees and by allowing greater managerial control over personnel 
functions through a more responsive and flexible personnel system. 
Federal laboratories need more efficient, cost effective, and timely 
processes and methods to acquire and retain a highly creative, 
productive, educated, and trained workforce. This project, in its 
entirety, attempts to improve employees' opportunities and provide 
managers, at the lowest practical level, the authority, control, and 
flexibility needed to achieve the highest quality organization and hold 
them accountable for the proper exercise of this authority within the 
framework of an improved personnel management system.
    While many aspects of a demonstration project were once considered 
experimental, many have been implemented in various DoD laboratories 
for a number of years. Modifications have been made based on the 
implementation experience of other DoD laboratories, best practices, 
and formative evaluation efforts. Additional modifications may be 
needed from time to time as additional experience is gained during this 
specific implementation based on evaluations of how the system is 
working to meet the goals and objectives of the personnel demonstration 
project.

B. Problems With the Present System

    The current Civil Service GS system has existed in essentially the 
same form since the 1920s. Work is classified into one of fifteen 
overlapping pay ranges that correspond with the fifteen grades. Base 
pay is set at one of those fifteen grades and the ten interim steps 
within each grade. The Classification Act of 1949 rigidly defines types 
of work by occupational series and grade, with very precise 
qualifications for each job. This system does not quickly or easily 
respond to new ways of designing work and changes in the work itself. 
In addition, the GS system makes it difficult for the DoD labs to 
recruit and retain the best and the brightest scientists.
    The need to change the current hiring system is essential, as ARI 
must be able to recruit and retain professional scientific researchers, 
support staff, and other professionals and skilled technicians. ARI 
must be able to compete with the private sector for the best talent and 
be able to make job offers in a timely manner with the attendant 
bonuses and incentives to attract high-quality employees.
    Finally, current limitations on training, retraining, and otherwise 
developing employees make it difficult to correct skill imbalances and 
to prepare current employees for new lines of research needed to meet 
the Army's changing missions and emerging technology requirements.

C. Changes Required/Expected Benefits

    The primary benefit expected from this demonstration project is 
greater organizational effectiveness through increased employee 
satisfaction. The long-standing Department of the Navy ``China Lake'' 
and subsequent demonstration projects have produced impressive 
statistics on increased job satisfaction and quality of employees 
versus that for the Federal workforce in general. Similar results have 
been demonstrated in more recent STRL demonstration projects and other 
alternative personnel systems implemented in the DoD and other 
agencies.

[[Page 76044]]

    This project will demonstrate that a human resource system tailored 
to the mission and needs of the ARI workforce will facilitate:
    (1) Increased quality in the workforce and resultant research 
products and outcomes,
    (2) More effective, efficient, and adaptable organizational systems 
required to respond to Army needs,
    (3) Increased timeliness of key personnel processes,
    (4) Increased retention of excellent performers,
    (5) Increased success in recruitment of personnel with critical 
skills,
    (6) Increased management authority and accountability,
    (7) Simpler and more effective human resources management process, 
and
    (8) Increased workforce satisfaction with the personnel management 
system.

D. Participating Organizations

    ARI is comprised of the ARI Headquarters located at Fort Belvoir, 
Virginia, and ARI research, technical, and support personnel located at 
Fort Belvoir, with geographically dispersed research units located at 
key strategic locations at Fort Benning, Georgia; Fort Hood, Texas; and 
Fort Leavenworth, Kansas. ARI also has a small number of employees 
dispersed at other locations in small numbers required to meet Army 
needs and mission requirements. As in the past and as expected in the 
future, there may be modifications to organizational structure and 
locations based on changing needs.

E. Participating Employees and Union Representation

    This demonstration project will cover approximately 113 ARI 
civilian employees under Title 5 U.S.C. in the occupations listed in 
Appendix B. Additional employees and other occupations may be added 
after implementation of the project. The project plan does not cover 
members of the Senior Executive Service (SES), Senior Level (SL), 
Scientific and Professional (ST) employees, Federal Wage System (FWS) 
employees, and employees presently covered by the Defense Civilian 
Intelligence Personnel System (DCIPS).
    Department of the Army, Army Command centrally funded, local 
interns, and Pathways Program employees (hired prior to implementation 
of the project) will not be converted to the demonstration project 
until they reach their full performance level. Pathways employees will 
continue to follow the Defense Performance Management and Appraisal 
Program (DPMAP) until they have reached their full performance level 
and are transitioned to the STRL personnel system.
    The American Federation of Government Employees (AFGE) Local 1920 
represents a small percentage of ARI's workforce located at one 
research location. Those represented employees may or may not 
participate in the personnel demonstration project depending on 
negotiations with the Union, specific hiring actions, and other 
factors. Of those employees assigned to ARI, approximately seven 
percent are represented by a labor union.

F. Project Design

    Upon notification of the initial authority granted by Congress 
designating ARI as an STRL, the ARI Director assigned an experienced 
and tenured leader within the organization to contact appropriate 
agencies to develop the project plan. Initial guidance was provided by 
the DoD, Defense Civilian Personnel Advisory Services (DCPAS) and HQDA, 
Office of the Assistant Chief of Staff, G-1, Civilian Personnel 
Staffing and Classification Division. As a result of those initial 
discussions, ARI conducted a comprehensive review of the personnel 
practices of existing DoD laboratories designated as STRLs. That review 
resulted in a detailed list of personnel flexibilities adopted by the 
various DoD laboratories. As a part of the initial review, the 
Laboratory Quality Enhancement Program (LQEP)--Personnel Subpanel was 
contacted. The LQEP--Personnel Subpanel (LQEP-P) consists of STRL/
Personnel Management Demonstration professionals and experts. LQEP-P 
members provided extensive advice and example materials for 
consideration. Detailed discussions with LQEP-P members focused on the 
capabilities provided by the various flexibilities employed, lessons 
learned and best practices, and implementation guidance. Concurrent to 
the review of existing flexibilities, a review of ARI's specific 
organizational personnel needs and requirements was conducted. Finally, 
a review of innovative personnel practices used outside of the federal 
government was conducted.
    The initial set of existing flexibilities, with descriptions, 
waiver requirements, and expected benefits was briefed to ARI 
leadership and supervisors. Detailed discussion focused on how the 
proposed flexibility would help ARI accomplish its personnel management 
goals and how it would impact the workforce. The briefing and 
subsequent discussions resulted in a set of flexibilities for further 
research and consideration that were aligned with ARI personnel 
management needs. Those flexibilities were then extensively researched 
and discussed with LQEP-P members to determine if the proposed 
flexibility would meet those needs and to determine the cost and 
benefit of implementing the specific flexibility. The LQEP-P members 
were invaluable in this process. This resulted in a subset of personnel 
demonstration flexibilities that were best matched to ARI personnel 
needs and requirements. A team of senior leaders reviewed the potential 
flexibilities and provided recommendations for further consideration.
    This preparatory work resulted in a proposed IOP that fully 
described how the proposed personnel management program would be 
implemented in ARI. The IOP was reviewed by and discussed with senior 
managers and supervisors to determine if the proposed system would meet 
ARI needs and workforce expectations. Following these internal reviews, 
final changes were made to the IOP and the associated FRN.

G. Personnel Management Board

    ARI will create a Personnel Management Board (PMB) to oversee and 
monitor the fair, equitable, and consistent implementation of the 
provisions of the demonstration project to include establishment of 
internal controls and accountability. Members of the board will be 
senior ARI managers/supervisors and independent contributors appointed 
by the ARI Director. As needed, ad hoc members (such as Human Resources 
representatives), will serve as advisory members to the board.
    Based on guidance and consistent interaction with the ARI Director, 
the board will execute the following:
    (1) Carry out the guidance and procedures in all aspects of the 
personnel demonstration program in accordance with the direction given 
by the ARI Director.
    (2) Determine the composition of the pay-for-performance pay pools 
in accordance with the guidelines of the IOP;
    (3) Review operation of pay pools and provide guidance to pay pool 
managers;
    (4) Oversee disputes in pay pool issues;
    (5) Formulate and execute the civilian pay budget;
    (6) Manage the awards pools;
    (7) Determine hiring and promotion base pay as well as exceptions 
to pay-for-performance base pay increases;
    (8) Conduct classification review and oversight, monitoring, and 
adjusting

[[Page 76045]]

classification practices and deciding broad classification issues;
    (9) Approve major changes in position structure;
    (10) Address issues associated with multiple pay systems during the 
demonstration project;
    (11) Establish Standard Performance Elements and Benchmarks;
    (12) Assess the need for changes to demonstration project 
procedures and policies;
    (13) Review requests for Supervisory/Team Leader Base Pay 
Adjustments and provide recommendations to the ARI Director;
    (14) Ensure in-house personnel budget discipline;
    (15) Develop policies and procedures for administering 
Developmental Opportunity Programs;
    (16) Ensure all employees are treated in a fair and equitable 
manner in accordance with all policies, regulations, and guidelines 
covering this demonstration project; and
    (17) Conduct a formative evaluation of the project.
    In executing these duties and responsibilities, the board will keep 
in close contact and consultation with the ARI Director to ensure 
policies and procedures are executed consistently across the 
organization and aligned with the Director's guidance.

H. Organizational Structure and Design

    To optimize the effectiveness and efficiency of ARI during the 
adoption of the new STRL personnel system, the ARI Director will review 
and realign the organization structure to best meet mission needs and 
requirements. Realignment may include removing limitations in terms of 
supervisory ratios consistent with section 342(b) of the NDAA for FY 
1995 as amended by section 1109 of the NDAA for FY 2000, and the 
alignment and organization of the workforce required to accomplish the 
mission of the STRL consistent with 10 U.S.C. 2358a.
    The ARI Director will manage workforce strength, structure, 
positions, and compensation without regard to any limitation on 
appointments, positions, or funding in a manner consistent with the 
budget available in accordance with 10 U.S.C. 2358a.

I. Funding Levels

    The Under Secretary of Defense (Personnel & Readiness), may, at 
his/her discretion, adjust the minimum funding levels to take into 
account factors such as the Department's fiscal condition, guidance 
from the Office of Management and Budget, and equity in circumstances 
when funding is reduced or eliminated for GS pay raises or awards

III. Personnel System Changes

A. Pay Banding

    The design of the ARI pay banding system takes advantage of the 
many reviews performed by DA and DoD. The design has the benefit of 
being preceded by exhaustive studies of pay banding systems currently 
practiced in the Federal sector, to include those practiced by the 
Navy's ``China Lake'' experiment and subsequent demo/STRL demonstration 
projects. In addition, the pay plans, occupational families, pay bands, 
and general schedule equivalent grade structures for all the existing 
DoD laboratories were reviewed. ARI's pay banding system will replace 
the current GS structure. Currently, the fifteen grades of the GS are 
used to classify positions and, therefore, to set pay. The GS covers 
all white-collar work: Administrative, technical, clerical and 
professional. Changes in this rigid structure are required to allow 
flexibility in hiring, developing, retaining, and motivating the 
workforce. The pay banding structure adopted by ARI's STRL is similar 
to the one employed by the U.S. Army Armament Research, Development, 
and Engineering Center as well as other DoD laboratories.
1. Occupational Families
    Occupations with similar characteristics will be grouped together 
into one of three occupational families with pay band levels designed 
to facilitate pay progression. The naming structure and other 
occupational family features adopted for ARI's STRL are consistent with 
other Army laboratories implementing a similar system. Each 
occupational family will be composed of pay bands corresponding to 
recognized advancement and career progression expected within the 
occupations. These pay bands will replace individual grades and will 
not be the same for each occupational family. Each occupational family 
will be divided into three to six pay bands with each pay band covering 
the same pay range now covered by one or more GS grades. Employees 
track into an occupational family based on their current series as 
provided in Appendix B. The upper and lower pay rate for base pay of 
each pay band is defined by the GS rate for the grade and step as 
indicated in Figure 1 except for Pay Band VI of the Engineering & 
Scientist (E&S) occupational family. Comparison to the GS grades was 
used in setting the upper and lower base pay dollar limits of the pay 
band levels. However, once employees are moved into the demonstration 
project, GS grades will no longer apply. The current occupations have 
been examined, and their characteristics and distribution have served 
as guidelines in the development of the following three occupational 
families: Engineering and Science (E&S), Business & Technical (B&T), 
and General Support (GEN).
    Engineering and Science (E&S) (Pay Plan DB): This occupational 
family includes technical professional positions, such as psychologist 
and statisticians. Additional occupational series may be added in the 
future. Specific course work or educational degrees are required for 
these occupations. Six pay bands have been established for the E&S 
occupational family:
    (1) Band I is a student trainee track covering GS-1, step 1 through 
GS-4, step 10.
    (2) Band II is a developmental track covering GS-5, step 1 through 
GS-11, step 10.
    (3) Band III is a full-performance technical track covering GS-12, 
step 1 through GS-13, step 10.
    (4) Band IV includes senior technical/team leader positions 
covering GS-14, step 1 through GS-14, step 10.
    (5) Band V includes supervisor/manager/senior technical positions 
covering GS-15, step 1 through GS-15, step 10.
    (6) Band VI includes SSTM positions. The pay range is: Minimum base 
pay is 120 percent of the minimum base pay of GS-15; maximum base pay 
is Level IV of the Executive Schedule (EX-IV); and maximum adjusted 
base pay is Level III of the Executive Schedule (EX-III).
    Business & Technical (B&T) (Pay Plan DE): This occupational family 
includes such positions as procurement specialists, finance, 
accounting, management analysis, computer specialists, and quality 
assurance specialists. Employees in these positions may or may not 
require specific course work or educational degrees. Five pay bands 
have been established for the B&T occupational family:
    (1) Band I is a student trainee track covering GS-1, step 1 through 
GS-4, step 10.
    (2) Band II is a developmental track covering GS-5, step 1 through 
GS-11, step 10.
    (3) Band III is a full performance track covering GS-12, step 1 
through GS-13, step 10.
    (4) Band IV includes first-level supervisors and senior technical

