Status Report

Testimony by George Nesterczuk before the House Science Committee

By SpaceRef Editor
March 12, 2003
Filed under ,

Testimony of
George Nesterczuk
President, Nesterczuk and Associates
before the
Committee on Science
U. S. House of Representatives
on H.R. 1085,
"NASA Flexibility Act of 2003"
March 12, 2003

Mr. Chairman and Members of the Committee, thank you
for the opportunity to testify today on H.R. 1085, the
"NASA Flexibility Act of 2003", a bill to
make certain personnel authorities and enhanced flexibilities
available to the National Aeronautics and Space Administration.
My name is George Nesterczuk and I am President of Nesterczuk
and Associates, a management-consulting firm located
in Vienna, VA.


As a long time participant in public sector management
initiatives I welcome the Committee’s willingness to
delve into some of the arcane aspects of civil service
personnel rules. I come to these issues with a perspective
of someone trained in the sciences that, through no
fault of his own, became immersed in the realm of human
resource management. I began my professional work experience
as a graduate research assistant at the Goddard Space
Flight Center. During subsequent years I spent a decade
as a government contractor supporting NASA satellite
tracking operations, and performing research in geodesy,
atmospheric physics, and remote sensing.

Later, during the Reagan years I went on to hold senior
positions at the US Office of Personnel Management,
the Department of Defense, and the Department of Transportation.
While at OPM I managed a variety of programs including
government wide pay and performance management systems
and the Senior Executive Service. At the Department
of Transportation I served as Science and Technology
Advisor to the Secretary and was DoT’s liaison with
the White House Office of Science and Technology Policy.
In 1995, I returned to federal human resource management
issues as Staff Director of the Subcommittee on the
Civil Service in the House of Representatives. I have
now dealt with federal HR issues continuously for over
20 years.


The problems that confront NASA are not new nor is
NASA alone in its predicament. Over the past twenty
years a continuous stream of budget reduction and downsizing
initiatives have taken their toll on a workforce previously
accustomed to lifetime employment with careers spanning
30 to 40 years. Managers could expect to recruit a steady
stream of young entry-level college graduates every
year to replace a fairly predictable cohort of retirees.
In recent years, however, reduced budgets and lower
staff ceilings have resulted in hiring freezes and occasional
reductions in force to complement the steady outflow
of retirement eligible federal employees. In the mid
1990s a new tool came along — the Voluntary Separation
Incentive, also known as the buy-out – to further accelerate

Now federal agencies must deal with the aftermath:
an aging workforce and a significantly reduced pool
of young talent from which to grow the next generation
of senior managers and executives. In addition to this
aging workforce syndrome, NASA faces the challenge of
recruiting and retaining highly skilled technical professionals
against a highly competitive private sector. Further,
NASA must also deal with a potential crisis in depleted
expertise as an increasing proportion of its aging workforce
achieves retirement eligibility. The agency is aware
of these problems and has provided demographic data
to the Committee to illustrate and quantify these problems.

General Support for HR 1085

HR 1085 contains measures to deal with at least some
of these issues in the short term using financial incentives
to attract and retain quality staff in critical functions.
However, in the long term, more basic systemic reforms
will be needed to reestablish some balance in NASA’s
workforce and promote and maintain a high performance
environment. Though very important, compensation alone
is not sufficient. The quality of the work environment
is an important factor that can attract or drive away

To that end, the enhanced demonstration authority proposed
in the bill is perhaps the most important part of HR
1085. It will permit NASA to experiment with agency
wide reforms that can streamline recruitment, revamp
the pay and classification systems, and reform the administrative
appeals procedures by which the agency deals with problem

Broadly speaking, I support the intent of HR 1085 and
believe its provisions will indeed provide NASA much
needed flexibility in dealing with some vexing human
resource issues. At the same time I have serious reservations
about the provision extending increased voluntary separation

Views on Specific Provisions

At this point in my testimony, I will provide more
detailed comments on specific provisions of HR 1085.

Using NASA’s organic act

The Committee has chosen to amend NASA’s organic act
instead of the civil service statutes contained in Title
5 of the US Code. This is a sound strategy which permits
you to tailor agency specific remedies for provide immediate
relief without bearing the burden of justifying government
wide changes and bearing the cost and attendant implementation

There is ample precedent of Congress providing other
federal agencies with flexible personnel provisions
to deal with agency specific problems. The annual authorizing
legislation for the Department of Defense invariably
carries a handful of civil service provisions to deal
with DOD specific matters. Federal banking regulators
and financial institutions received broad pay exemptions
back in the 1980s to the exclusion of all other federal
agencies. In 1995, the FAA was removed from coverage
by Title 5 USC and permitted to establish an entirely
separate system of personnel rules. More recently, the
IRS, the Transportation Security Administration, and
the Department of Homeland Security were all provided
extensive flexibilities by Congress to modify existing
personnel rules in order to function more effectively.

