COMMENTS REGARDING SENIOR INTELLIGENCE SERVICE PROPOSAL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-01114R000300090036-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 81
• Document Creation Date: December 12, 2016
• Document Release Date: November 6, 2001
• Sequence Number: 36
• Publication Date: September 10, 1979
• Content Type: MF

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DD/A 79-0534/4
10 September 1979
MEMORANDUM FOR: Director of Personnel
FROM Clifford D. May, Jr.
Acting Deputy Director for Administration
SUBJECT ?
? Comments Regarding Senior Intelligence Service
Proposal
REFERENCE ? Memo frm D/Pers to DD/A, dtd 6 Sept 79,
Subj: Changes to the Senior Intelligence
Service Proposal
1. In response to your request for comments regarding
the Senior Intelligence Service (SIS) proposal, I believe
the following items should be reviewed or clarified prior
to implementation.
a. How will those supergrade employees in a
PRA status be handled?
It would appear that they would virtually he
eliminated from consideration for an award or
stipend since they would not be in a position
evaluated at the GS-16 level. This should not
always be the case and perhaps this topic should
be specifically addressed.
b. It is indicated that current supergrades
have the option Of either joining or not joining
the SIS. The question is what will happen to
those individuals who decide not to join the SIS.
How will they be ranked, appraised, etc,
c. In the M Career Sub-group there are a
number of individuals who are assigned to M
positions in other Directorates, probably a greater
number than other Sub-group supergrades assigned
to the DDA. In view of this, we foresee a problem
with the "Mist having to compete for the awards
within the Directorate to which they are assigned.
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Perhaps there could be a dual policy wherein
worthy individuals could be recommended for
monetary awards by either the operating component
to which they are assigned or by the Career
Service of which they are a member.
d. On Page 19, it is stated "that officers...
will be converted to an appropriate SIS annual pay
rate which is at least equal to their annual salary
rate payable on the date immediately prior to the
implementation of the SIS." If the implementation
date is to be 1 October 1979 as is proposed, it
appears that these individuals will be penalized by
not receiving the benefits of any pay raise that
might go into effect on 7 October 1979. Accordingly,
I recommend that the salary scale be modified to
correct this situation as appropriate.
e. Sub-System 7 refers to the Senior Intel-
ligence Officer Development Program. I believe this
Section needs expansion to clarify how this program
will tie into or replace the current PDP and how the
"feeder groups" will be identified and trained.
f. I recognize that there may be a number of
issues that may develop on the structure and
procedures described in your proposals and that
additional time may be needed to resolve these issues.
However, it seems to me we can implement the new
system on 1 October 1979 if we can:
in
(1)
CIA;
Agree
that an SIS should be implemented
(2) Agree on the scope of the system (whether
or not all supergrades are included); and
(3) Agree to prepare Annual Work Plans
shortly after 1 October, These actions will
provide a framework for performance evaluation
while the remaining procedures and issues are
being resolved. This will ensure that deserving
executives will be eligible for performance awards
in early FY-81
2. While there are other specific details and procedures
that must be worked out as the program progresses, I believe
the overall proposal is well conceived and necessary if we are
to attract and retain highly qualified senior execu ves in
the CIA.
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MEMORANDUM F Director of Personnel
I have reviewed the 14 September changes to the
basic proposal for the Senior Executive Service. I
have one objection to the changes -- to be found on
page 37. It concerns the limitation that "an officer
awarded either a Meritorious or Distinguished Officer
rank-stipend shall not be eligible to be awarded that
same rank during the following four fiscal years."
feel that "four" years is too long a period and should
be reduced at the most to one year.
STATI NTL
WI VOFTONTOus
o n J. Flicks
DD/NFAC
Dew 18 Sept 79
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18 September 1979
MEMORANDUM FOR: Director of Personnel
FROM: John N. McMahon
Deputy Director for Operations
SUBJECT: Senior Intelligence Service - Basic Proposals
Comments:
1. Re page 12, item 5, it would appear from the wording of
paragraph 5 that the Director of Personnel will submit "prioritized"
recommendations to the DDCI for approval. I really don't believe
that that is really what is intended and that point should be made
clear.
2. It is essential that we make the conversions according to
the conversion table on page 26 and not according to the narrative
on page 22. I feel it is necessary that Directorates retain the
flexibility to place and change supergrade positions. This is par-
ticularly true of the DDO overseas when the dynamics of crises
situations demand it.
3. I am worried about the developmental plan which is now
proposed because it implies that promotion to the SIS level requires
certain criteria to be met; that is, having an employee get the
proper tickets punched by rotating through many directorates. While
this is admirable for a handful of people, if it becomes the norm
or the basis for promotion, we will populate the Agency with a host
of managers who have little or no substantive knowledge. I wish to
reiterate that I am strongly opposed to any plan or personnel program
which does not make the thrust of its endeavor the career development
of specialists and experts who form the core of the Agency's knowledge.
STATI NTL
C.--- o n N. McMahon
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'"ERN AL
JaNCLASSI F Viiprovela r aleeM2002/01 /08 : CIA-RD
gri n n 36 El SEC RET
ROUTING AND RECORD SHEET
SUBJECT: (Optional) Changes to the Senior Intelligence Service
Proposal
EXTENSION
DDO
NO.
PERS --
DATE
7 SEP 1979
TO: (Officer designation, room number, and
building)
DATE
RECEIVED FORWARDED
D/Pers
--t
OFFICER'S
INITIALS
COMMENTS (Number each comment to show from whom
to whom. Draw a line across column after each comment.)
A
IMMEDIATE
Form
3-65 60c
(13)
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MEMORANDUM FOR:
Director of Personnel
7 SEP 1979
FROM John N. McMahon
Deputy Director for Operations
SUBJECT Changes to the Senior Intelligence Service
Proposal
REFERENCE D/Pers Memorandum dtd. 6 September 1979,
same subject
1. The proposed changes are satisfactory -- with one
exception. In pressing for a Deputy Director's right to
recommend awards for officers serving in his directorate,
but not from his career service, I did not intend for this
to be exclusive. In other words, I believe that a Deputy
Director should have the option to either make such a
recommendation on his own or to forward it to the appropriate
career service head for his action.
2. With additional time to review the SIS proposal,
we have discovered what could be serious problems with the
initial conversion system. The position conversion table
(page 26) is sensible and will coincide quite well with the
senior management needs of the Operations Directorate.
The incumbent conversion table (page 51) is another matter.
I recognize that it was designed to preclude salary loss
and this is commendable. However, the immediate result for
us would be serious imbalances in the numbers of senior
officers versus the numbers of senior positions at the
various levels. Our grade structures would become an elon-
gated diamond resting on top of the normal pyramid -- greatly
complicating management of headroom and "flow-through."