[[Page 76046]]

personnel covering GS-14, step 1 through GS-14, step 10.
    (5) Band V is a supervisor/manager track covering GS-15, step 1 
through GS-15, step 10.
    General Support (GEN) (Pay Plan DK): This occupational family is 
composed of positions for which specific course work or educational 
degrees are not required. Clerical work usually involves the processing 
and maintaining of records. Assistant work requires knowledge of 
methods and procedures within a specific administrative area. This 
family includes such positions as secretaries, office automation 
clerks, and budget/program/computer assistants. Three pay bands have 
been established for the GEN occupational family:
    (1) Band I includes entry-level positions covering GS-1, step 1 
through GS-4, step 10.
    (2) Band II includes full-performance positions covering GS-5, step 
1 through GS-8, step 10.
    (3) Band III includes senior technicians/assistants/secretaries 
covering GS-9 step 1 through GS-10, step 10.
2. Pay Band Design
    The pay bands for the occupational families and how they relate to 
the current GS framework are shown in Figure 1.
[GRAPHIC] [TIFF OMITTED] TN27NO20.013

    Employees will be converted into the occupational family and pay 
band that corresponds to their GS series and grade. Each employee 
converted to the demonstration project is assured, upon conversion, an 
initial place in the system without loss of pay. However, exceptional 
qualifications or other compelling reasons based on specific criteria 
may lead to a higher entrance base pay within a band, commensurate with 
the employee's experience and qualifications. As the pay rates of the 
GS scale are increased due to the annual general pay increases, the 
upper and lower base pay rates of the pay bands will also increase. 
Since pay progression through the bands depends directly on 
performance, there will be no scheduled Within-Grade Increases (WGIs) 
or Quality Step Increases (QSIs) for employees once the pay banding 
system is in place.
3. Pay Band VI
    The pay banding plan expands the pay banding concept used at 
``China Lake'' and other laboratories by creating Pay Band VI for the 
E&S occupational family. The band is designed for SSTM as authorized in 
10 U.S.C. 2358a and described in 79 FR 43722. Pay Band VI will apply 
exclusively to positions designated as SSTMs.
    The primary function of these positions is to engage in research 
and development in the physical, biological, medical, or engineering 
sciences, or another field closely related to the ARI mission and to 
carry out technical supervisory responsibilities.
    As a part of the initial implementation of the STRL, the Director 
will review organizational and mission requirements to determine 
appropriate use of available SSTM positions and, if appropriate, will 
establish SSTM positions consistent with long-term organizational plans 
and limitations set forth by Congress (e.g., number of SSTM positions 
based on percent of workforce requirements). The pay range for SSTM 
positions is as follows: Minimum base pay is 120 percent of the minimum 
base pay of GS-15, maximum rate of base pay is Level IV of the 
Executive Schedule (EX- IV), and maximum adjusted base pay is Level III 
of the Executive Schedule (EX- III). Adjusted base pay is base rate 
plus locality or supervisory pay differential as appropriate.
    After full implementation of the STRL, newly vacant SSTM positions 
will be filled competitively. Panels will be created to assist in the 
review of candidates for SSTM positions. Panel members typically will 
be SES members, ST employees, and, after full implementation, those 
employees designated as SSTMs. In addition, General Officers and 
recognized technical experts from outside ARI may serve, as 
appropriate. The panel will apply criteria developed largely from the 
OPM Research Grade Evaluation Guide for positions exceeding the GS-15 
level and other OPM guidance related to positions exceeding the GS-15 
level. The purpose of the panel is to ensure impartiality and a 
rigorous and demanding review.
    Consistent with 10 U.S.C. 2358a, the demonstration project will 
implement SSTM flexibilities described in 79 FR 43722.

B. Classification

1. Occupational Series
    The present GS classification system has over 400 occupational 
series, which are divided into 23 occupational groupings. ARI currently 
has positions in fewer than 20 occupational series. All positions 
listed in Appendix B will be in the classification structure. 
Provisions will be made for including other occupations in response to

[[Page 76047]]

changing missions and agency requirements.
2. Classification Standards and Position Descriptions
    If available, ARI will use a fully automated classification system 
modeled after the Navy's ``China Lake'' and ARL's automated systems. 
The Web-based automation tool is a fully integrated classification 
system that can create standardized, classified position descriptions 
under the new pay banding system. The present system of OPM 
classification standards will be used for the identification of proper 
series and occupational titles of positions within the demonstration 
project. Current OPM position classification standards, in some cases, 
will not be used to grade positions in this project. However, the 
grading criteria in those standards will be used as a framework to 
develop new and simplified standards for the purpose of pay band 
determinations. The objective is to record the essential criteria for 
each pay band within each occupational family by stating the 
characteristics of the work, the responsibilities of the position, and 
the competencies required. The classification standard for each pay 
band will serve as an important component to update existing position 
descriptions, which will include position-specific information, and 
provide data element information pertinent to the job. The computer-
assisted process will produce information necessary for position 
descriptions. The new descriptions will be easier to prepare, minimize 
the amount of writing time and make the position description a more 
useful and accurate tool for other personnel management functions.
    Specialty work codes (narrative descriptions) will be used to 
further differentiate types of work and the competencies required for 
particular positions within an occupational family and pay band. Each 
code represents a specialization or type of work within the occupation.
3. Fair Labor Standards Act
    Fair Labor Standards Act (FLSA) exemption and non-exemption 
determinations will be consistent with criteria found in 5 CFR part 
551. All employees are covered by the FLSA unless they meet the 
criteria for exemption. The duties and responsibilities outlined in the 
classification standards for each pay band will be compared to the FLSA 
criteria. As a general rule, the FLSA status can be matched to 
occupational family and pay band as indicated in Figure 2. For example, 
positions classified in Pay Band I of the E&S occupational family are 
typically nonexempt, meaning they are covered by the overtime 
entitlements prescribed by the FLSA. An exception to this guideline 
includes supervisors/managers whose primary duties meet the definitions 
outlined in the OPM GS Supervisory Guide. Therefore, supervisors/
managers in any of the pay bands who meet the foregoing criteria are 
exempt from the FLSA. The Director/manager/or supervisor with 
classification authority will make the determinations on a case-by-case 
basis by comparing assigned duties and responsibilities to the 
classification standards for each pay band and the 5 CFR part 551 FLSA 
criteria. Additionally, the advice and assistance of the servicing 
Civilian Personnel Advisory Center (CPAC) will be obtained in making 
determinations. The benchmark position descriptions will not be the 
sole basis for the determination. Basis for exemption will be 
documented and attached to each position description. Exemption 
criteria will be narrowly construed and applied only to those employees 
who clearly meet the spirit of the exemption. Changes will be 
documented and provided to the CPAC. 
[GRAPHIC] [TIFF OMITTED] TN27NO20.014


[[Page 76048]]


4. Classification Authority
    The ARI Director will have classification authority and may, in 
turn, delegate this authority to appropriate levels. Any individual 
with delegated classification authority must complete required 
training. Position descriptions will be developed to assist in 
exercising delegated position classification authority. Those leaders 
with classification authority will identify the occupational family, 
job series, functional code, specialty work code, pay band level, and 
other critical information. Personnel specialists will provide ongoing 
consultation and guidance to managers and supervisors throughout the 
classification process. These decisions will be documented in the 
position description.
5. Classification Appeals
    Classification appeals under this demonstration project will be 
processed using the following procedures:An employee may appeal the 
determination of occupational family, occupational series, position 
title, and pay band of his/her position at any time. An employee must 
formally raise the area of concern to supervisors in the immediate 
chain of command, either verbally or in writing. If the employee is not 
satisfied with the supervisory response, he/she may then appeal to the 
Personnel Management Board. A final appeal may be made to the DoD 
appellate level. Appeal decisions rendered by DoD will be final and 
binding on all administrative, certifying, payroll, disbursing, and 
accounting officials of the government. Classification appeals are not 
accepted on positions which exceed the equivalent of a GS-15 level. 
Time periods for cases processed under 5 CFR part 511 apply.
    An employee may not appeal the accuracy of the position 
description, the demonstration project classification criteria, or the 
pay-setting criteria; the assignment of occupational series to the 
occupational family; the propriety of a pay schedule; or matters 
grievable under an administrative or negotiated grievance procedure, or 
an alternative dispute resolution procedure.
    The evaluations of classification appeals under this demonstration 
project are based upon the demonstration project classification 
criteria. Prior to forwarding appeals to the decision authority, the 
servicing human resources entity will provide a recommendation and 
ensure that the case file includes copies of appropriate demonstration 
project criteria.

C. Pay for Performance

1. Overview
    The purpose of the pay-for-performance system is to provide an 
effective, efficient, and flexible method for assessing, compensating, 
and managing the ARI workforce. It is essential for the development of 
a highly productive workforce and to provide management at the lowest 
practical level, the authority, control, and flexibility needed to 
achieve a quality organization and meet mission requirements. The pay-
for-performance system allows for greater employee involvement in the 
assessment process, strives to increase communication between 
supervisor and employee, promotes a clear accountability of 
performance, facilitates employee career progression, and provides an 
understandable and rational basis for pay changes by linking pay and 
performance.
    The pay-for-performance system uses annual performance payouts 
based on the employee's total performance score rather than within-
grade increases, quality step increases, promotions from one grade to 
another where both grades are now in the same pay band (i.e., there are 
no within-band promotions), and performance awards. The standard rating 
period will be one year. The minimum rating period will be 120 days. 
Pay-for-performance payouts can be in the form of increases to base 
pay, cash bonuses and time off awards; the bonuses are not added to 
base pay but, rather, are given as a lump sum bonus. Other awards, such 
as Special Acts, will be retained separately from the pay-for-
performance payouts.
    The system will have the flexibility to be modified, if necessary, 
as more experience is gained under the project.
2. Performance Objectives
    Performance objectives define a target level of activity, expressed 
as tangible, measurable objective statements against which actual 
achievement can be compared. These objectives will specifically 
identify what is expected of the employee during the rating period and 
will typically consist of three to ten results-oriented statements. 
Employees are encouraged to participate in developing their performance 
objectives with their supervisor at the beginning of the rating cycle. 
These are to be reflective of the employee's duties/responsibilities 
and pay band along with the mission/organizational goals and 
priorities. Objectives will be reviewed annually and revised upon 
changes in pay reflecting increased responsibilities commensurate with 
pay increases. Supervisors will make the final decision for approving 
their employee's performance objective. Use of generic one-size-fits-
all objectives will be avoided, as performance objectives are meant to 
define an individual's specific responsibilities and expected 
accomplishments. While generic objectives will be avoided, objectives 
will be commensurate to the employees pay and employees at similar 
positions in the pay band are expected to have objectives of similar 
complexity, responsibility, and/or another defining characteristic. 
Thus, exemplar, baseline, objectives will be developed and provided to 
supervisors and employees to highlight appropriate performance 
requirements at various pay levels. These exemplars will be used to 
help define performance expectations commensurate to employee pay.
    In contrast, performance elements as described in the next 
paragraph will identify generic performance characteristics, against 
which the accomplishment of objectives will be measured. As a part of 
this demonstration project, training focused on overall organizational 
objectives and the development of performance objectives will be held 
for both supervisors and employees. Performance objectives may be 
jointly modified, changed, or deleted as appropriate during the rating 
cycle. However, additional objectives may not be added within the last 
120 days of the rating cycle, given the minimum period of performance. 
Changes initiated by employees must be approved by their supervisor. As 
a general rule, performance objectives should only be changed when the 
employee successfully meets or exceeds the original objectives or 
circumstances outside the employee's control prevent or hamper the 
accomplishment of the original objectives. It is also appropriate to 
change objectives when mission or workload shifts occur. Objectives 
will not be changed when an employee's lack of performance prevents or 
hinders successful performance.
3. Performance Elements
    Performance elements define generic performance characteristics 
that will be used to evaluate the employee's success in accomplishing 
his/her performance objectives. The use of generic characteristics for 
scoring purposes helps to ensure comparable scores are assigned while 
accommodating diverse individual objectives. This pay-for-performance 
system will utilize those performance elements provided in Appendix C; 
as adapted from the system

[[Page 76049]]

of performance elements implemented at other DoD Labs designated as 
STRLs.
    All elements are critical. A critical performance element is 
defined as an attribute of job performance that is of sufficient 
importance that performance below the minimally acceptable level 
requires remedial action and may be the basis for removing an employee 
from his/her position. Non-critical elements will not be used. Each of 
the performance elements will be assigned a weight, which reflects its 
importance in accomplishing an individual's performance objectives. A 
minimum weight (expressed as a percentage) is set for each performance 
element. The sum of the weights for all of the elements must equal 100.
    A single set of performance elements will be used for evaluating 
the annual performance of all ARI personnel covered by this plan. This 
set of performance elements may evolve over time, based on experience 
gained during each rating cycle. This evolution is essential to capture 
the critical competencies that enable the workforce to meet individual 
and organizational performance objectives. The evolving nature of 
performance elements may be particularly necessary in an environment 
where mission requirements, technology, and work processes are changing 
at an increasingly rapid pace. Thus, the ARI Personnel Management Board 
will annually review the set of performance elements and set them for 
the entire organization before the beginning of the rating period. The 
following is an initial set of performance elements:

    (1) Technical Rigor
    (2) Interpersonal Effectiveness
    (3) Managing Time and Other Resources
    (4) Driving Organizational Success
    (5) Team Leadership
    (6) Supervision/Leadership, and Equal Employment Opportunity (EEO).