Limitations on authorities granted

Sections 501 and 503 impose important limitations on
the authorities granted. First, the financial recruitment
and retention incentives are limited to situations of
critical need. In addition the workforce authorities
themselves expire after a period of approximately six
years. These are important controls that place the agency
on notice that abuses would not be tolerated. Unchecked
or unlimited reliance on recruitment and retention bonuses
would ultimately create new morale problems in the workforce
and give rise to questions of equitable treatment and
raised expectations.

Placing a limit on the duration of these flexibilities
will also put the agency on a notice of "use it
or lose it". It will speed up the implementation
of needed reforms and provide Congress with a specific
opportunity to revisit these issues after a reasonable
time period has elapsed. Based on prior demonstration
projects 5 years is sufficient time to gather data to
evaluate the efficacy of the demonstration. This depends
however on the depth and breadth of proposed reforms.
More complicated HR changes may require a longer evaluation

To answer the specific question posed by the Committee
as to the adequacy of the six year time limit placed
on these authorities I would answer yes on the critical
pay, on bonuses, buy-outs, term conversions, and IPA
assignments. As to the demonstration authority a more
qualified response is called for. Broad and / or complex
changes may require a longer period. Much will depend
on NASA’s ability to propose specific reforms in the
first few months of this authority and what it can reasonably
proceed to implement during the first year of the demonstration

Congress and the Agency will have the sixth year to
decide which authorities to extend, which to make permanent,
and which to terminate. At that point the demonstration
authority itself could be extended if NASA needs additional
time to tackle remaining agency wide HR problems. The
important thing is for all parties — NASA, its employees
and Congress – to know that oversight over the process
and its results will be maintained in order to promote
an environment of accountability.

Notification requirements

The planning and reporting requirements set out in
Sect 502 give the agency 90 days in which to submit
to Congress a Workforce Plan stipulating how it will
implement the workforce authorities granted under HR
1085. Employees are to be provided the Workforce Plan
at least 60 days before any authorities are exercised.
Subsequent changes require similar Congressional and
employee notification. Both notifications to Congress
and employees are reasonable requirements and should
not pose an undue burden on the agency. The disclosures
will permit the Committee to track the implementation
of authorities and provide insight into NASA’s implementation

Demonstration project authority

Since the demonstration project authority granted in
Section 510 is perhaps the most important authority
extended to NASA I will address it first. The enhancement
over existing demonstration project authority consists
of lifting the limit on the size of the demonstration
from 5,000 employees to as many as the Administrator
determines necessary. This would permit NASA to implement
much needed agency wide personnel rule changes in areas
such recruitment and selection procedures, pay and classification
systems, and administration procedures to deal with
performance and conduct cases.

It is not clear, however, that the current statutory
language in HR 1085 will suffice since all other language
governing demonstration projects remains in place in
Chapter 47 of Title 5 USC. Thus, if 10 other projects
are already under way according to 4703 (d) (2) NASA
could not proceed with its own demonstration. OPM could
also find grounds to keep NASA from implementing since
it remains the controlling authority over demonstration

I believe more directive language will be required
in the bill to give NASA the lead in establishing a
demonstration project. OPM should be designated a consulting
agency to NASA during the term of the demonstration
authority, and the project could follow the remaining
rules in 5 USC 4703. The notification requirements contained
in 4703 (b) (1) however should be overridden and streamlined
by language in HR 1085 since the existing notifications
are extremely cumbersome and arguably not appropriate
to the Committee’s intent. The notification rules in
section 502 of HR 1085 are more appropriate than those
currently in 4703(b)(1).

Targeted financial incentives

The provisions in Sections 504 and 505 permitting bonuses
for recruitment and retention, and for transferring
or relocating employees will allow NASA greater leeway
in attracting and keeping certain employees with highly
specialized skills. The critical pay authority in Section
508 will serve the same purpose.

These bonuses could address the difficulty faced by
many federal agencies in attracting mid-career employees
either from other federal agencies or the private sector.
The use of service periods to make sure an employee
"buys in" to the agency for several years
is a particularly good idea. The size of the bonuses
makes them noteworthy. Currently they are limited to
25% of pay, payable in a lump sum. The bill proposes
to increase this to 50% for critical jobs for each of
2 years and up to 25% for up to 4 years for non-critical
jobs. The payout can be spread out over time but in
no instance can it exceed 100% of basic pay.