We must attempt to find a system which maintains the pyramid
structure and which does not involve splitting current GS
grades among the SIS levels. (If there proves to be no
legal alternative to grade splitting, it should not be done
just on the basis of current step and "salary.")
e d Fo721t1?002/04
?ti
on N. McMahon
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DDSU-4773-79
18 September 1979
MEMORANDUM FOR: Director of Personnel
FROM: Leslie C. Dirks
Deputy Director for Science and Technology
SUBJECT: Senior Executive Service
REFERENCE: Basic Proposals Senior Executive Service
Revised 14 September 1979
1. I have reviewed the most recent version of the proposal
for a CIA Senior Executive Service (reference) and find one
major deficiency. It is my recollection that the Executive
Committee agreed to substantial changes in the way performance
awards were to be determined, and yet the revised proposal
(pp 40-45) reflects only the most modest differences. Specif-
ically, it is my understanding that the DCl/DDCI, in consultation
with the DD's, will allot bonus pool dollars to each directorate
on the basis of their perception of the quality of the overall
performance of that directorate, and that the Deputy Director in
consultation with the DDCI in turn will further divide this
sum among the offices (divisions) of his directorate in accord
with his views of the offices' respective levels of achievement.
Each Office ?Director will then identify the 50 percent (more or
less depending on DDCI and DD allocations in any given year)
of his SIS cadre to receive awards and determine how much each
is to receive subject to the total amount available. (A/IU0)
2. The office (or division) bonus determinations are
subject to review and approval by the head of the career service
concerned and final approval by the DDCl/DCI. SRB's will be
concerned with promotions to the SIS 1, 2, and 3 levels and
the career development program both within the SIS 1, 2, and 3
levels and the GS-15 "feeder group." The Office of Personnel
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SUBJECT: Senior Executive Service
will provide staff support on matters concerning the SIS both
to the DDCI and to the agency level Senior Resources Board.
I still have residual concerns about SPS positions. These
concerns are described in the attachment. (A/IU0)
3. Since my understanding of the DDCI's decisions,
reached as a result of the last Executive Committee meeting,
on the SIS structure were crucial to setting aside most of
my reservations on the SIS structure as proposed by the
Office of Personnel SIS Task Force, I would appreciate it if
you would let me know immediately if I have misunderstood the
sense of the Executive Committee discussions and the DDCI's
decisions. (A/IUO)
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Attachment: a/s
2
Leslie C. Dirks
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SPS ISSUE
In the SIS structure as presently proposed, the current
independent SPS structure disappears and all SPS personnel
now in the DDSU, NFAC and DDA will be folded into the SIS
in a way identical to current supergrade personnel. It is
clear that an acceptable SIS structure must offer the same
benefits both for the current supergrade and SPS personnel,
but at the same time we should preserve as much flexibility
as possible in our ability to hire and promote exceptionally
STATINTLwell qualified technical personnel which we have profited
from under the current SPS system. Although OMB has set an
upper limit of on the number of SPS personnel we can have
on board, we currently have, among the DDSU, NFAC and DDA,
STATINTL only SPS positions on the Tb, and even fewer encumbents.
Thus thisceiling has never been a problem. But now the SG
and SPS ceilings will be combined into a common SIS ceiling.
Under the new system, it is conceivable that pressures to
promote non-SPS types of personnel, long thwarted by the
troublesome supergrade encumbency ceiling, could result in
a spate of promotions thus consuming the additional headroom
brought into the SIS from the SPS system. If this were to
occur, it could become very difficult to fill key senior
technical positions, formerly rated at SPS levels, with SIS
personnel either hired from the outside or promoted from
within. Perhaps the best way to deal with this potential
problem is to monitor very closely promotions and lateral
entries into the SIS ranks to make sure that some ceiling
allocation can always be made available for our critical
senior technical personnel.
Attachment to:
DDSU-4773-79
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DDSU-4602-79
10 September 1979
MEMORANDUM FOR: Director of Personnel
FROM: Leslie C. Dirks
Deputy Director for Science and Technology
SUBJECT: CIA Senior Executive Service
REFERENCE:
Your Memo dtd 6 Sept 1979
Subj: Changes to the Senior
Intelligence Service Proposal
1. I have reviewed the revised version of your working
group's basic proposals for a CIA Senior Executive Service and
would like to offer my comments on it. (U)
2. In general, I fully support the concept of a Senior
Intelligence Service for CIA open to all current officers at
or above the rank of GS-16, and I agree that it should be modeled
to some extent after the Senior Executive Service currently
being implemented elsewhere in the Government. I am concerned,
however, that we may be trying to define and implement a system
for CIA too hastily without full consideration of the possible
pitfalls. On this score, I have been told that implementation
of the Senior Executive Service under OPM auspices is not going
smoothly -- that it is taking on highly political overtones
and that other unintended effects are surfacing. (AMC))
3. It would seem preferable to me for the Agency to issue
shortly a notice of intent to establish a Senior Intelligence
Service including an outline of its proposed structure and a
commitment to furnish additional necessary details around
1 November at which time current supergraders would be asked
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SUBJECT: CIA Senior Executive Service
to declare their intentions with respect to joining the SIS.
In theory, the revised performance appraisal system will
already be in effect on 1 November, and the performance awards
and rank bonuses can still be distributed 11 months later.
The additional month's time should permit us to look a bit
more carefully, and I would think profitably, at the system
we wish to implement.
4. In my view, there are some features of the SIS
currently proposed which indeed require further study and
discussion. For example, I feel we should look more carefully
at how we will deal with our SPS specialists. As you know,
our SPS officers currently are not subject to the same encumbency
ceiling imposed on our supergraders. The present proposal would
place both the supergrade and SPS officers under one ceiling for
the first time. Including SPS officers in this single ceiling
could make it quite difficult to hire highly technical specialists
at SPS rank from private industry on those frequent occasions
when the directorate has reached its supergrade ceiling.
Regarding this ceiling, I disagree strongly with the statement
on page 21 of the reference which claims that our current ceiling
is "adequate." At present, DDSU has Illsupergrade positiSTATINTL
approved by PMCD on the T/0 which the ceiling allocation will
not allow to be filled with supergrade personnel. Including our
SPS specialists in the SIS without differentation from the super-
grade managers would also force them to be competitively ranked
against supergrade managers for performance awards. This could
turn out to be a very difficult task. (U)
5. I am also concerned about the possible adverse morale
aspect of the 50% limitation on performance awards. My senior
managers and I tend to think it would be far less harmful to
morale to reduce the size of the group receiving absolutely
no award to, say, 10% or 20% of the SIS cadre, not a full 50%.
We feel there are very few "average" or mediocre supergrade and
SPS personnel in CIA in the absolute sense, and to summarily
exclude some good, solid performers from at least a token award
at, say, the 35th percentile of performance is very questionable.