    All employees will be rated against the first four (Core) 
performance elements. Team Leadership is mandatory for team leaders 
(within this document ``team leader'' refers to non-supervisory team 
leaders as determined by the OPM GS Leader Grade Evaluation Guide).
    Supervision/Leadership, and Equal Employment Opportunity is 
mandatory for all managers/supervisors. At the beginning of the rating 
period, pay pool managers will review the objectives and weights 
assigned to employees within the pay pool, to verify consistency and 
appropriateness across the organization.
4. Performance Feedback and Formal Ratings
    The most effective means of communicating job requirements, 
performance goals, and desired results is person-to-person discussion 
between supervisors and employees. Employees and supervisors alike are 
expected to actively participate in these discussions to clarify 
expectations and identify potential obstacles to meeting performance 
goals. To the extent possible, employees should describe what they need 
from their supervisors to support goal accomplishment. The timing of 
performance feedback and discussions will vary based on the nature of 
work performed, but at a minimum will occur formally at the beginning, 
mid-point, and end of the rating period. If employees are unsure of 
their performance goals or quality at any time, they are encouraged to 
initiate discussions with their supervisor. In addition, supervisors 
will initiate discussions at the earliest possible sign of unacceptable 
performance or as needed to maintain successful performance. The 
supervisor and employee will discuss job performance and 
accomplishments in relation to the performance objectives and 
performance elements. At least two reviews, normally the mid-point 
review and annual review, will be documented as a formal progress 
review. More frequent informal task-specific discussions may be 
appropriate in certain circumstances. In cases where work is 
accomplished by a team, team discussions regarding goals and 
expectations may also be conducted as appropriate.
    Employees will be requested to provide a summary of their 
accomplishments to their supervisor to highlight their most important 
performance outcomes, at both the mid-point and at the end of the 
rating period. Space limitations may be imposed in the performance 
management system to limit the length of the employee's self-summary of 
their accomplishments. The goal of employee self-reports is to 
highlight significant employee accomplishments rather than to describe 
job processes at a granular level of detail.
    At the end of the rating period and following a review of the 
employee's accomplishments, the supervisor will rate each performance 
element by assigning a score between 0 and 50. Supervisors will use 
benchmark performance standards that describe the level of performance 
associated with a score. Benchmark standards ensure the employee's 
performance is accurately captured and ensures different supervisors 
apply a similar rating standard and scoring approach to their employees 
during the rating process. During the rating and point assignment 
process, the supervisor reflects on the specific objectives for each 
employee and rates the individual on each performance element using 
specific descriptors of performance related to the benchmark 
performance criteria. It should be noted these scores are not discussed 
with the employee or considered final until scores for all employees 
are reconciled and approved by the Pay Pool Manager. The element scores 
will then be multiplied by the element-weighting factor to determine 
the weighted score expressed to two decimal points. The weighted scores 
for each element will then be totaled to determine the employee's 
overall appraisal score and rounded to a whole number as follows: If 
the digit to the right of the decimal is between five and nine, it 
should be rounded to the next higher whole number; if the digit to the 
right of the decimal is between one and four, it should be dropped.
    For each performance element, a total, unweighted score of 10 or 
above will result in a rating of acceptable. A total, unweighted score 
of 9 or below, or an unweighted score of 9 or below in a single 
performance element, will result in a rating of unacceptable. An 
unacceptable rating requires action to be taken by management to 
address deficient performance in accordance with Section 5 below.
5. Unacceptable Performance
    Formal corrective action, to include placing an employee on a PIP, 
may be taken at any time during the rating cycle and must be taken 
following an unacceptable rating. Whenever a supervisor recognizes an 
employee's performance on one or more performance elements is 
unacceptable, the supervisor will immediately inform the employee. 
Efforts will be made to identify the possible reasons for the 
unacceptable performance. An employee who is on a PIP is not eligible 
to receive the general pay increase.
    If an employee performs at an unacceptable level or has received an 
unacceptable rating, and the supervisor chooses to initiate a PIP, the 
following steps will be followed. The supervisor will identify the 
items/actions that need to be corrected or improved, outline required 
time frames (generally 30 days) for such improvement, and provide the 
employee with available assistance as appropriate. Progress will be 
monitored during the PIP, and all counseling/feedback sessions will be 
documented.

[[Page 76050]]

    If the employee's performance is acceptable at the conclusion of 
the PIP, no further action is necessary. If a PIP ends prior to the end 
of the annual performance cycle and the employee's performance improves 
to, and remains at, an acceptable level, the employee is appraised at 
the end of the annual performance cycle. If the employee's performance 
deteriorates to an unacceptable level in any element within two years 
from the beginning of a PIP, follow-on actions may be initiated with no 
additional opportunity to improve. If an employee's performance is at 
an acceptable level for two years from the beginning of the PIP, and 
performance once again declines to an unacceptable level, the employee 
will be given an additional opportunity to improve before management 
proposes follow-on actions.
    If the employee fails to improve at the conclusion of the PIP, the 
employee will be given notice of proposed appropriate action. This 
action can include removal from the Federal service, placement in a 
lower pay band or grade level with a corresponding reduction in pay 
(demotion), reduction in pay within the same pay band, or change in 
position or occupational family. In many situations, employees with an 
unacceptable rating will not be permitted to remain at their current 
pay and may be reduced in pay band.
    Reductions in base pay within the same pay band or changes to a 
lower pay band will be accomplished with a minimum of a five-percent 
decrease in an employee's base pay.

    Note:  Nothing in this subsection will preclude action under 5 
U.S.C. chapter 75 [Adverse Actions], when appropriate.

    All relevant documentation concerning a reduction in pay or removal 
based on unacceptable performance will be preserved and made available 
for review by the affected employee or a designated representative. At 
a minimum, the record will consist of a copy of the notice of proposed 
personnel action, the employee's written reply, if provided, or a 
summary when the employee makes an oral reply. Additionally, the record 
will contain the written notice of decision and the reasons therefore 
along with any supporting material (including documentation regarding 
the opportunity afforded the employee to demonstrate improved 
performance).
6. Reconciliation Process
    Following the initial scoring of each employee by the supervisor, a 
panel of rating officials and supervisors will meet in a structured 
review and reconciliation process panel managed by the Pay Pool 
Manager. In this step, each employee's performance objectives, 
accomplishments, preliminary scores, and pay are compared. Through 
discussion and consensus building, consistent and equitable ratings are 
reached. There will not be a prescribed distribution of total scores. 
The Pay Pool Manager will chair a final review with the rating 
officials/supervisors to validate these ratings and resolve any 
remaining scoring issues. If consensus on scoring cannot be reached for 
one or more employees in this process, the Pay Pool Manager makes all 
final decisions. IOPs will provide details on this process to employees 
and supervisors.
    Given the unique organizational structure of ARI, the 
reconciliation process of employees who report directly to the ARI 
Director may be different from the procedures described above. In those 
cases, the ARI Director will review and resolve all ratings as pay pool 
manager for those direct reports. Should the organization's structure 
change to allow for a pay pool process comparable to the one previously 
described, the procedures for the ARI Director's direct reports are 
likely to change to incorporate pay pool panel participation and 
reconciliation.
    After the reconciliation process is complete, scores are finalized. 
Payouts proceed according to each employee's final score and adjusted 
base pay. Information pertaining to the reconciliation process will be 
made available to all employees.
7. Pay Pools
    ARI will have one or more pay pools, and each ARI employee will be 
placed into one of these pools. Pay pools are combinations of 
organizational elements that are defined for the purpose of determining 
performance payouts under the pay-for-performance system. The next 
paragraph provides the guidelines for determining pay pools. These 
guidelines will normally be followed, but deviations may occur if there 
is a compelling need. The rationale for any deviations will be 
documented in writing, and final procedures will be published prior to 
start of the rating period.
    The ARI Director will establish pay pools. A pay pool should be 
large enough to encompass a reasonable distribution of ratings but not 
so large as to compromise rating consistency. Supervisory personnel 
will be placed in a pay pool separate from subordinate non-supervisory 
personnel. Neither the Pay Pool Manager nor supervisors within a pay 
pool will recommend or set their own individual pay. Decisions 
regarding the amount of the performance payout are based on the 
established formal payout calculations.
    Funds within a pay pool available for performance payouts are 
calculated from anticipated pay increases under the existing system and 
divided into two components, base pay and bonus. The funds within a pay 
pool used for base pay increases are those that would have been 
available from within-grade increases, quality step increases, and 
promotions. This amount will be defined based on historical data and 
will be set at no less than two percent of total adjusted base pay 
annually. The funds available to be used for bonus payouts are funded 
separately within the constraints of the organization's overall award 
budget. This amount will be defined based on historical data and at no 
less than one percent of total adjusted base pay annually. The pay pool 
funding percentages are the same for all pay pools. The sum of these 
two factors is referred to as the pay pool percentage factor.
    The ARI Personnel Management Board will annually review the pay 
pool funding and recommend adjustments to the ARI Director to ensure 
cost discipline over the life of the demonstration project. The ARI 
Director makes the final decision on pay pool funding.
8. Performance Payout Determination
    The performance payout an employee will receive is based on the 
total performance score from the pay for performance assessment 
process. An employee will receive a performance payout as a percentage 
of adjusted base pay. This percentage is based on the number of shares 
that equates to an employee's final appraisal score. Shares will be 
awarded on a continuum as follows:

[[Page 76051]]

[GRAPHIC] [TIFF OMITTED] TN27NO20.015

    Fractional shares will be awarded for scores that fall between 
these scores. For example, a score of 38 will equate to 1.8 shares, and 
a score of 44 will equate to 2.4 shares.
    The value of a share cannot be exactly determined until the rating 
and reconciliation process is completed and scores for all employees 
are finalized. The share value is expressed as a percentage. The 
formula that computes the value of each share uses base pay rates and 
is based on (1) the sum of the base pay of all employees in the pay 
pool times the pay pool percentage factor, (2) the employee's base pay, 
(3) the number of shares awarded to each employee in the pay pool, and 
(4) the total number of shares awarded in the pay pool. This formula 
assures that each employee within the pool receives a share amount 
equal to other employees in the same pool who are at the same rate of 
base pay and receive the same score. The formula is shown in Figure 3.
[GRAPHIC] [TIFF OMITTED] TN27NO20.016

    An individual payout is calculated by first multiplying the shares 
earned by the share value and multiplying that product by base pay. An 
adjustment is then made to account for locality pay.
    A pay pool manager is accountable for staying within pay pool 
limits. The pay pool manager makes the final decision on base pay 
increases and/or bonuses to individuals based on rater recommendation, 
the final score, the pay pool funds available, and the employee's pay.
9. Base Pay Increases and Bonuses
    The amount of money available for performance payouts is divided 
into two components: Base pay increases and bonuses. The base pay and 
bonus funds are based on the pay pool funding formula established 
annually. Once the individual performance amounts have been determined, 
the next step is to determine what portion of each payout will be in 
the form of a base pay increase as opposed to a bonus payment. The 
payouts made to employees from the pay pool may be a mix of base pay 
and bonus as determined by the rules set forth in this FRN and IOPs, 
such that all the allocated funds are disbursed. To provide performance 
incentives while ensuring cost discipline, base pay increases may be 
limited or capped.
    Certain employees will not be able to receive the projected base 
pay increase due to base pay caps. Base pay is capped when an employee 
reaches the maximum rate of base pay in an assigned pay band, when the 
mid-point rule applies (see below), when the Significant 
Accomplishment/Contribution rule applies (see below), or otherwise 
subject to other salary control point established by the STRL Director. 
Prior to implementing, modifying, or terminating any new control point, 
appropriate notice will be provided to the workforce. Also, for 
employees receiving retained rates above the applicable pay band 
maximum, the entire performance payout will be in the form of a bonus 
payment.
    When capped, the payout an employee receives will be in the form of 
a bonus versus the combination of base pay and bonus. Bonuses are cash 
payments and are not part of the base pay for any purpose (e.g., lump 
sum payments of annual leave on separation, life insurance, and 
retirement). The maximum base pay rate under this personnel 
demonstration project will be the unadjusted base pay rate of GS-15/
step 10, except for employees in Pay Band VI of the E&S occupational 
family.
    Based on pay pool operating procedures and business rules, the 
organization may re-allocate a portion (up to the maximum possible 
amount) of the unexpended base pay funds. This re-allocation will be 
determined by the Pay Pool Manager. Any dollar increase in an 
employee's projected base pay increase will be offset, dollar for 
dollar, by an accompanying reduction in the employee's projected bonus 
payment. Thus, the employee's total performance payout is unchanged. 
This re-allocation could be required for a number of reasons to include 
the use of re-allocation of to reduce extreme pay-for-performance gaps.