Since the mid 1990s voluntary separation incentives
have been quite the rage in federal HR circles. Reported
data from the initial implementation of buy outs indicated
that out of 132,000 buy outs between 1994 and 1998 92%
went to retirement eligible employees. In other words
nearly $4 billion dollars was spent in extending a "golden
handshake" to freely departing federal employees.
The justification for the high cost was that this was
a more effective means of downsizing than running reductions
in force. While this point can be argued, Members of
Congress were sufficiently persuaded that they extended
buy out authority permanently and government wide in
legislation establishing the Department of Homeland

Existing law pegs the buyouts at $25,000 per hand shake
and requires no offsetting payment into the retirement
system. The earlier buy out authority recognized that
moving people prematurely into retirement shifted the
cost burden from the Treasury payroll account to the
Treasury retirement account and required that an appropriate
payment be made into the already under funded Civil
Service Retirement and Disability Fund.

Section 506 proposes to raise the "golden handshake"
in value from $25,000 to 50% of salary – over $70,000
for a Senior Executive, and it too has no offsetting
provision for cost to the retirement system. This is
a highly problematic provision that sends a mixed message
at best. How can an agency express concern about losing
senior talent, make a special effort to pay retention
bonuses and then turn around and spend money on separation
bonuses which is all a buy out really is.

HR 1085 proposes to limit these huge "golden handshakes"
to individuals in "critical need" positions.
How is one to understand this? The "critical need"
designation makes the incumbent eligible for a retention
bonus of up to 100% of salary. If instead he is offered
$50,000 or $60,000 or maybe $70,000 to leave what does
that tell us about his value to the agency or his performance
on the job? And is he a better or worse performer than
the one in the non-critical job to whom you only offer
$25,000 to leave? Are you willing to pay more money
because the incumbent in the critical job does more
damage? Non-performing or non-productive employees should
be removed or reassigned into jobs they are better suited
for. They should not be rewarded with cash to get them
to move on. That simply short changes the good performers
who aren’t getting performance awards for lack of money.

Buyouts raise a lot of questions as to intent of purpose,
especially if the function is not being abolished following
the incumbent’s departure. Their use sends a mixed message
at best particularly in an organization arguing for
relief because it is losing talent. I strongly urge
the Committee to delete this provision entirely and
leave NASA to tip toe around the existing government
wide authorities for buy outs at the $25,000 level.
The agency will have its hands full making buy outs
credible at the lower level without the extra public
scrutiny of $70,000 "golden handshakes".

Other provisions

Section 507 provides for the conversion to career status
of employees serving in term appointments. This is a
useful flexibility for the Administrator to exercise
as long as the provisions are not abused, for the abuses
would seriously undermine merit system staffing principles.
Temporary hires are usually brought in to deal with
peak or surge workloads. Since they are temporary the
rules by which such positions are filled tend to be
relaxed and don’t necessarily comply with full and open
competition requirements for career status in the civil
service. If a pool of temporary employees serves as
an agency "farm team" entry into permanent
civil service positions will over time become compromised.

The flexibility in extending IPA assignments by four
years as proposed under Section 509 is likewise a very
useful provision for the Administrator to have. Since
it is exercised after the initial two-year appointment
expires there would have been ample opportunity to evaluate
the individual’s performance hence the provision poses
no risk to the agency. One must nevertheless guard against
the abuse of sending non-performers out of the agency
for extended periods of time. IPA assignments for federal
employees to state and local governments have been known
to be examples of "turkey farms". The Administrator
should implement controls to make sure this does not
occur – it is a very costly practice.

Summary and Conclusion

In conclusion let me express general support for HR
1085 and its intent to provide NASA with much needed
HR flexibility. The bill provides the immediate remedy
of additional compensation for specific purposes of
retaining and attracting talented individuals for critical
agency needs. The pay differentials paid in bonuses
and the higher pay authorized are substantially above
current authorities and therefore meaningful. These
provisions will provide the agency with better access
to professionals at mid career rather than at entry
level. Most important is the enhanced demonstration
project authority that will permit NASA to experiment
with agency wide reforms to potentially streamline recruitment,
revamp the pay and classification systems, and reform
the administrative appeals procedures by which the agency
deals with problem employees.

This concludes my testimony. I will be happy to respond
to any questions you may have.

SpaceRef staff editor.