Perhaps awards on the order of 4% or 5% of base pay should be
made available to the 20th or 50th percentile performers. While
recognizing this may cause other problems, I think it would be
worth considering. (U)
2
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SUBJECT: CIA Senior Executive Service
6. The extent to which we consciously tailor the
performance award structure to compensate for grade compression
also seems worthy of further study. Perhaps we would want to
establish guidelines recognizing that under normal circumstances,
higher fractions of the more senior SISers would be expected to
receive performance awards given that their base pay does not
properly reflect their level of responsibility. This will be
particularly important if Congress does not increase the pay
scale.
7. I think we should reexamine the proposed process
for interleaving the career services' individual recommendations
for performance awards into a master prioritized list. If may
be preferable to simply agree that a fixed percentage of SIS
members in each career service will be eligible for performance
awards at the ES-1, 2 and 3 levels, and leave it to the
individual career services to identify them. This arrangement
would not impact on the DDCI establishing directorate bonus
allocations on an annual basis based on his judgmental overall
directorate performance.
8. Lastly I am convinced that the successful implementation
of a bonus system will require a carefully thought through
structured approach. There is much potential for abuse and dis-
putes arising from the members of the Senior Executive Service if
firm and clear ground rules for administering these large amounts
of money are not defined. Of particular importance are the
guidelines for allocating bonuses to the various executive scale
levels. As mentioned above, some tailoring of this nature might
be intended as a partial conversation for the current distorted
pay scale situation, but in addition there is some merit in
allocating bonuses proportionate to the levels of responsibility.
As you may recall this tailoring was characteristic of the bonus
incentive systems of the three companies who met with the
Executive Committee in July. While some details can be left
for subsequent definition, this matter is of fundamental impor-
tance and will have a major impact on the decision of senior
officers to join the SIS or elect the retirement option which
is available to many of our senior supergrade officers. This
and other matters are particularly important for early resolution
given the difficulties apparently already being encountered by
other government agencies in implementation of the SES.
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SUBJECT: CIA Senior Executive Service
9. This discussion of my concerns was not meant to be
exhaustive, but only representative. I offer it primarily as
evidence of a need to avoid rushing unnecessarily forward with
a senior intelligence service that is not fully thought out.
I am hopeful that we will have the time required to discuss
this matter more fully, and I look forward to such discussion. (U)
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cc: DDCI
DDO
DDA
D/NFAC
4
Leslie C. Dirks
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MEMORANDUM FOR:
FROM:
DCl/RM-79-0049
September 18, 1979
Director of Personnel
Deputy to the DCI for Resource Management
Deputy to the DCI for Collection Tasking
SUBJECT: Senior Executive Service
1. Ile have reviewed the corrections to the Senior Intelli-
gence Service proposals that are contained in your draft dated 14 Sep-
tember. Attached are our annotations to that draft. Essentially
we eliminated references to "the Agency" when provisions are to
apply to both CIA and ICS. In a few instances we caught oversights
that you have probably already noted. In addition to these changes,
we would like the final document, which Mr. Carlucci will be asked
to aporove, to include the paragraph under "Fundamental Proposals"
which now appears in the foreword to the effect that the policies
and procedures of the Senior Intelligence Service will be fully
applicable to all organizational elements of both the Central In-
telligence Agency and the Intelligence Community Staff, with each
managed and administered under separate but parallel systems.
2. We understand you will be discussing the final draft
with Mr, Carlucci this afternoon. If you have any questions abotSTATINTL
o reco iended changes, please feel free to contact either one of us.
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SUBJECT: Senior Executive Service
Distribution:
Original - Addressee
1 - D/DCl/RM Chrono
1 - D/DCl/CT Chrono
1 - RM Registry
1 - CT Registry
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D/DCURM41111111:pbj111111 (18 Sept. 1979)
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MEMORANDUM FOR: Director of Personnel
FROM:
DCl/RM-79-2920
10 September 1979
Deputy to the DCI for Resource Management
Deputy to the DCI for Collection Tasking
SUBJECT: Senior Executive Service
1. We have reviewed the revised "Basic Proposals CIA Senior
Executive Service" that we received on 6 September 1979, and have the
following comments. These comments address both the overall proposals
and the need for the Intelligence Community Staff (RMS and CTS) to be
covered under the provisions of a DCI approved Senior Executive Service.
2. As stated in the Foreward of the Proposals, the policies and
provisions of the DCI's SES would apply to both the CIA and the IC Staff
with each being managed and administered under separate but parallel
systems. To accomplish this simply and to avoid confusion in the future,
we believe the whole system should be titled the "DCI's Senior Intelligence
Service" (page 3). This title would demonstrate that the ICS-SIS as well
as the CIA-SIS, clearly flowed from the DCI's authority to establish an
SES.
3. In order to define the scope of coverage, and the separate but
parallel systems under which CIA and the IC Staff will operate, a new
subparagraph D should be added in "Fundamental Proposals; Section F". This
subparagraph would include the following statement, made in the Foreward in
the approval sections as well.
D. Scope and Administration of a Senior Intelligence Service
Proposal: The policies and procedures of the DCI's Senior
Intelligence Service will be fully applicable to all
organizational elements of both the Central Intelligence
Agency and the Intelligence Community Staff with each
managed and administered under separate but parallel
systems.
4. As a consequence of changing the name of the system to the
DCI's SIS, the language of the proposals would have to be reviewed for
syntax. Most of the proposals could refer simply to SIS with
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the understanding that the content referred to both the CIA and ICS except
as specifically noted.
5. The Management Structure detailed in Sub-System does not include
ICS participation in the PRC, and it has been amended to delete ICS
participation in the 0/DDCI Senior Resources Board. This is in consonance
with the ICS maintaining a separate system. In order to establish
comparable review groups the following statement should be added as
paragraph E.
E. The ICS will establish a Performance Review Board (PRB) to
make recommendations to the DDCI on SIS-1 to SIS-4 personnel.
The Board will be chaired by the DCI's Director of Personnel
and will consist of appropriate representatives from RMS and
CTS.
With the inclusion of the above statement in the Management Structure as
a separate paragraph, the reference to ICS participation in a separate
Senior Resources Board may be deleted, since the PRB will serve this
function for the ICS.
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18 SEP 1979
MEMORANDUM FOR: Director of Personnel
FROM : James H. Taylor
Comptroller
SUBJECT Comments on the Senior Intelligence Service
(REVISED Draft, 14 September 1979)
REFERENCE Your Routing Sheet Note of 14 September 1979
1. As you requested, I have reviewed the Basic Proposal for
the Senior Intelligence Service as Revised 14 September 1979.