[[Page 76052]]

    In addition, the pay pool manager may request approval from the PMB 
for use of an Extraordinary Achievement Recognition. Such recognition 
grants a base pay increase and/or bonus to an employee that is higher 
than the one generated by the compensation formula for that employee. 
The funds available for an Extraordinary Achievement Recognition are 
separately funded within the constraints of the organization's budget. 
Extraordinary Achievement Recognition, if warranted, will be determined 
by the Review and Reconciliation Panel, and the pay pool manager will 
provide the request to the PMB who will make the final decision based 
on the merits and funds available.
10. Mid-Point Rule
    To provide added performance incentives as an employee progresses 
through a pay band, a mid-point rule will be used to determine base pay 
increases. The mid-point rule dictates that any employee must receive a 
score of 30 or higher for his/her base pay to cross the mid-point of 
the base pay range for his/her pay band. Also, once an employee's base 
pay exceeds the mid-point, the employee must receive a score of 30 or 
higher to receive any additional base pay increases. Any amount of an 
employee's performance payout, not paid in the form of a base pay 
increase because of the mid-point rule, will be paid as a bonus. This 
rule effectively raises the standard of performance expected of an 
employee once the mid-point of a band is crossed. This applies to all 
employees in every occupational family and pay band. The performance 
rating of 30 is set as an initial value and may be changed by the PMB, 
as necessary, with a goal of continuously increasing employee and 
organizational performance.
11. Significant Accomplishment/Contribution Rule
    The purpose of this rule is to maintain cost discipline while 
ensuring that employee payouts are in consonance with accomplishments 
and levels of responsibility. The rule will apply only to employees in 
E&S Pay Band III whose base pay would fall within the top 15 percent of 
the band. For employees meeting these criteria, the following 
provisions will apply:
    (1) If an employee's score falls in the top third of scores 
received in his/her pay pool, he/she will receive the full allowable 
base pay increase portion of the performance payout. The balance of the 
payout will be paid as a lump sum bonus.
    (2) If an employee's score falls in the middle third of scores 
received in his/her pay pool, the base pay increase portion will not 
exceed one percent of base pay. The balance of the payout will be paid 
as a lump sum bonus.
    (3) If an employee's appraisal score falls in the bottom third of 
scores received in his/her pay pool, the full payout will be paid as a 
lump sum bonus.
12. Awards
    In addition to the annual performance evaluation and payout 
process, the ARI Director may recognize outstanding individual or group 
achievements as they occur. Awards may include, but are not limited to, 
honorary, special act or on-the-spot monetary awards, and time-off 
awards. The ARI Director may re-delegate this authority. The ARI 
Director will have the authority to grant special act awards to covered 
employees of up to $10,000 IAW the criteria of AR 672-20, Incentive 
Awards. The funds available to be used for traditional 5 U.S.C. awards 
are separately funded within the constraints of the organization's 
budget.
13. General Pay Increase--Limitations for Unacceptable Performance
    Employees on a PIP at the time pay determinations are made do not 
receive performance payouts or the annual general pay increase. An 
employee who receives an unacceptable rating of record will not receive 
any portion of the general pay increase until such time as his/her 
performance improves to the acceptable level and remains acceptable for 
at least 90 days. When the employee has performed acceptably for at 
least 90 days, the general pay increase will not be retroactive but 
will be granted at the beginning of the next pay period after the 
supervisor authorizes its payment. These actions may result in a base 
pay that is identified in a lower pay band. This occurs because the 
minimum rate of base pay in a pay band increases as the result of the 
general pay increase (5 U.S.C. 5303). This situation (a reduction in 
band level with no reduction in pay) will not be considered an adverse 
action, nor will band retention provisions apply.
14. Retention Counteroffers
    The Director, working with the PMB, may offer a retention 
counteroffer to retain high performing employees with critical 
scientific or technical skills who present evidence of an alternative 
employment opportunity with higher compensation. Such employees may be 
provided increased base pay (up to the ceiling of the pay band) and/or 
a one-time cash payment that does not exceed 50 percent of one year of 
base pay. Further details will be published in the IOP. This 
flexibility addresses the expected benefits described in paragraph II. 
C, particularly ``increased retention of high-quality employees.'' 
Retention allowances, either in the form of a base pay increase and/or 
a bonus, count toward the Executive Level I aggregate limitation on pay 
consistent with 5 U.S.C. 5307 and 5 CFR part 530, subpart B. Further 
details will be published in the IOP.
15. Grievances
    An employee may grieve the performance rating/score received under 
the pay-for-performance system through the administrative grievance 
procedure. Bargaining unit employees may not file a negotiated 
grievance disputing their rating/score unless the applicable collective 
bargaining agreement permits it.
16. Adverse Actions
    Except where specifically waived or modified in this plan, adverse 
action procedures under 5 CFR part 752 remain unchanged.

D. Hiring Authority

1. Qualifications
    A candidate's basic eligibility will be determined using OPM's 
Qualification Standards Handbook for General Schedule Positions. 
Candidates must meet the minimum standards for entry into the pay band. 
For example, if the pay band includes positions in grades GS-5 and GS-
7, the candidate must meet the qualifications for positions at the GS-5 
level. Specific experience/education requirements will be determined 
based on whether a position to be filled is at the lower or higher end 
of the band. Selective placement factors can be established in 
accordance with the OPM Qualification Handbook, when judged to be 
critical to successful job performance. These factors will be 
communicated to all candidates for particular position vacancies and 
must be met for basic eligibility. Restructuring the examining process 
and providing an authority to appoint candidates meeting distinguished 
scholastic achievements will allow the laboratory to compete more 
effectively for high quality personnel and strengthen the manager's 
role in personnel management as well as the goals of the demonstration 
project.
2. Delegated Examining
    Competitive service positions will be filled through Merit 
Staffing, and through direct-hire authority or under Delegated 
Examining. Section 1108 of the NDAA for FY 2009, as amended by

[[Page 76053]]

section 1103 of the NDAA for FY 2012, provides for delegation of 
direct-hire authority for qualified candidates with an advanced degree 
to scientific and engineering positions within STRL laboratories 
designated under section 1105 of NDAA FY2010. Direct-hire authority 
will be exercised in accordance with the requirements of the delegation 
of authority.
    When there are no more than 15 qualified applicants and no 
preference eligibles, all eligible applicants are immediately referred 
to the selecting official without rating and ranking. Rating and 
ranking may occur when the number of qualified candidates exceeds 15 or 
there is a mix of preference and non-preference applicants. Category 
rating may be used to provide for a more streamlined and responsive 
hiring system to increase the number of eligible candidates referred to 
selecting officials. This provides for the grouping of eligible 
candidates into quality categories and the elimination of consideration 
according to the ``rule of three.'' This includes the coordination of 
recruitment and public notices, the administration of the examining 
process, the administration of veterans' preference, the certification 
of candidates, and selection and appointment consistent with merit 
principles. Specific procedures used for competitive examining 
authority will be detailed in the IOP.
    Statutes and regulations covering veterans' preference will be 
observed in the selection process when rating and ranking are required. 
Veterans with preference will be referred ahead of non-veterans with 
the same score/category.
3. Direct Hire
    ARI will use the direct-hire authorities authorized by section 1108 
of the NDAA for FY 2009, as amended by section 1103 of the NDAA for FY 
2012, the direct hire authorities published in 79 FR 43722, and the 
direct hire authorities in 10 U.S.C. 2358a, as appropriate, to appoint 
the following:
    (1) Candidates with advanced degrees to scientific and engineering 
positions;
    (2) Candidates with bachelor's degrees to scientific and 
engineering positions;
    (3) Veteran candidates to scientific, technical, engineering, and 
mathematics positions (STEM), including technicians; and
    (4) Student candidates enrolled in a program of instruction leading 
to a bachelors or advanced degree in a STEM discipline.
    In addition, other Direct Hire authorities, documented in FRNs and 
available to all DoD STRL laboratories, may be utilized, as 
appropriate.
4. Legal Authority
    For actions taken under the auspices of the demonstration project, 
the first legal authority code (LAC)/legal authority Z2U/Public Law 
103-337 will be used. The second LAC/legal authority may identify the 
authority utilized (e.g., Direct Hires). For all other actions, the 
nature of action codes and legal authority codes prescribed by OPM, 
DoD, or DA will continue to be used.
5. Revisions to Term Appointments
    ARI will continue to have career and career-conditional 
appointments and temporary appointments not to exceed one year. These 
appointments will use existing authorities and entitlements. Under the 
demonstration project, ARI will have the added authority to hire 
individuals under a modified term appointment, and the Flexible Length 
and Renewable Term Technical Appointments authorized by section 
1109(b)(1) of the NDAA for FY 2016, as amended by section 1106 of the 
NDAA for FY 2019, and published in 82 FR 43339.
    Employees hired under the modified term appointment authority are 
in a non-permanent status in the competitive service for up to five 
years. The ARI Director is authorized to extend a modified term 
appointment for up to one additional year. Employees on modified term 
appointments may be eligible for conversion to career conditional 
appointments. To be converted, the employee must (1) have been selected 
for the term position under competitive procedures, with the 
announcement specifically stating that the individual(s) selected for 
the term position may be eligible for conversion to a career-
conditional appointment at a later date; (2) have served two years of 
continuous service in the term position; (3) be selected under merit 
promotion procedures for the permanent position; and (4) be performing 
at the acceptable level of performance with a current score of 30 or 
greater.
    The Flexible Length and Renewable Term Technical Appointment 
authority will allow ARI to appoint qualified candidates who are not 
currently DoD civilian employees, or who are DoD civilian employees in 
term appointments, into any scientific, technical, engineering, and 
mathematic positions, including technicians, for a period of more than 
one year but not more than six years. The appointment of any individual 
under this authority may be extended without limit in up to six year 
increments at any time during any term of service under conditions set 
forth by the ARI Director. These appointments will allow ARI to 
dynamically shape the workforce to respond to mission requirements. 
Consistent with section 1109(b)1) of the NDAA for FY 2016, as amended, 
employees hired under this provision will be counted as fractional 
employees of the laboratory for the purpose of determining workforce 
size of the laboratory. All waivers published in 82 FR 43339 apply to 
this demonstration project.
    Employees appointed under Flexible Length and Renewable Term 
Technical Appointments may be eligible for noncompetitive conversion to 
a permanent appointment if the job announcement clearly states the 
possibility of being made permanent, in addition to any other provision 
in the STRL's modified term appointment authority. Unless otherwise 
eligible for a noncompetitive hiring authority, positions filled under 
this authority must be competed. Job opportunity announcements must 
clearly identify the type of appointment and the expected duration of 
initial appointment (up to six years). Appointees will also be afforded 
the opportunity to apply for vacancies that are otherwise limited to 
``status'' candidates as described in 82 FR 43339.
    Employees serving under term appointments will be covered by the 
plan's pay-for-performance system.
6. Extended Probationary or Trial Period
    The current two-year probationary period (Pub. L. 114-92) for DoD 
employees will be extended to three years for all newly hired permanent 
career-conditional employees. Trial periods for term appointments will 
also be extended to three years. The purpose of extending the 
probationary period is to allow supervisors an adequate period of time 
to fully evaluate an employee's ability to complete cycles of work and 
to fully assess an employee's contribution and conduct. The three-year 
probationary period will apply only to new hires subject to a 
probationary period.
    Aside from extending the time period for probationary or trial 
periods, all other features of the current probationary and trial 
period are retained including the potential to remove an employee 
without providing the full substantive and procedural rights afforded a 
non-probationary employee. Any employee appointed prior to the 
implementation date will not be affected.