2. I have only one conceptual concern with the most recent
draft. In my reading of the procedure for handling performance
awards (and Meritorious and Distinguished Executive awards) en-
dorsed by the Senior Resources Boards, I don't believe the sense
of the decision made by the Executive Committee (at its meeting
on 11 September 1979) has been captured. The Committee did
not intend that the Director of Personnel or the SIS Support
Staff do any winnowing or integrating of the award recommenda-
tions made by the Boards. It is my recollection that the Com-
mittee intended that this be a command rather than a staff
function. Specifically, the DDCI decided to use a quota system.
The DCl/DDCI, in consultation with the Deputy Directors (or
possibly the SISAS as such), will allocate the number of awards
to each directorate based on the performance of that directorate
against stated goals. Each Deputy Director, in turn, will
distribute his allocation among his offices/divisions. Thus,
no Agencywide prioritized list is needed. I believe it was the
consensus that the prioritized lists of recommendations prepared
by the Senior Resources Boards and endorsed by the Deputy Direc-
tors would be the basis on which recommendations ultimately
would be submitted to the DCl/DDCI for final approval. It was
my understanding that the Director of Personnel's role in this
procedure is to review the line decisions for possible ineq-
uities, such as for example biases against people on rotational
assignments, and for adherence to prescribed procedures. I
believe these concepts need to be incorporated in the SIS
revised draft and that the responsibility of the Director of
Personnel (SIS Support Staff) for providing staff support as
now outlined on pages 44-46 modified accordingly.
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3. One other area is of minor concern. In my view, the last
two action responsibilities outlined for the Senior Resources
Boards (pages 15-16) are more properly the responsibility of the
existing Career Service Panel/Board structure. While the membership
of the Senior Resources Boards and the Career Service Panels/Boards
may be the same, I believe the distinction here is important.
I suggest the two subparagraphs be deleted from the SIS proposal --
or at least the point should be made clearly that the existing
Career Service structure will handle both comparative value
rankings and competitive merit promotion exercises.
4. We also have noted a number of minor technical/editorial
changes which we believe should be made before the proposal is
submitted to the DCl/DDCI for final approval. We have given our
suggested changes directly to your staff.
STATI NTL
James H. Ta lor
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MEMORANDUM FOR: Director of Personnel
FROM : James H. Taylor
Comptroller
SUBJECT
to SEP 1979
Comments on the Revised Senior Intelligence Service (U)
REFERENCE Memo to Multi frm D/Pers dtd 6 Sept 1979, Subj:
Changes to the Senior Intelligence Service Proposal (U)
The following are my concerns about the draft proposal
as revised:
1. The paper does not adequately separate the promotion process
from the performance review process nor does it yet totally reflect
the decision I believe we made in the first EXCOM to carry out the
performance review function within an organizational and not a
career service context. This point could be covered by making
very explicit somewhere early in the paper that performance review
will be an organizational responsibility, that promotion review
and executive development will be a career service responsibility,
the reasons for this distinction, and the safeguards built in.
The distinction should be carefully and. explicitly maintained
throughout the paper. There are still, for example, references
to career service responsibilities for performance review rather
than directorate responsibilities (see paragraph 2 on page 13
for an example). (U)
2. I think it is important to make it clear that the DDCI
may (indeed probably should) allocate awards on other than a _pro
rata basis among the directorates. On page 12 it is noted that
the Director of Personnel in collaboration with the Comptroller
will determine the "monetary resources available for performance
awards and 'rank' stipends and ... guidelines for their distribution
to the major components of the Agency." I agree there should
be guidelines, but we should also propose alternative distributions
to the DDCI for decision and make a recommendation as to the kind
of process which should underlie such alternative recommendations,
probably based on his goals program. In all three of the presentations
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by corporate people on this subject, it was clear that in the cor-
porate world two decisions are made before the performance award
system is carried to its natural conclusion. First, a decision
Is made as to whether the corporation did well enough to justify
at_a. awards in a given year, and if yes, how many (much). Second,
a decision is made as to how the money agreed to will be divided
within the organization before individual awards are divided.
I think the law suggests how the first decision will be made by
us. But the DDCI clearly has an option with respect to the second.
He might, for example, decide 13 months from now that NFAC or
DDA had in fact made a disproportionately high (or low) contribution
to our general performance and reward them accordingly--perhaps
adding 5 percent or 10 percent of the "kitty" (beyond its 212
rata share) to one directorate or independent office at the expense
of others. This approach would require the DDCI to enter into
a dialogue with the deputies at the beginning of the year as to
what he expects from their organizations. This could put some
life into our goals system and profoundly and favorably affect
the conduct of the whole review process. It would also add an
emphasis on "team performance" to our system. In any event, the
paper should be more explicit as to what we are considering here.
(U)
3. A key problem with our implementation of the SIS system
will be the very natural pressure on us to spread the "wealth"
around. To be more specific, given the pay compression we are
likely to be faced with over the next few years, it will be sur-
prising to me if we do not discover after two to three years
that the system operates to give Joe a performance award this
year and Frank one next year--despite merit. There is an evident
need for policy guidance here and for very close central monitoring.
I believe the DDCI should make explicit now his concern about this
problem and that we should consider what that policy guidance--at
least broadly--is going to look like and how it will be monitored.
I think our political position is weak without such an effort.
More importantly, pressures for equity, particularly given the salary
compression which seems to be a fact of life, are likely to overtake
our pursuit of excellence. Instead of rewarding performance,
we may end up compensating for Pay Act compression. I would think
this also could be a function of the support staff you have provided
for. (U)
4. The section on management structure, pages 11 through 17,
remains confusing to me. If I read the section correctly (and
I am not at all sure that I do), we have a policy review com-
mittee consisting of the four Associate Deputy Directors, the
2
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Chairman of the E Career Service, and the Director of Personnel
reviewing and making recommendations to the DDCI for approval.