[[Page 76054]]

7. Termination of Probationary Employees
    Probationary employees may be terminated when they fail to 
demonstrate proper conduct, technical competency, and/or acceptable 
performance for continued employment, and for conditions arising before 
employment. When a supervisor decides to terminate an employee during 
the probationary period because his/her work performance or conduct is 
unacceptable, the supervisor will terminate the employee's services by 
written notification stating the reasons for termination and the 
effective date of the action. The information in the notice will, at a 
minimum, consist of the supervisor's conclusions as to the inadequacies 
of the employee's performance or conduct, or those conditions arising 
before employment that support the termination.
8. Supervisory Probationary Periods
    Supervisory probationary periods will be consistent with 5 CFR part 
315, subpart I. Existing Federal employees who are competitively 
selected or reassigned to a supervisory position will be required to 
complete a two-year supervisory probationary period for initial 
appointment to a supervisory position. Newly appointed supervisors, new 
to Federal service, must complete the probationary periods in 
accordance with section III.D.6 of this FRN for Extended Probationary 
Periods. Consistent with 5 U.S.C. 3321, if, during this supervisory 
probationary period, the decision is made to return the employee to a 
non-supervisory position for reasons related to supervisory 
performance, the employee will be returned to a position comparable in 
pay and job duties to the position from which they were originally 
promoted or reassigned. A return to a non-supervisory position will 
result in a return to the employees' salary immediately prior to the 
appointment to a supervisory position, plus any increases that would 
have been afforded to the employee if the employee had remained in the 
position.
    Supervisors hired, new to the Government, who have not demonstrated 
successful performance in a lower position at ARI and who do not 
successfully complete their probationary period may be terminated when 
they fail to demonstrate proper conduct, technical competency, and/or 
acceptable performance for continued employment, and for conditions 
arising before employment. As with non-supervisors and consistent with 
5 U.S.C. 3321, a supervisor who is not performing at an acceptable 
level may be moved to another position in a different pay band. Such a 
move would result in a reduction of pay of no less than 6 percent or to 
the top of the lower pay band, whichever reduction is greater.
    The ARI Director may place the supervisor on a PIP at any time 
during the supervisory probationary period to help improve performance 
to a successful level.
9. Volunteer Emeritus Program (VEP)
    The ARI Director will have the authority to offer former Federal 
employees who have retired or separated from the Federal service, 
voluntary assignments in ARI. VEP assignments are not considered 
``employment'' by the Federal government. Thus, such assignments do not 
affect an employee's entitlement to buyouts or severance payments based 
on an earlier separation from Federal service. The VEP will ensure 
continued quality research while reducing the overall salary line by 
allowing higher paid individuals to accept retirement incentives with 
the opportunity to retain a presence in the scientific community. The 
program will be of most benefit during manpower reductions as senior 
employees could accept retirement and return to provide valuable on-
the-job training or mentoring to less experienced employees. Volunteer 
service will not be used to replace any employee, or interfere with 
career opportunities of employees. The VEP may not be used to replace 
or substitute for work performed by civilian employees occupying 
regular positions required to perform the ARI's mission.
    To be accepted into the VEP, a candidate must be recommended by an 
ARI manager to the ARI Director. Everyone who applies is not entitled 
to participate in the program. The Director will document the decision 
process for each candidate and retain selection and non-selection 
documentation for the duration of the assignment or two years, 
whichever is longer.
    To ensure success and encourage participation, the volunteer's 
federal retirement pay (whether military or civilian) will not be 
affected while serving in a volunteer capacity. Retired or separated 
federal employees may accept an emeritus position without a break or 
mandatory waiting period.
    Volunteers will not be permitted to monitor contracts on behalf of 
the government or to participate on any contracts or solicitations 
where a conflict of interest exists. The same rules that currently 
apply to source selection members will apply to volunteers.
    An agreement will be established between the volunteer and the ARI 
Director. The agreement will be reviewed by the servicing legal office. 
The agreement must be finalized before the assumption of duties and 
will include:
    (1) A statement that the service provided is gratuitous, that the 
volunteer assignment does not constitute an appointment in the civil 
service and is without compensation or other benefits except as 
provided for in the agreement itself, and that, except as provided in 
the agreement regarding work-related injury compensation, any and all 
claims against the Government (stemming from or in connection with the 
volunteer assignment) are waived by the volunteer;
    (2) a statement that the volunteer will be considered a federal 
employee for the purpose of:
    (a) 18 U.S.C. 201, 203, 205, 207, 208, 209, 603, 606, 607, 643, 
654, 1905, and 1913;
    (b) 31 U.S.C. 1343, 1344, and 1349(b);
    (c) 5 U.S.C. chapters 73 and 81;
    (d) The Ethics in Government Act of 1978;
    (e) 41 U.S.C. chapter 21;
    (f) 28 U.S.C. chapter 171 (tort claims procedure), and any other 
Federal tort liability statute;
    (g) 5 U.S.C. 552a (records maintained on individuals); and
    (3) The volunteer's work schedule;
    (4) The length of agreement (defined by length of project or time 
defined by weeks, months, or years);
    (5) The support to be provided by ARI (travel, administrative, 
office space, supplies);
    (6) The volunteer's duties;
    (7) A provision that states no additional time will be added to a 
volunteer's service credit for such purposes as retirement, severance 
pay, and leave as a result of being a participant in the VEP;
    (8) A provision allowing either party to void the agreement with 10 
working days written notice;
    (9) The level of security access required (any security clearance 
required by the assignment will be managed by ARI while the volunteer 
is a participant in the VEP);
    (10) A provision that any written products prepared for publication 
that are related to VEP participation will be submitted to the ARI 
Director for review and must be approved prior to publication;
    (11) A statement that the volunteer accepts accountability for loss 
or damage to Government property

[[Page 76055]]

occasioned by the volunteer's negligence or willful action;
    (12) A statement that the volunteer's activities on the premises 
will conform to the ARI's regulations and requirements;
    (13) A statement that the volunteer will not improperly use or 
disclose any non-public information, to include any pre-decisional or 
draft deliberative information related to DoD programming, budgeting, 
resourcing, acquisition, procurement or other matter, for the benefit 
or advantage of the VEP participant or any non-Federal entities. VEP 
participants will handle all non-public information in a manner that 
reduces the possibility of improper disclosure.
    (14) A statement that the volunteer agrees to disclose any 
inventions made in the course of work performed at ARI. The ARI 
Director will have the option to obtain title to any such invention on 
behalf of the U.S. Government. Should the Director elect not to take 
title, the laboratory will retain a non-exclusive, irrevocable, paid 
up, royalty-free license to practice or have practiced the invention 
worldwide on behalf of the U.S. Government.
    (15) A statement that the VEP participant must complete either a 
Confidential or Public Financial Disclosure Report, whichever applies, 
and ethics training in accordance with office of Government Ethics 
regulations prior to implementation of the agreement; and
    (16) A statement that the VEP participant must receive post-
government employment advice from a DoD ethics counselor at the 
conclusion of program participation. VEP participants are deemed 
Federal employees for purposes of post-government employment 
restrictions.

E. Internal Placement

1. Promotion
    A promotion is the movement of an employee to a higher pay band in 
the same occupational family or to another pay band in a different 
occupational family, wherein the band in the new family has a higher 
maximum base pay than the band from which the employee is moving. 
Positions with known promotion potential to a specific band within an 
occupational family will be identified when they are filled. Movement 
from one occupational family to another will depend upon individual 
competencies, qualifications, and the needs of the organization.
    Progression within a pay band is based upon performance-based pay 
increases; as such, these actions are not considered promotions and are 
not subject to the provisions of this section. Except as specified 
below, promotions will be processed under competitive procedures in 
accordance with Merit System Principles and requirements of the local 
merit promotion plan.
    To be promoted competitively or non-competitively from one band to 
the next, an employee must meet the minimum qualifications for the job 
and have a current performance rating of 30 or better, or equivalent 
under a different performance appraisal system. The minimum performance 
rating of 30 is set as an initial value and may be changed by the PMB, 
as necessary, with a goal of continuously increasing employee and 
laboratory performance. If an employee does not have a current 
performance rating, the employee will be treated the same as an 
employee with an ``acceptable'' rating as long as there is no 
documented evidence of unacceptable performance.
2. Reassignment
    A reassignment is the movement of an employee from one position to 
a different position within the same occupational family and pay band 
or to another occupational family and pay band wherein the band in the 
new family has the same maximum base pay. The employee must meet the 
qualifications requirements for the occupational family and pay band.
3. Demotion or Placement in a Lower Pay Band or Grade
    A demotion is a placement of an employee into a lower pay band 
within the same occupational family or placement into a pay band in a 
different occupational family with a lower maximum base pay. Demotions 
may be for cause (performance or conduct) or for reasons other than 
cause (e.g., erosion of duties, reclassification of duties to a lower 
pay band, application under competitive announcements, at the 
employee's request--if approved, placement actions resulting from 
reduction-in-force ((RIF) procedures). Such actions will be executed 
using the applicable adverse action procedures in Title 5, U.S.C., 
Chapter 43 or Chapter 75.
4. Simplified Assignment Process
    Today's environment of downsizing and workforce fluctuations 
mandates that the organization have maximum flexibility to assign 
duties and responsibilities to individuals. Pay banding can be used to 
address this need, as it enables the organization to have maximum 
flexibility to assign an employee with no change in base pay, within 
broad descriptions, consistent with the needs of the organization and 
the individual's qualifications and level. Subsequent assignments to 
projects, tasks, or functions anywhere within the organization 
requiring the same level, area of expertise, and qualifications would 
not constitute an assignment outside the scope or coverage of the 
current position description. For instance, a Research Psychologist 
could be assigned to any project, task, or function requiring similar 
expertise. Likewise, a manager/supervisor could be assigned to manage 
any similar function or organization consistent with that individual's 
qualifications. This flexibility allows broader latitude in assignments 
and further streamlines the administrative process and system. 
Execution of such actions may require fulfilling labor obligations, 
where applicable.
5. Details and Expanded Temporary Promotions
    Employees may be detailed to a position at the same or similar 
level (position in a pay band with the same maximum salary). 
Additionally, employees may be temporary promoted to a position in a 
pay band with a higher maximum salary. Details and temporary promotions 
may be for up to two years. A detail or temporary promotion may be 
effected without a change in pay or may result in a base pay increase 
when the detail or temporary assignment significantly increases the 
complexity, responsibility, authority, or for other compelling reasons. 
Such an increase is subject to the specific guidelines established by 
the PMB. Details and temporary promotions may be determined by a 
competitive or a non-competitive process. The specifics of these 
authorities will be stipulated by local business rules, policies, or 
procedures as organizational experience dictates. Execution of such 
actions may require fulfilling labor obligations, where applicable.
6. Exceptions to Competitive Procedures for Assignment to a Position
    The following actions are excepted from competitive procedures:
    (1) Re-promotion to a position which is in the same pay band or GS 
equivalent and occupational family as the employee previously held on a 
permanent basis within the competitive service.
    (2) Promotion, reassignment, demotion, transfer, or reinstatement 
to a position having promotion potential no greater than the potential 
of a position an employee currently holds or

[[Page 76056]]

previously held on a permanent basis in the competitive service.
    (3) A position change permitted by RIF procedures.
    (4) Promotion without current competition when the employee was 
appointed through competitive procedures to a position with a 
documented career ladder.
    (5) A temporary promotion, or detail to a position in a higher pay 
band, of two years or less.
    (6) A promotion due to the reclassification of positions based on 
accretion (addition) of duties.
    (7) A promotion resulting from the correction of an initial 
classification error or the issuance of a new classification standard.
    (8) Consideration of a candidate who did not receive proper 
consideration in a competitive promotion action.

F. Pay Setting

1. General
    Pay administration policies will be established by the PMB. These 
policies will be exempt from Army Regulations or local pay fixing 
policies. Employees whose performance is acceptable will receive the 
full annual general pay increase and the full locality pay. The ARI 
Director shall have delegated authority to may make full use of 
recruitment, retention, and relocation payments as currently provided 
for by OPM.
    Grade and pay retention will follow current law and regulations at 
5 U.S.C. 5362, 5363, and 5 CFR part 536, except as waived or modified 
in Section IX, the waiver section of this plan. The ARI Director may 
also grant pay retention to employees who meet general eligibility 
requirements, but do not have specific entitlement by law, provided 
they are not specifically excluded.
2. Pay and Compensation Ceilings
    A demonstration project employee's total monetary compensation paid 
in a calendar year may not exceed the base pay of Level I of the 
Executive Schedule consistent with 5 U.S.C. 5307 and 5 CFR part 530 
subpart B. In addition, each pay band will have its own pay ceiling, 
just as grades do in the GS system. Base pay rates for the various pay 
bands will be directly keyed to the GS rates, except as noted for the 
Pay Band VI of the Engineer and Scientist occupational family. Other 
than where retained rate applies, base pay will be limited to the 
maximum base pay payable for each pay band.
3. Pay Setting for Appointment
    For initial appointments to Federal service, the individual's pay 
may be set at the lowest base pay in the pay band or anywhere within 
the band level consistent with the special qualifications of the 
individual, specific organizational requirements, the unique 
requirements of the position, or other compelling reason. These special 
qualifications may be in the form of education, training, experience or 
any combination thereof that is pertinent to the position in which the 
employee is being placed. Guidance on pay setting for new hires will be 
established by the PMB and documented in IOPs.
    Highest Previous Rate (HPR) may be considered in placement actions 
authorized under rules similar to the HPR rules in 5 CFR 531.221. 
Request to use HPR must be made to the PMB and is subject to policies 
established by the PMB, as approved by the ARI Director. To maintain 
consistent application of pay setting decisions, the PMB will collect 
and track pay setting data, qualifications, and other relevant 
information.
4. Pay Setting for Promotion
    The minimum base pay increase upon promotion to a higher pay band 
will be six percent or the minimum base pay rate of the new pay band, 
whichever is greater. The maximum amount of a pay increase for a 
promotion is 20 percent but will not normally exceed $10,000 or other 
such amount as established by the Personnel Management Board. The 
maximum base pay increase for promotion may be exceeded when necessary 
to allow for the minimum base pay increase. For employees assigned to 
occupational categories and geographic areas covered by special rates, 
the minimum base pay rate in the pay band to which promoted is the 
minimum base pay for the corresponding special rate or locality rate, 
whichever is greater. For employees covered by a staffing supplement 
(described in III.F.9.), the demonstration staffing supplement adjusted 
pay is considered base pay for promotion calculations. When a temporary 
promotion is terminated, the employee's pay entitlements will be re-
determined based on the employee's position of record, with appropriate 
adjustments to reflect pay events during the temporary promotion, 
subject to the specific policies and rules established by the PMB. In 
no case may those adjustments increase the base pay for the position of 
record beyond the applicable pay range maximum base pay rate.
5. Pay Setting for Reassignment
    A reassignment may be effected without a change in base pay. 
However, a base pay increase may be granted where a reassignment 
significantly increases the complexity, responsibility, authority, or 
for other compelling reasons. Such an increase is subject to the 
specific guidelines established by the PMB.
6. Pay Setting for Demotion or Placement in a Lower Pay Band
    Employees demoted for cause (performance or conduct) are not 
entitled to pay retention and will receive a minimum of a five percent 
decrease in base pay. Employees demoted for reasons other than cause 
(e.g., erosion of duties, reclassification of duties to a lower pay 
band, or placement actions resulting from RIF procedures) may be 
entitled to pay and grade retention in accordance with the provisions 
of 5 U.S.C. 5363 and 5 CFR part 536, except as waived or modified in 
Section IX of this plan.
    Employees who receive an unacceptable rating or who are on a PIP at 
the time pay determinations are made do not receive performance payouts 
or the general pay increase. This action may result in a base pay that 
is identified in a lower pay band. This occurs because the minimum rate 
of base pay in a pay band increases as the result of the general pay 
increase (5 U.S.C. 5303). This situation (a reduction in band level 
with no reduction in pay) will not be considered an adverse action, nor 
will band retention provisions apply.
    A supervisor who fails to successfully complete a supervisory 
probationary period will no longer receive a supervisory pay adjustment 
(supervisory differential/adjustment).
7. Supervisory and Team Leader Pay Adjustments
    Supervisory and team leader pay adjustments may be approved by the 
ARI Director at his/her discretion, based on the recommendation of the 
PMB, to compensate employees with supervisory or team leader 
responsibilities. Supervisory and team leader pay adjustments are a 
tool that may be implemented at the discretion of the ARI Director and 
are not to be considered an employee entitlement due solely to his/her 
position as a supervisor or team leader. Only employees in supervisory 
or team leader positions as defined by the OPM GS Supervisory Guide or 
GS Leader Grade Evaluation Guide may be considered for the pay 
adjustment. These pay adjustments are funded separately from 
performance pay pools. These pay adjustments are increases to base pay, 
ranging up to 10 percent of that pay rate

[[Page 76057]]

for supervisors and for team leaders. Pay adjustments are subject to 
the constraint that the adjustment may not cause the employee's base 
pay to exceed the pay band maximum base pay. Criteria to be considered 
in determining the pay increase percentage include:
    (1) Needs of the organization to attract, retain, and motivate 
high-quality supervisors/team leaders;
    (2) Budgetary constraints;
    (3) Years and quality of related experience;
    (4) Relevant training;
    (5) Performance appraisals and experience as a supervisor/team 
leader;
    (6) Unique requirements of a specific position or level of 
complexity compared to other positions of a similar nature,
    (7) Organizational level of position; and
    (8) Impact on the organization.
A pay adjustment may be considered under the following conditions:
    (1) New supervisory/team leader positions will have their initial 
rate of base pay set within the pay range of the applicable pay band 
and rules established by the PMB. Request for initial rate of pay will 
be made to the PMB and approved by the ARI Director or delegated 
official. This rate of pay may include a pay adjustment determined by 
using the ranges and criteria outlined above.
    (2) A career employee selected for a supervisory/team leader 
position may also be considered for a base pay adjustment. If a 
supervisor/team leader is already authorized a base pay adjustment and 
is subsequently selected for another supervisor/team leader position, 
then the base pay adjustment will be re-determined. Upon initial 
conversion into the demonstration project into the same or 
substantially similar position, supervisors/team leaders will be 
converted at their existing base rate of pay and will not be eligible 
for a base pay adjustment.
    (3) The supervisory/team leader pay adjustment will be reviewed 
annually, or more often as needed, and may be increased or decreased by 
a portion or by the entire amount of the supervisory/team leader pay 
adjustment based upon the employee's performance appraisal score for 
the performance element, Team Project Leadership or Supervision/EEO, 
needs of the organization, and/or criteria outlined above. If the 
entire portion of the supervisory/team leader pay adjustment is to be 
decreased, the initial dollar amount of the supervisory/team leader pay 
adjustment will be removed. A decrease to the supervisory/team leader 
pay adjustment as a result of the annual review or when an employee 
voluntarily leaves a position is not an adverse action and is not 
subject to appeal.
8. Supervisory/Team Leader Pay Differentials
    Supervisory and team leader pay differentials may be used by the 
ARI Director to provide an incentive and reward supervisors and team 
leaders. Supervisory and team leader pay differentials are a tool that 
may be implemented at the discretion of the ARI Director and is not to 
be considered an entitlement due to an employee solely due to their 
position as a supervisor or team leader. Pay differentials are not 
funded from performance pay pools. A pay differential is a cash 
incentive that may range up to 10 percent of base pay for supervisors 
and for team leaders. It is paid on a pay period basis with a specified 
not-to-exceed (NTE) of one year or less and is not included as part of 
the base pay. Criteria to be considered in determining the amount of 
the pay differential are the same as those identified for Supervisory/
Team Leader Pay Adjustments.
    The pay differential may be considered, either during conversion 
into or after initiation of the demonstration project. The differential 
must be terminated if the employee is removed from a supervisory/team 
leader position, regardless of cause.
    After initiation of the demonstration project, all personnel 
actions involving a supervisory/team leader differential will require a 
statement signed by the employee acknowledging that the differential 
may be terminated or reduced at the discretion of the ARI Director. The 
termination or reduction of the supervisory differential is not 
considered an adverse action under Chapter 75, of Title 5, U.S.C. and 5 
CFR 752, and is not subject to appeal with the Merit Systems Protection 
Board.
9. Staffing Supplements
    Employees assigned to occupational categories and geographic areas 
covered by special rates will be entitled to a staffing supplement if 
the maximum adjusted base pay for the banded GS grades (i.e., the 
maximum GS locality rate) to which assigned is a special rate that 
exceeds the maximum GS locality rate for the banded grades. Specific 
provisions will be described in IOPs.

G. Employee Development

1. Expanded Developmental Opportunity Program
    The Expanded Developmental Opportunity Program will be available to 
all demonstration project employees. Expanded developmental 
opportunities complement existing developmental opportunities such as 
long-term training; rotational job assignments; developmental 
assignments to ARI, Army, or DoD; and self-directed study via 
correspondence courses, local colleges, and universities. Each 
developmental opportunity must result in a product, service, report, or 
study that will benefit ARI or customer organization as well as 
increase the employee's individual effectiveness. The PMB will provide 
written guidance for employees on application procedures and develop a 
process that will be used to review and evaluate applicants for 
development opportunities. These expanded developmental opportunities 
may be made available when there is a critical skill, need, or gap that 
must be filled for organizational success. Determinations for 
sabbaticals and critical skills training shall be made based on the 
needs of ARI and the relationship to the research mission, merit, 
organization fill rates, current, near- and mid-term workload 
requirements, budget, and employee performance scores.
    (1) Sabbatical. The ARI Director has the authority to grant paid or 
unpaid sabbaticals to all career employees. The purpose of a sabbatical 
will be to permit employees to engage in study or uncompensated work 
experience that will benefit the organization and contribute to the 
employee's development and effectiveness. Each sabbatical must result 
in a product, service, report, or study that will benefit the ARI 
mission as well as increase the employee's individual effectiveness. 
Various learning or developmental experiences may be considered, such 
as research, self-directed or guided study, and on-the-job work 
experience. Limitations and eligibility requirements for sabbaticals 
will be published in the IOP. Employees approved for a paid sabbatical 
must sign a service obligation agreement to continue in service in ARI 
for a period of three times the length of the sabbatical. If an 
employee voluntarily leaves ARI before the service obligation is 
completed he/she is liable for repayment of expenses incurred by ARI 
that are associated with the sabbatical. Expenses do not include salary 
costs. The ARI Director has the authority to waive this requirement. 
Criteria for such waivers will be addressed in the operating 
procedures. Specific procedures will be developed for processing 
sabbatical applications upon implementation of the demonstration 
project.

[[Page 76058]]

    (2) Critical Skills Training. The ARI Director has the authority to 
approve academic degree training where consistent with a current 
employee's current line of work, and where it provides a clear benefit 
to the organization. Training is an essential component of an 
organization that requires continuous acquisition of advanced and 
specialized knowledge. Degree training is also a tool for maintaining 
required knowledge and skills critical to the present and future 
requirements of the organization. Degree or certificate payment may not 
be authorized where it would result in a tax liability for the employee 
without the employee's express and written consent. Any variance from 
this policy must be rigorously determined and documented. Guidelines 
will be developed to ensure a fully competitive approval process for 
expanded critical skills training. Employees approved for degree 
training must sign a service obligation agreement to continue service 
in the ARI for a period three times the length of the training period 
commencing after the completion of the entire degree program. If an 
employee voluntarily leaves ARI before the service obligation is 
completed, he/she is liable for repayment of expenses incurred by ARI 
that are related to the critical skills training. Expenses do not 
include salary costs. The ARI Director has the authority to waive this 
requirement. Criteria for such waivers will be addressed in the 
operating procedures.

IV. Implementation Training

    Critical to the success of the demonstration project is the 
training developed to promote understanding of the broad concepts and 
finer details needed to implement and successfully execute this 
project. Training will be tailored to address employee concerns and to 
encourage comprehensive understanding of the demonstration project. 
Training will be required both prior to implementation and at various 
times during the life of the demonstration project.
    A training program will begin prior to implementation and will 
include modules tailored for employees, supervisors, and administrative 
staff. Typical modules are:
    (1) An overview of the demonstration project personnel system.
    (2) How employees are converted into and out of the system.
    (3) Pay banding.
    (4) The pay-for-performance system.
    (5) Defining performance objectives.
    (6) How to assign weights to performance elements.
    (7) Assessing performance and giving feedback.
    (8) New position descriptions.
    (9) Demonstration project administration and formal evaluation.
    Various types of training are being considered, including videos, 
video-teleconference tutorials, and train-the-trainer concepts. To the 
extent possible, materials already developed from other STRLs will be 
utilized when appropriate to reduce implementation cost and to maintain 
consistency in application of similar procedures across laboratories.