But some of the recommendations are those which their bosses,
the Deputy Directors and the DDCI, have previously approved--
either acting as the Office of the DDCI Senior Resources Board
or acting within their directorate responsibilities. Perhaps there
are reasons why this makes sense, but if there are, they remain
elusive. There is , however, a more fundamental point: why is
the PRC required? What will it do? The DDCI will make a decision
to allocate the funds available on either a pro rata basis or
merit basis. Each organization will have submitted a prioritized
list of recommendations. The functions which remain to be done:
examining the recommended lists for signs of systematic bias for
or against certain groups of people or for indications that time
in grade or loyalty are being rewarded at the expense of performance,
for example, would be better accomplished by the small staff unit
described elsewhere. It might well be desirable to have a meeting
of the interested parties to discuss issues or the staff's recom-
mendations, but I see little value in assigning any formal
responsibility to a Committee which cannot, in my view, serve
a useful purpose. (U)
5. I think there should be a section in the paper outlining the
decision the DDCI has already made on the issue of confidentiality,
making explicit our present policy in this regard. (U)
6. The proposed system rests heavily upon the Annual Work
Plans proposed by supervisors. The employee's perception of whether
or not he is getting a fair shake, his desire to participate in
the system, and the ability of managers at all levels to review
reasonably uniform performance appraisal reports--all rest on
the quality of this effort. There is very little discussion in
the paper of the Annual Work Plan. I have seen your proposed
revised performance appraisal package and agree that it is an
adequate point of departure. I would not propose that we reopen
discussion of that. But I would suggest that we need to try to
build into the process some way of insuring that the Annual Work
Plan itself will be carefully developed by all supervisors responsible
for doing so. Possibly this could be done by providing that the
attention supervisors give to the development of Advanced Work
Plans for their employees will be explicitly cosidered as their
performance appraisals are prepared. (U)
7. Finally, despite my concerns above, I remain convinced
that we can in fact get this program under way by 1 October or shortly
thereafter. Speaking as an employee, there are a limited number
3
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of basic points which I must understand in order to decide whether
or not I want to participate in the program. These key points
include: what is the Annual Work Plan going to be like; how are
the rewards going to be recommended and approved (in broad terms);
and what are the rewards and penalties associated with my par-
ticipation? Most remaining administrative details as to the exact
nature of the review process can wait until the end of the calendar
year to be resolved. (U)
James H. Taylor
4
STATI NTL
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EEO 79-268
10 September 1979
MEMORANDUM FOR: Director of Personnel
FROM Omego J. C. Ware, Jr.
Director, Equal Employment Opportunity
SUBJECT Senior Intelligence Service Proposal
REFERENCE Your memorandum dated 6 September 1979;
Same Subject
I conclude from reviewing this revised version of
the draft SIS plan that it presents a reasonable basis
to begin implementation. My major reservation centers
on two considerations. The first, is the obligation to
integrate the requirement of Affirmative Action into the
complexities of our "SIS" system. The second is to assure,
before a finding of adverse action, that the varied direct
and indirect "selection" procedures of the SIS are "valid."
I propose that these ends may be addressed by two changes.
a. The Director EEO of the CIA and Agency
Ombudsman be added to the Performance Review
Committee (PRC).
b. The Directorate EEO Officers be made
members of the Directorate Level Senior Resources
Boards.
Omego C. Ware, Jr. ,
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STATI NTL
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ApprovedP
F o rQfQfjI
Y
MEMORANDUM FOR: Director of Personnel
FROM: John H. Waller
Inspector General
SUBJECT: Comments re Senior Intelligence Service Proposal
REFERENCE:
D/Pers memorandum dated 6 September 1979
entitled "Changes to the Senior Intelligence
Service Proposal"
1. The referenced memorandum requested comments by COB
7 September on the "Basic Proposals--CIA Senior Executive Service,"
dated 28 August 1979. Paragraph 4 contains my recommendation for
change to the text of Sub-Section 8, Adverse and Other Adminis-
trative Actions, of the Basic Proposals.
2. Subparagraph (c) on page 66 of the Basic Proposals deals
with grievances' which may arise as a result of actions growing
out of the SIS Performance Appraisal System. I have attached a
version of page 66 which I recommend as a replacement for the
current version. The material which I have deleted on the attach-
ment appears to be an attem t to summarize the procedures outlined
STATINTL in HR..' However, HR provides for advice and guidance by STATINTL
the Director of Personnel, direct appeal to the DCI and the
Inspector General, and a review by a DCI Grievance Board, none of
which are mentioned in the current version of subparagraph (c).
Rather than add these provisions and the necessary explanation
they would entail to subparagraph (c), I believe subparagraph (c)
should end, as I have indicated, with the general statement, "The
basic rules set forth in Agency Headquarters Regulation III on STATINTL
Grievance Systems generally apply."
3. I wish also to point out that HR Illidescribes certain STATINTL
exclusions of matters which are not grievable. Among these is
"any judgment of a Personnel Evaluation Board or Panel in ranking
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t-riTERNAL USE G "
or selecting employees for promotion on the basis of merit, un-
less the grievant can demonstrate with clear and convincing evi-
dence that the record under consideration was significantly
deficient . . ." The effect of this exclusion on potential
grievances resulting from the procedures of the SIS Performance
Appraisal System is not, as yet, clear to me. I tend to a rather
strict interpretation of its applicability to the SIS System:
i.e., to the position that most cases of dissatisfaction with
ranking decisions under the SIS Performance Appraisal System
will not be grievable. However, this is a matter that should be
discussed by the Executive Committee.
4. In view of the above, I recommend that the change indi-
cated on the attached copy of page 66 be adopted for subpara-
graph (c) on grievances.
STATI NTL
Attachment:
As stated
2
John H. Waller
ADMINISTRATIVEATEM, USE Or."
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(
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(c) Grievances can take a number of forms such as dissatisfaction
with performance ratings, with not receiving performance awards,
with not receiving high enough performance awards or with
remedial, probationary or removal decisions. The basic rules
set forth in Agency Headquarters Regulation lOMO on GrievancSTATINTL
Systems generally apply, namely:
0 SIS members are expected to seek resolutions to grievances
informally within their Career Services (or Directorates) -
through-consultations with supervisors or other officials.
When their gri
to actions taken within the
jurisdiaien of other Career Service (or Directorate)
components,-thoy-may-likewise consult those component officials.
2-
If not satisfied-with the outcome of discussions at the
Career-Service (or-Directorate) level, SIS members may appeal
?to the DDC1--whoso-decisions will- be final.
COMMENTARY
More detailed procedures will need to be developed if the above
general ones are approved in order that actions described can be taken
fairly, quickly and in the best interest of both the SIS member and the
Agency.
The above proposals are:
( ) APPROVED ( ) DISAPPROVED
Deputy Director of Central Intelligence Date
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.,. DE;.. ILL C ,.. ,.... ?, : t. ^?,
Se e?-? !I ..,... 1 ..
:WI
? 07, 1
E IAL
SECRET
OFFICIAL ROUTING SLIP
TO
NAME AND ADDRESS
DATE
INITIALS
1
Mr. Harry Fitzwater
Director ofPers-aftne4
ACTION
DIRECT REPLY
PREPARE REPLY
APPROVAL
DISPATCH
RECOMMENDATION
COMMENT
FILE
RETURN
CONCURRENCE
INFORMATION
SIGNATURE
Remarks:
FOLD HERE TO RETURN TO SENDER
FROM: NAME, ADDRESS AND PHONE NO.
DATE
Inspector General 10
Sept 79
ppr veOrfigrAggiff#W20 8W L9-11
. (
FORM NO. 937 Use previous editions
1-67
(40)
36-6
036-6
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g--a 7(4) .72--
10 September 1979
MEMORANDUM FOR: Mr. Harry Fitzwater
Director of Personnel
FROM: John H. Waller
Inspector General
SUBJECT: Basic Proposals CIA Senior Executive
Service Changes Dated 6 September 1979
1. I am concerned that inspectors, whose effectiveness
rests on their independence of judgement and immunity from
implied pressure, will be subject to the Performance Review
Committee for any merit awards or rank stipends. This poses
the fear that inspectors may perceive retaliation -- active
or subliminal -- by certain PRC members whose components had
been criticized by the results of the inspector's survey.
2. I recognize it is difficult to design an alternative
system without making the MCI himself responsible for deter-
mining merit awards and stipends for inspectors in competition
with all others. Perhaps PRC members whose components had been
inspected by the particular inspector under review could dis-
qualify themselves from passing judgement or voting in such a
case. But over a period of time, it is possible that an in-
dividual inspector's candidacy for award could be reviewed by
more than one PRC member, making the disqualification technique
unrealistic. At any rate, I urge you to consider this problem
which may apply as well to OGC officers. STATINTL
H. Waller -
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MEMORANDUM FOR: Director of Personnel
FROM:
Deputy General Counsel
OGC 79-08218
10 September 1979
SUBJECT: Comments on Changes to the Senior
Intelligence Service Proposal
STATI NTL
1. In addition to comments on the changes to the
basic proposals arising out of the Executive Committee
meeting on Thursday, 30 August, there is one part of the
management structure in the basic proposals for the Senior
Intelligence Service which we should have commented on at the
first Executive Committee meeting, but did not because we had
not had time before the meeting to carefully review the pro-
posals and focus on the potential effect of this particular
one.
2. The system for evaluating members of the SIS and
recommending them for performance awards creates a potential
threat to the independence of those officials of the Agency and
the supergrade members of their offices who are responsible for
policing the activities of the various Agency components.
While the DCl/DDCI will administer directly the program for
SIS 5 and 6 level officers, those at lower levels of the SIS
will have their performance evaluated by a board or committee
composed of heads and associate heads of components whose
activities they police. It is inevitable that in carrying out
their responsibilities they will, from time to time, cause
resentment or worse in directorates and offices whose activities
they must inspect, adjudicate and report on. It is not suggested
that board and committee members would reflect in their rankings
and award recommendations resentment of or disagreement with the
way these independent office members carried out their duties,
nor that members of these offices would pull their punches in
order to avoid disfavor, but nevertheless the potential for
and appearance of this impingement upon independence exists.
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Such a system is inconsistent with the responsibility and
authority that has been granted to certain officials, partic-
ularly the Inspector General and General Counsel, and to the
many recommendations, including those of the Church Committee
that these officials have unquestioned independence.
3. While the need for independence of reviewing officials
is most evident in the cases of the Inspector General and
the General Counsel, there may be others in the Agency,
particularly, but not only, in the DCI's Directorate, whose
functions could be impaired or be seen to be impaired by a
system which would grant awards based upon the evaluation of
those whom they are required to police. Accordingly, we
recommend that the performance management program for all
members of the SIS in the Office of the Inspector General
and General Counsel and such other members as the DCI or
DDCI shall designate be administered directly by the DCl/DDCI.
4. Additional comments on changes and specific sections:
Page 3, paragraph 1(c) - The correct title 50
section citation is 403a-403j.
Page 5, Commentary, first paragraph - This para-
graph is unclear. It seems that the first
sentence should end after the words "managerial
personnel". The remainder of the paragraph
should then be rephrased to indicate that
positions of senior non-managerial specialist/
analyst personnel and positions of those
opting out of SES will remain under the current
supergrade system.
Page 8, Section II, 1 f - This subparagraph
should be deleted. It is not a purpose of
the SIS and it is implicit in subparagraph
a.
Page 9, subparagraph e - Add at the end
of the paragraph ..."except as they may
be valid security considerations". There
may be circumstances, particularly in hiring
from outside the Agency, where one of these
factors would be a valid security consideration,
but where a disqualification on the basis of
it could be challenged based on our own
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regulation if we did not have a security
disclaimer. For example, a member of the
Communist party might argue that our own
rules did not permit considering his
political affiliation. An alcoholic could
argue that he had a mere physical impairment.
Page 12, A.1 - Add the words "in collaboration
with the General Counsel".
D.2. Page 14 - "Directorate Level Senior
Resources Boards" seems to refer literally to
the four Directorates. Since there are func-
tions performed by these boards that do not
appear to be performed by anyone else for
members of the DCI area it would be appropriate
to create career service senior resources
boards, including one for the DCI career
Service, or to otherwise see that provision
is made for the DCI Career Service.
References to "executives" and "senior officers" -
It was intended that all references to "executives"
be changed to "senior officers" but that has not
been done consistently throughout the draft.
Page 18, paragraph A. - No question was raised
at the last Executive Committee meeting about
the proposal that supergrade employees be
permitted to opt out of the SIS. Upon reflection
I would like to raise this as an issue. Is
there any reason why we need to follow the
SES example in this Agency? The original pro-
posal for mandatory inclusion of all supergrades
in SES was changed for political reasons, but
it may be worth considering whether such reasons
are applicable here. It would be more consistent
with a desire for the highest quality senior
personnel to require all supergrade employees to
compete against each other. There would appear
to be no advantage to the Agency in maintaining
a separate corps of non-SIS supergrades and
it is questionalbe whether there is any advantage
to those supergrades.
3
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Page 46, subparagraph (c) - Our concern that
there may be special legal considerations
applying to unlimited accrual of annual
leave also applies to granting sabbaticals.
Add the words "and the sabbitical benefit",
after the word benefit in the parenthetical
phrase at the end of the subparagraph on
annual leave.
Page 65, subparagraph (a) - Disciplinary
proceedings would not seem to be a proper
matter for consideration by the Performance
Review Committee except in cases of adverse
actions based upon performance. I suggest
adding the words "based upon performance"
after the words "disciplinary actions" in
subparagraph (a) and adding the words
"concerning career development" after the
words "grievances" in the language immediately
preceding subparagraph (a).
STATI NTL
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SLY 1.1i
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6325-01
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 540
Merit Pay System
AGENCY: Office of Personnel Management.
ACTION: Final rule.
eralf
SUMMARY: These regulations implement the provisions of Title V of the
Civil Service Reform Act of 1978, which establish a Merit Pay System
for supervisors and management officials in positions classified in GS-13,
14, and 15. The Merit Pay System is intended to recognize and reward
quality performance by merit pay increases in varying amounts. The
Merit Pay System will be fully implemented in October 1981, although
agencies may implement the System in whole or in part in October 1980.
DATE: These regulations are effective on [date of publication], although,
in accordance with section 540.110 of the regulations, the Merit Pay
System will not become operational before October 1980.
FOR FURTHER INFORMATION CONTACT: Barbara Fiss, [phone].