V. Conversion

A. Conversion to the Demonstration Project

    Conversion from current GS grade and pay into the new pay band 
system will be accomplished during implementation of the demonstration 
project. Initial entry into the demonstration project will be 
accomplished through a full employee-protection approach that ensures 
each employee an initial place in the appropriate pay band without loss 
of pay on conversion.
    Under the GS pay structure, employees progress through their 
assigned grade in step increments. Since this system is being replaced 
under the demonstration project, employees will be awarded that portion 
of the next higher step they have completed up until the effective date 
of conversion. As under the current system, supervisors will be able to 
withhold these partial step increases if the employee's performance is 
below an acceptable level of competence.
    Rules governing WGIs will continue in effect until conversion. 
Adjustments to the employee's base salary for WGI equity will be 
computed as of the effective date of conversion. WGI equity will be 
acknowledged by increasing base pay by a prorated share based upon the 
number of full weeks an employee has completed toward the next higher 
step. Payment will equal the value of the employee's next WGI times the 
proportion of the waiting period completed (weeks completed in waiting 
period/weeks in the waiting period) at the time of conversion. 
Employees at step 10, or receiving retained rates, on the day of 
implementation will not be eligible for WGI equity adjustments since 
they are already at or above the top of the step scale. Employees 
serving on retained grade will receive WGI equity adjustments provided 
they are not at step 10 or receiving a retained rate.
    Employees who enter the demonstration project after initial 
implementation by lateral transfer, reassignment, or realignment will 
be subject to the same pay conversion rules as above. If conversion 
into the demonstration project is accompanied by a geographic move, the 
employee's GS pay entitlements in the new geographic area must be 
determined before performing the pay conversion.

B. Conversion or Movement From a Project Position to a General Schedule 
Position

    If a demonstration project employee is moving to a GS position not 
under the demonstration project, or if the project ends and each 
project employee must be converted back to the GS system, the following 
procedures will be used to convert the employee's project pay band to a 
GS-equivalent grade and the employee's project rate of pay to GS 
equivalent rate of pay. The converted GS grade and GS rate of pay must 
be determined before movement or conversion out of the demonstration 
project and any accompanying geographic movement, promotion, or other 
simultaneous action. For conversions upon termination of the project 
and for lateral reassignments, the converted GS grade and rate will 
become the employee's actual GS grade and rate after leaving the 
demonstration project (before any other action). For employee movement 
from within DoD (transfers), promotions, and other actions, the 
converted GS grade and rate will be used in applying any GS pay 
administration rules applicable in connection with the employee's 
movement out of the project (e.g., promotion rules, highest previous 
rate rules, pay retention rules), as if the GS converted grade and rate 
were actually in effect immediately before the employee left the 
demonstration project.
1. Grade-Setting Provisions
    An employee in a pay band corresponding to a single GS grade is 
converted to that grade. An employee in a pay band corresponding to two 
or more grades is converted to one of those grades according to the 
following rules:
    (1) The employee's adjusted rate of basic pay under the 
demonstration project (including any locality payment or staffing 
supplement) is compared with step four rates on the highest applicable 
GS rate range. (For this purpose, a ``GS rate range'' includes a rate 
in (1) the GS base schedule, (2) the locality rate schedule for the 
locality pay area in which the position is located, or (3) the 
appropriate special rate schedule for the employee's occupational 
series, as applicable.) If the series is a two-grade interval series, 
only

[[Page 76059]]

odd-numbered grades are considered below GS-11.
    (2) If the employee's adjusted project rate equals or exceeds the 
applicable step four rate of the highest GS grade in the band, the 
employee is converted to that grade.
    (3) If the employee's adjusted project rate is lower than the 
applicable step four rate of the highest grade, the adjusted rate is 
compared with the step four rate of the second highest grade in the 
employee's pay band. If the employee's adjusted rate equals or exceeds 
step four rate of the second highest grade, the employee is converted 
to that grade.
    (4) This process is repeated for each successively lower grade in 
the band until a grade is found in which the employee's adjusted 
project rate equals or exceeds the applicable step four rate of the 
grade. The employee is then converted at that grade. If the employee's 
adjusted rate is below the step four rate of the lowest grade in the 
band, the employee is converted to the lowest grade.
    (5) Exception: An employee will not be converted to a lower grade 
than the grade held by the employee immediately preceding a conversion, 
lateral reassignment, or transfer from within DoD into the project, 
unless since that time the employee has undergone a reduction in band 
or accepted a lower grade/band position.
2. Pay-Setting Provisions
    An employee's pay within the converted GS grade is set by 
converting the employee's demonstration project rate of pay to GS rate 
of pay in accordance with the following rules:
    (1) The pay conversion is done before any geographic movement or 
other pay-related action that coincides with the employee's movement or 
conversion out of the demonstration project.
    (2) An employee's adjusted rate of basic pay under the project 
(including any locality payment or staffing supplement) is converted to 
the GS adjusted rate on the highest applicable rate range for the 
converted GS grade. (For this purpose, a ``GS rate range'' includes a 
rate range in (1) the GS base schedule, (2) an applicable locality rate 
schedule, or (3) an applicable special rate schedule.)
    (3) If the highest applicable GS rate range is a locality pay rate 
range, the employee's adjusted project rate is converted to a GS 
locality rate of pay. If this rate falls between two steps in the 
locality-adjusted schedule, the rate must be set at the higher step. 
The converted GS unadjusted rate of basic pay would be the GS base rate 
corresponding to the converted GS locality rate (i.e., same step 
position). (If this employee is also covered by a special rate schedule 
as a GS employee, the converted special rate will be determined based 
on the GS step position. This underlying special rate will be basic pay 
for certain purposes for which the employee's higher locality rate is 
not basic pay.)
    (4) If the highest applicable GS rate range is a special rate 
range, the employee's adjusted project rate is converted to a special 
rate. If this rate falls between two steps in the special rate 
schedule, the rates must be set at the higher step. The converted GS 
unadjusted rate of basic pay will be the GS rate corresponding to the 
converted special rate (i.e., same step position).
3. E&S Pay Band III Employees
    An employee in Pay band III of the E&S Occupational family will 
convert out of the demonstration project at no higher than the GS-13, 
step 10 level. ARI, in consultation with the CPAC, will develop a 
procedure to ensure that employees entering E&S Pay band III understand 
that if they leave the demonstration project and their adjusted pay 
exceeds the GS-13, step 10 rate, there is no entitlement to retained 
pay; their GS-equivalent rate will be deemed to be the rate for GS-13, 
step 10. These procedures will be documented in IOPs.
4. E&S Pay Band VI Employees
    E&S Pay Band VI Employees: An employee in Pay Band VI of the E&S 
occupational family will convert out of the demonstration project at 
the GS-15 level. Procedures will be documented in IOPs to ensure that 
employees entering Pay Band VI understand that if they leave the 
demonstration project and their adjusted base pay under the 
demonstration project exceeds the highest applicable GS-15, step 10 
rate, there is no entitlement to retained pay. However, consistent with 
79 FR 43722, July 28, 2014, pay retention may be provided to SSTM 
members under criteria established by the PMB (and approved by the 
Director) who are impacted by a reduction in force, work realignment, 
or other planned management action that would necessitate moving the 
incumbent to a position in a lower pay band within the STRL. Pay 
retention may also be provided under criteria established when an SES 
or ST employee is placed in a SSTM position as a result of reduction in 
force or other management action. SSTM positions not entitled to pay 
retention above the GS-15, step 10 rate will be deemed to be the rate 
for GS-15, step 10. For those Pay Band VI employees paid below the 
adjusted GS-15, step 10 rate, the converted rates will be set in 
accordance with paragraph 2.
5. Employees With Band or Pay Retention
    (1) If an employee is retaining a band level under the 
demonstration project, apply the procedures in paragraphs 1.a. and 1.b. 
(Grade-Setting Provisions) above, using the grades encompassed in the 
employee's retained band to determine the employee's GS-equivalent 
retained grade and pay rate. The time in a retained band under the 
demonstration project counts toward the 2-year limit on grade retention 
in 5 U.S.C. 5382.
    (2) If an employee is retaining rate under the demonstration 
project, the employee's GS-equivalent grade is the highest grade 
encompassed in his or her band level. ARI will coordinate with DoD to 
prescribe a procedure for determining the GS-equivalent pay rate for an 
employee retaining a rate under the demonstration project.
6. Within-Grade Increase
    Equivalent Increase Determinations: Service under the demonstration 
project is creditable for within-grade increase purposes upon 
conversion back to the GS pay system. Performance pay increases 
(including a zero increase) under the demonstration project are 
equivalent increases for the purpose of determining the commencement of 
a within-grade increase waiting period under 5 CFR 531.405(b).

C. Personnel Administration

    All personnel laws, regulations, and guidelines not waived by this 
plan will remain in effect. Basic employee rights will be safeguarded 
and Merit System Principles will be maintained. Servicing CPAC(s) will 
continue to process personnel-related actions and provide consultative 
and other appropriate services.

D. Automation

    ARI will use the DoD approved automated personnel system for the 
processing of personnel-related data. Payroll servicing will continue 
from the respective payroll offices.
    An automated tool or other appropriate procedures will be used to 
support computation of performance related pay increases and awards and 
other personnel processes and systems associated with this project.

E. Revision

    Constant assessment and refinement is needed to maximize the 
effectiveness of the system. Modifications may be

[[Page 76060]]

made from time to time as experience is gained, results are analyzed, 
and conclusions are reached on how the new system is working. 
Modifications will be made in accordance with the provisions of DoDI 
1400.37, or applicable superseding instructions.

VI. Project Duration

    Public Law 103-337 removed any mandatory expiration date for this 
demonstration project. ARI, DA, and DoD will ensure this project is 
evaluated for the first five years after implementation in accordance 
with 5 U.S.C. 4703. Modifications to the original evaluation plan or 
any new evaluation will ensure the project is evaluated for its 
effectiveness, its impact on mission, and any potential adverse impact 
on any employee groups.

VII. Evaluation Plan

A. Overview

    Chapter 47 of 5 U.S.C. requires that an evaluation be performed to 
measure the effectiveness of the demonstration project, and its impact 
on improving public management. A comprehensive evaluation plan for the 
entire demonstration program, originally covering 24 DoD laboratories, 
was developed by a joint OPM/DoD Evaluation Committee in 1995. This 
plan was submitted to the Office of Defense Research & Engineering and 
was subsequently approved. The main purpose of the evaluation is to 
determine whether the waivers granted result in a more effective 
personnel system and improvements in ultimate outcomes (i.e., 
organizational effectiveness, mission accomplishment, and customer 
satisfaction). That plan, while useful, is dated and does not fully 
afford the laboratories the ability to evaluate all aspects of the 
demonstration project in a way that fully facilitates assessment and 
effective modification based on actionable data. Therefore, in 
conducting the evaluation ARI will ensure USD(R&E) evaluation 
requirements are met in addition to applying knowledge gained from 
other DoD laboratories and their evaluations to ensure a timely, useful 
evaluation of the demonstration project.

B. Method of Data Collection

    Data from a variety of different sources will be used in the 
evaluation. Information from existing management information systems 
supplemented with perceptual survey data from employees will be used to 
assess variables related to effectiveness. Multiple methods provide 
more than one perspective on how the demonstration project is working. 
Information gathered through one method will be used to validate 
information gathered through another. Confidence in the findings will 
increase as they are substantiated by the different collection methods. 
The following types of qualitative and/or quantitative data will be 
collected as part of the evaluation: (1) Workforce data; (2) personnel 
office data; (3) employee attitudes and feedback using surveys, 
structured interviews, and focus groups; (4) local activity histories; 
and, (5) core measures of laboratory effectiveness.

VIII. Demonstration Project Costs

A. Cost Discipline

    An objective of the demonstration project is to ensure in-house 
cost discipline. A baseline will be established at the start of the 
project and labor expenditures will be tracked yearly. Implementation 
costs (including project development, automation costs, step buy-in 
costs, and evaluation costs) are considered one-time costs and will not 
be included in the cost discipline.
    The Personnel Management Board will track personnel cost changes 
and recommend adjustments if required to achieve the objective of cost 
discipline.

B. Developmental Costs

    Costs associated with the development of the personnel 
demonstration project include software automation, training, and 
project evaluation. All funding will be provided through the 
organization's budget. The projected annual expenses are summarized in 
Table 1. Project evaluation costs are not expected to continue beyond 
the first five years unless the results warrant further evaluation. 
Additional cost may be incurred as a part of the implementation and 
operation of the project.
[GRAPHIC] [TIFF OMITTED] TN27NO20.017

IX. Required Waivers to Law and Regulation

    Public Law 106-398 gave the DoD the authority to experiment with 
several personnel management innovations. In addition to the 
authorities granted by the law, the following are waivers of law and 
regulation that will be necessary for implementation of the 
demonstration project. In due course, additional laws and regulations 
may be identified for waiver request.
    The following waivers and adaptations of certain Title 5 U.S.C. 
provisions are required only to the extent that these statutory 
provisions limit or are inconsistent with the actions contemplated 
under this demonstration

[[Page 76061]]

project. Nothing in this plan is intended to preclude the demonstration 
project from adopting or incorporating any law or regulation enacted, 
adopted, or amended after the effective date of this demonstration 
project.