SUPPLEMENTARY INFORMATION:
The Office of Personnel Management is publishing regulations to supplement
and implement the Merit Pay System established by Title V of the Civil
Servi&PKPFROmFctEtRetlta/5RP491/981,:.C1A-ROP89-01114R000300090036-6
-4D4. Proposed regulations were
Omk Awk
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published in the Federal Register on April 20, 1979 (44 FR 23530-23533).
Substantial editorial revisions have been made in the regulations, in
order to simplify and clarify them, and a number of substantive changes
have also been made.
In addition to the regulations in Part 540, a number of other regulations
concerning the Merit Pay System will be added to 5 CFR Chapter I in the
future, dealing with the relationship of the Merit Pay System to various
other provisions of law and regulation.
Analysis of Comments The proposed regulations provided a 60-day period
for public comment. The Office of Personnel Management received comments
from 23 agencies, two labor organizations, three employee associations,
and six individuals. Most of the comments offered specific recommendations
for clarifying or modifying specific provisions of the proposed regulations.
As a result, the Office has modified the final regulations, as discussed
below. The Office will also supplement the regulations with guidance
issued through the Federal Personnel Manual System which will address
certain other concerns expressed during the public comment period.
2
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(1) General.
Editorial revisions have been made to section 540.101.
(2) Ranges of basic pay and employee coverage..
Six comments expressed concern over the apparent prohibition on the use
of "asterisked rates" and special rate ranges for merit pay employees.
These limitations were illustrated with the reference to actual "GM"
rates in the proposed regulations. The Office of Personnel Management
has determined that the use of "asterisked rates" for merit pay employees
in the same manner as they are used for General Schedule employees is
legally permissible and consistent with congressional intent. Thus,
merit pay employees could receive a "paper" adjustment if their base pay
exceeded the Executive Schedule Level V ceiling (currently $47,500) by
virtue of a salary increase due to the granting of the automatic portion
of comparability or a merit pay determination. In regard to the special
rate ranges, two commenters recommended specifying that special rate
ranges are covered under the Merit Pay System. The final regulations in
section 540.102 clarify that the Merit Pay System does include special
rate ranges for positions covered by special rate authorizations. In
relation to this issue, one commenter also recommended that the range of
annual rates of basic pay for merit pay employees not be printed in the
regulations, but instead, the regulations should clarify that the pay
ranges are the same as the corresponding General Schedule grades. This
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change was incorporated in section 540.102. Finally, five commenters
questioned the legality of using "GM" instead of "GS" as the pay plan
code for the Merit Pay System. After restudy of the issue, the Office
confirms that the Merit Pay System is a separate pay system and, accordingly,
that the use of "GM" as the pay plan code for the Merit Pay System is
both legally permissible and necessary for identifying merit pay employees
and evaluating the effectiveness of the Merit Pay System and cash award
program. Forthcoming guidance in the Federal Personnel Manual will
provide additional information on the use of the "GM" pay plan code.
Three commenters requested clarification and expansion of the definitions
of supervisor and management official. Since these definitions are
contained in law, the Office of Personnel Management cannot alter or
expand upon their basic meaning in regulation. However, the Office will
continue to publish guidance from time to time to assist agencies in
identifying merit pay employees.
One commenter recommended that coverage under the Merit Pay System be
reviewed in the agency only in accordance with such procedures as the
agency may prescribe, provided that the review is conducted by an official
or officials other than the one who made the original coverage determination.
Another commenter recommended that an appeal of coverage determinations
to the Merit Systems Protection Board be provided. As the Office has
indicated in previous guidance (Federal Personnel Manual (FPM) Bulletin
540-1, Attachment 3), the head of each agency has the authority for
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identifying employees who are supervisors or management officials for
purposes of coverage under the Merit Pay System. However, section 540.102
has been modified to provide clear authority and responsibility to the
head of an agency to identify merit pay employees in GS-13, 14, and 15.
In regard to the recommendation for specific regulatory language on
agency reviews of Merit Pay System employee coverage, Part 771 of
Title 5, Code of Federal Regulations (CFR), Agency Grievance System,
allows employees to grieve "any matter of concern or dissatisfaction to
an employee which is subject to the control of agency management or any
matter in which an employee alleges that coercion, reprisal, or retaliation
has been practiced against him or her." Since merit pay employee coverage
determinations are not among the items specifically excluded from grievance
coverage, employees may grieve coverage or non-coverage under the Merit
Pay System within their agency. Therefore, it would be redundant and
confusing to provide for similar agency review procedures in the final
merit pay regulations. The Office believes that the existing agency
administrative grievance system procedures afford employees sufficient
recourse in questioning their coverage under or exclusion from the Merit
Pay System.
Finally, two commenters suggested that the Office exclude temporary
employees, probationary employees and employees on details from the
Merit Pay System. Employees on detail to merit pay positions are not
included because they do not officially occupy a merit pay position.
Merit pay employees on detail to another position continue to be covered
by the Merit Pay System. 5 U.S.C. 5401 allows the President to exclude
an agency or any unit of an agency from the Merit Pay System, but does
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not allow exclusion of individual employees for any reason, including
appointment, career status, occupation, etc. Therefore, the suggestions
for employee exclusions could not be adopted.
(3) Determination and allocation of merit pay funds.
In the proposed regulations, a standard formula for uniform Government-
wide use by all agencies was established as the basis for determining
the amount of funds available for merit pay purposes. Five agencies
disagreed with the Government-wide approach while one agency supported
this approach. A detailed analysis by the Office revealed such variation
among agencies in the distribution of employees among step rates, and in
the use of quality step increases, that the uniform approach would
produce funds in amounts bearing little relationship to what would have
been paid out by agencies under the General Schedule step system. As a
result, the Office developed a "Merit Pay Fund Computation Table" which
agencies will use to determine merit pay funds based on their merit pay
employee distribution in each grade. This approach, which is incorporated
in section 540.103 of the final regulations, provides the highest degree
of equity possible for the establishment of individual agency merit pay
funds. The provision in the proposed regulations for a +5 percent
variance in each agency's merit pay fund has been retained in section 540.103,
in recognition of the difficulty of meeting an absolute monetary requirement,
and to permit agencies some flexibility to allocate more or less of the
calculated merit pay fund, depending upon the performance of either
organizations or individuals.
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Two commenters requested that the Office notify agencies as early as
possible of the estimate of the amount of merit pay funds. One of these
commenters specifically mentioned that there might be practical problems
with budgeting for employees who are normally paid from industrial
funds. With the use of the "Merit Pay Fund Computation Table" approach,
agencies will have sufficient time each year to estimate the portion of
the merit pay fund allocations that is attributable to what would have
been allocated to within-grade and quality step increases. However, the
exact amount of the total comparability adjustment may not be known
until near the end of a fiscal year, as under the present General Schedule
comparability pay system. Therefore, section 540.103(b) retains the
requirement that the Office will provide the needed information before
the beginning of each fiscal year.