A. Waivers to Title 5, United States Code

    Chapter 5, section 552a: Records maintained on individuals. This 
section is waived only to the extent required to clarify that 
volunteers under the Volunteer Emeritus Corps are considered employees 
of the Federal government for purposes of this section.
    Chapter 31, section 3104: Employment of specially qualified 
scientific and professional personnel. Waived to allow SSTMs.
    Chapter 31, section 3132: The Senior Executive Service: Definitions 
and exclusions. Waived as necessary to allow for the Pay Band VI of the 
E&S Occupational Family.
    Chapter 33, section 3317(a): Competitive Service; certification 
from registers. Waived insofar as ``rule of three'' is eliminated under 
the demonstration projects.
    Chapter 33, section 3318(a): Competitive Service, selection from 
certificate. Waived to the extent necessary to eliminate the 
requirement for selection using the ``Rule of Three'' and other 
limitations on recruitment list.
    Chapter 33, section 3321: Competitive service; probationary period. 
This section waived only to the extent necessary to replace grade with 
``pay band.''
    Chapter 33, section 3324 and section 3325: Appointments to 
positions classified above GS-15. Waived in entirety to fully allow for 
positions above GS-15.
    Chapter 33, section 3341: Details. Waived as necessary to extend 
the time limits for details.
    Chapter 41, section 4107(a) (1), (2), (b) (1), (3): Pay for 
Degrees. Waived to the extent required to allow ARI to pay for all 
courses related to a degree program approved by the ARI Director.
    Chapter 41, section 4108(a)-(c): Employee agreements; service after 
training. Waived to the extent necessary to require the employee to 
continue in the service of ARI for the period of the required service 
and to the extent necessary to permit the Director, ARI, to waive in 
whole or in part a right of recovery.
    Chapter 43, sections 4301-4305: Related to performance appraisal. 
These sections are waived to the extent necessary to allow provisions 
of the performance management system as described in this FRN.
    Chapter 51, sections 5101-5112: Classification. Waived as necessary 
to allow for the demonstration project pay banding system.
    Chapter 53, sections 5301-5307: Related to pay comparability system 
and GS pay rates. Waived to the extent necessary to allow demonstration 
project employees, including SSTM employees, to be treated as GS 
employees, and to allow basic rates of pay under the demonstration 
project to be treated as scheduled rates of pay. SSTM pay will not 
exceed EX-IV and locality adjusted SSTM rates will not exceed EX III.
    Chapter 53, sections 5331-5336: GS pay rates. Waived in its 
entirety to allow for the demonstration project's pay banding system 
and pay provisions.
    Chapter 53, sections 5361-5366: Grade and pay retention. Waived to 
the extent necessary to allow pay retention provisions described in 
this FR notice and to allow SSTMs to receive pay retention as described 
in 79 FR 43722.
    Chapter 55, section 5545(d): Hazardous duty differential. Waived to 
the extent necessary to allow demonstration project employees to be 
treated as GS employees. This waiver does not apply to employees in Pay 
Band VI of the E&S occupational family.
    Chapter 57, section 5753, 5754, and 5755: Recruitment and 
relocation, bonuses, retention allowances and supervisory 
differentials. Waived to the extent necessary to allow (1) employees 
and positions under the demonstration project to be treated as 
employees and positions under the GS, (2) employees in Pay Band VI of 
the E&S occupational family to be treated as ST and/or GS employees as 
appropriate, (3) previsions of the retention counteroffer and 
incentives as described in this FRN, and (4) to allow SSTMs to receive 
supervisory pay differentials as described in 79 FR 43722.
    Chapter 59, section 5941: Allowances based on living costs and 
conditions of environment; employees stationed outside continental U.S. 
or Alaska. Waived to the extent necessary to provide that cost-of-
living allowances paid to employees under the demonstration project are 
paid in accordance with regulations prescribed by the President (as 
delegated to OPM).
    Chapter 75, sections 7501(1), 7511(a)(1)(A)(ii), and 
7511(a)(1)(C)(ii): Adverse actions--definitions. Waived to the extent 
necessary to allow for up to a three-year probationary period and to 
permit termination during the extended probationary period without 
using adverse action procedures for those employees serving a 
probationary period under an initial appointment except for those with 
veterans' preference. Waived to the extent necessary to allow for two-
year supervisory probationary periods and to permit re-assignment of 
supervisors during the probationary period without adverse action 
procedures for those employees serving in a supervisory probationary 
period.
    Chapter 75, section 7512(3): Adverse actions. Waived to the extent 
necessary to replace ``grade'' with ``pay band.''
    Chapter 75, section 7512(4): Adverse actions. Waived to the extent 
necessary to provide that adverse action provisions do not apply to (1) 
reductions in pay due to the removal of a supervisory or team leader 
pay adjustment/differential upon voluntary movement to a non-
supervisory or non-team leader position or (2) decreases in the amount 
of a supervisory or team leader pay adjustment/differential during the 
annual review process.

B. Waivers to Title 5, Code of Federal Regulations

    Part 300-330: Employment (general) other than subpart G of 300. 
Waived to the extent necessary to allow provisions of the direct hire 
authorities as described in 79 FR 43722 and 82 FR 29280.
    Part 300, sections 300.601 through 605: Time-in-grade restrictions. 
Waived to eliminate time-in-grade restrictions in the demonstration 
project.
    Part 315, section 315.801(a), 315.801(b)(1), (c), and (e) and 
315.802(a) and (b)(1): Probationary period and length of probationary 
period. Waived to the extent necessary to (1) allow for up to a three-
year probationary period and to permit termination during the extended 
probationary period without using adverse action procedures for those 
employees serving a probationary period under an initial appointment 
except for those with veterans' preference and (2) to the extent 
necessary to allow for supervisory probationary periods to permit 
reassignment during the supervisory probationary period without using 
adverse action procedures for employees serving a probationary period.
    Part 315, section 315.804: Termination of probationers for 
unsatisfactory performance or conduct. Waived to the extent necessary 
to reduce a supervisor who fails to successfully complete a supervisory 
probationary period to a lower grade/band.
    Part 315, section 315.805: Termination of probationers for

[[Page 76062]]

conditions arising before appointment. Waived to the extent necessary 
to permit termination during the extended probationary period without 
using adverse procedures.
    Part 315, section 315.901-315.909: Statutory requirement. Waived to 
the extent necessary to (1) replace ``grade'' with ``pay band;'' (2) 
establish a two-year supervisory probationary period; and (3) allow the 
movement of a newly hired supervisor who fails to meet requirements to 
a lower grade/band.
    Part 316, sections 316.301, 316.303, and 316.304: Term employment. 
Waived to the extent necessary to allow modified term appointments and 
Flexible Length and Renewable Term Technical Appointments as described 
in this FRN and in 82 FR 43339.
    Part 332, section 332.401, 332. 402 and 332.404: Order of selection 
from certificates. Waived to the extent necessary to eliminate the 
requirement for selection using the ``Rule of Three'' or other 
procedures to limit recruitment lists.
    Part 335, section 335.103: Agency promotion programs. Waived to the 
extent necessary to extend the length of details and temporary 
promotions without requiring competitive procedures.
    Part 337, section 337.101(a): Rating applicants. Waived to the 
extent necessary to allow referral without rating when there are 15 or 
fewer qualified candidates and no qualified preference eligibles.
    Part 340, subpart A, subpart B, and subpart C: Other than full-time 
career employment. These subparts are waived to the extent necessary to 
allow a Volunteer Emeritus Corps.
    Part 359, section 359.705: Pay. Waived to allow demonstration 
project rules governing pay retention to apply to a former SES or ST 
placed on an SSTM position.
    Part 410, section 410.308(a-e): Training to obtain an academic 
degree. Waived to the extent necessary to allow provisions described in 
this FR.
    Part 410, section 410.309: Agreements to continue in service. 
Waived to the extent necessary to allow the ARI Director to determine 
requirements related to continued service agreements.
    Part 430, subpart B: Performance appraisal for GS, prevailing rate, 
and certain other employees. Waived to the extent necessary to be 
consistent with the demonstration project's pay-for-performance system.
    Part 432, section 432.102-432.106: Performance based reduction in 
grade and removal actions. Waived to the extent necessary to allow 
provisions described in the FRN.
    Part 511: Classification under the general schedule. Waived to the 
extent necessary to allow classification provisions outlined in this FR 
to include the list of issues that are neither appealable nor 
reviewable, the assignment of series under the project plan to 
appropriate occupational families; and to allow appeals to be decided 
by the ARI Director. If the employee is not satisfied with the ARI 
Director's response to the appeal, he/she may then appeal to the DoD 
appellate level.
    Part 530, subpart C: Special rate schedules for recruitment and 
retention. Waived in its entirety to allow for staffing supplements, if 
applicable.
    Part 531, subpart B: Determining rate of basic pay. Waived to the 
extent necessary to allow for pay setting and pay-for-performance under 
the provisions of the demonstration project.
    Part 531, subparts D and E: Within-grade increases and quality step 
increases. Waived in its entirety.
    Part 531, subpart F: Locality-based comparability payments. Waived 
to the extent necessary to allow (1) demonstration project employees, 
except employees in Pay Band VI of the E&S occupational family, to be 
treated as GS employees; and (2) base rates of pay under the 
demonstration project to be treated as scheduled annual rates of pay.
    Part 536: Grade and pay retention. Waived to the extent necessary 
to (1) replace ``grade'' with ``pay band;'' (2) provide that pay 
retention provisions do not apply to conversions from GS special rates 
to demonstration project pay, as long as total pay is not reduced, and 
to reductions in pay due solely to the removal of a supervisory pay 
adjustment upon voluntarily leaving a supervisory position; (3) allow 
demonstration project employees to be treated as GS employees; (4) 
provide that pay retention provisions do not apply to movements to a 
lower pay band as a result of not receiving the general increase due to 
an annual performance rating of ``Unacceptable;'' (5) provide that an 
employee on pay retention whose rating of record is ``Unacceptable'' is 
not entitled to 50 percent of the amount of the increase in the maximum 
rate of base pay payable for the pay band of the employee's position; 
(6) ensure that for employees of Pay Band VI in the E&S occupational 
family, pay retention provisions are modified so that no rate 
established under these provisions may exceed the rate of base pay for 
GS-15, step 10 (i.e., there is no entitlement to retained rate); and 
(7) provide that pay retention does not apply to reduction in base pay 
due solely to the reallocation of demonstration project pay rates in 
the implementation of a staffing supplement. This waiver applies to ST 
employees only if they move to a GS-equivalent position within the 
demonstration project under conditions that trigger entitlement to pay 
retention.
    Part 536, section 536.306(a): Limitation on retained rates. Waived 
to the extent necessary to allow SSTMs to receive pay retention as 
described in 79 FR 43727.
    Part 550, section 550.703: Definitions. Waived to the extent 
necessary to modify the definition of ``reasonable offer'' by replacing 
``two grade or pay levels'' with ``one band level'' and ``grade or pay 
level'' with ``band level.''
    Part 550, section 550.902: Definitions. Waived to the extent 
necessary to allow demonstration project employees to be treated as GS 
employees. This waiver does not apply to employees in Pay Band VI of 
the E&S occupational family.
    Part 575, subparts A, B, C, and D: Recruitment incentives, 
relocation incentives, retention incentives and supervisory 
differentials. Waived to the extent necessary to allow (1) employees 
and positions under the demonstration project covered by pay banding to 
be treated as employees and positions under the GS system, (2) to allow 
SSTMs to receive supervisory pay differentials as described in 73 FR 
43727, and (3) to allow the Director to pay an offer up to 50 percent 
of basic pay of either a base pay and/or a cash payment to retain 
quality employees; and to the extent necessary to allow SSTMs to 
receive supervisory pay differentials. Criteria for retention 
determination and preparing written service agreements will be as 
prescribed in 5 U.S.C. 5754 and as waived herein.
    Part 591, subpart B: Cost-of-living allowance and post 
differential--Non-foreign Areas. Waived to the extent necessary to 
allow demonstration project employees to be treated as employees under 
the GS system.
    Part 752, sections 752.101, 752.201, 752.301 and 752.401: Principal 
statutory requirements and coverage. Waived to the extent necessary to 
(1) allow for up to a three-year probationary period; (2) permit 
termination during the extended probationary period without using 
adverse action procedures for those employees serving a probationary 
period under an initial appointment except for those with veterans' 
preference; (3) allow for supervisory probationary periods and to 
permit reassignment during the supervisory probationary period without 
use of adverse action procedures for those employees serving a 
probationary

[[Page 76063]]

period under a supervisory probationary period; (4) replace ``grade'' 
with ``pay band;'' and (5) provide that a reduction in pay band level 
is not an adverse action if it results from the employee's rate of base 
pay being exceeded by the minimum rate of base pay for his/her pay 
band. Waived to the extent necessary to provide that adverse action 
provisions do not apply to (1) conversions from GS special rates to 
demonstration project pay, as long as total pay is not reduced and (2) 
reductions in pay due to the removal of a supervisory or team leader 
pay adjustment/differential upon voluntary movement to a non-
supervisory or non-team leader position or decreases in the amount of a 
supervisory or team leader pay adjustment based on the annual review.
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[GRAPHIC] [TIFF OMITTED] TN27NO20.022


    Dated: November 20, 2020.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2020-26165 Filed 11-25-20; 8:45 am]
BILLING CODE 5001-06-C