One commenter noted that there were no provisions in the proposed regulations
for operating under continuing resolutions at the beginning of the
fiscal year, supplemental appropriations occurring during the year, and
rescissions of budget authority in regard to the merit pay funds. The
final regulations do not add any such provisions because merit pay funds
are not a line item in agency budgets, and funding of the system, for
budgeting, appropriation, and expenditure purposes, is the same as the
salary funding procedures for General Schedule employees.
Several comments dealt with the computation of the merit pay funds,
especially with the effect on the funds of employees positioned at the
minimum and maximum of the range of basic pay. The mechanics of determining
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the merit pay ApprisAf dvuRileatat200/4)1768/fialg-RDIS8411-1841GPFKRIV63160-090036-6
Table" and will be thoroughly explained in Federal Personnel Manual
guidance. One commenter recommended that agencies distribute merit pay
funds among merit pay employees in the three covered grades at their own
discretion, rather than account for funds grade-by-grade. The proposed
regulations did not provide for funding by grades and therefore no
change is needed. Agencies have discretion to determine the procedures
for internal distribution of funds, consistent with the provisions of
the merit pay regulations. Distribution of funds is a matter for agencies
to take into account when developing their merit pay plans.
Five commenters raised questions as to whether or not merit pay funds are
limited to each appropriation account. The Office of Personnel Management
is consulting with the General Accounting Office to determine whether
appropriation lines may be crossed within agencies for purposes of al-
locating merit pay funds. The final regulations provide for a single
merit pay fund in each agency but the regulations may be revised in the
future in this regard.
Seven commenters recommended that the final regulations be rewritten to
make evaluations of organizational accomplishment for merit pay purposes
discretionary, as provided in law. It was not intended to require the
consideration of organizational accomplishment, and the final regulations,
In sections 540.103 and 540.104, provide that organizational accomplish-
ments may be taken into account if the agency determines it is appropriate
to do so. Four commenters recommended that the Office of Personnel Man-
agement require agencies to maintain objective documentation to support any
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variations in the level of funding provided different organizations.
The final regulations incorporate this recommendation in sections
540.103 and 540.104.
(4) Merit pay determinations.
One commenter noted that the 90-day provision for making merit pay
determinations and granting any resulting increase could be a very heavy
burden on an agency payroll system and instead recommended a maximum of
two pay periods for these retroactive provisions. Another commenter
recommended that all retroactive funds be paid to employees before the
end of the calendar year, that is, by the last agency pay period in
December. The Office of Personnel Management notes that the 90-day
provision of the proposed regulations was written to provide agencies
with the flexibility to make a merit pay determination within a reason-
able period before or after the beginning of the fiscal year. In recognition
of the problem described, however, the Office has modified the 90-day
provision for making merit pay determinations in section 540.104 to no
more that 90 days before or 60 days after October 1, and also requires
in section 540.105 that all retroactive funds be paid no later than
December 31 of the calendar year during which the merit pay increase
takes effect. However, the Office cautions that agencies should take
into consideration the administrative impact as well as the motivational
impact on employees in delaying any merit pay increase.
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Avik
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The final regulations provide that a merit pay determination is to be
based on a current performance appraisal, which shall include an appraisal
of the employee's performance in meeting affirmative action goals and
achieving equal opportunity requirements, to the extent the employee's
position involves such responsibilities. One commenter objected to this
provision in the proposed regulations, adding it is either superfluous
or it will provide a loophole to avoid responsibility in carrying out
the full requirements of a supervisory position. However, the original
language has been retained in section 540.104, because there are many
"management officials" who will be covered by the Merit Pay System, yet
have no supervisory responsibilities. It would be unfair to require the
consideration of a factor which is not a part of the employee's position.
Three commenters supported the objective documentation of merit pay
determinations, one commenter requested clarification of what the Office
considered to be objective documentation, and one commenter disagreed
with the need for this requirement at all. In section 540.104 of the
final regulations, the Office has modified the documentation requirement
to include individual merit pay determinations, and organizational
accomplishment, where applicable. In the case of individual merit pay
determinations, a written performance appraisal, which has been provided
to the employee in accordance with section 430.203(g) of the Office of
Personnel Management's regulations, and which has had the concurrence of a
higher level official as a part of the merit pay determination, is
considered appropriate documentation; in the case of organizational
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accomplishments, an additional description of the differences of an
organization's performance in relation to the performance of other
organizations within the agency is considered appropriate documentation.
When the proposed merit pay regulations were written, the Office of
Personnel Management's interim performance appraisal regulations and
guidance prohibited forced distribution of employee performance ratings.
At that time, the Office believed it was clear, by extension, that there
was also a prohibition of forced distribution of merit pay determinations
and resulting pay adjustments. Since there seemed to be some confusion
on this matter during the public comment period, the final regulations
in section 540.104 now specifically provide that no merit pay determination
may be modified in order to force a specific distribution of performance
levels among Merit Pay System employees. In addition, section 540.105
provides that a forced distribution of the dollar or percentage amounts
of individual merit pay increases may not be used as a basis for distributing
merit pay funds. Intrinsic to the Merit Pay System is the principle
that each and every employee is limited in his or her merit pay increase
and advancement in the salary range only by his or her performance.
Each employee must have an equal chance to be rewarded for effort
expended, achievement of objectives, and contribution to the organi-
zation. To allow artificial and arbitrary non-performance factors to
control the amount of the merit pay increases would, in the Office's
opinion, do irreparable harm to the Merit Pay System.
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Eight comments were received in regard to the proposed requirement for
agency review of merit pay determinations. Five commenters supported
the requirement, two opposed it, and one recommended that the requirement
be modified to include concurrence by an official at a higher level in
the organization than the one who makes the initial merit pay determination.
The last recommendation was incorporated in the final regulations.
After an analysis of the modified provisions, the Office believes that
the regulatory requirement for concurrence of merit pay determinations
in section 540.104 does not conflict with or go beyond the purview of
5 U.S.C. 5402. The Office notes that each agency retains full authority
to establish its own procedures for review; the only requirement is that
some concurrence at a higher level be made before the merit pay determination
is final. This regulation is based on the general authority in 5 U.S.C.
5405 for the Office of Personnel Management to provide regulations to
carry out the purposes of the Merit Pay System. Virtually all existing
merit pay plans outside the Federal Government require a before-the-fact
merit pay review. That is, some official, other than, and at a higher
level than, the one who made the initial merit pay determination, must
review and approve the determination before it may become effective.
Since Federal supervisors, managers, and management officials will be
called upon to make compensation decisions as a new role, the requirement
for concurrence is minimal, yet absolutely necessary for the credibility
and integrity of the new pay system. Therefore, section 540.104 of the
final regulations requires a higher level concurrence in merit pay
determinations (except where there is no higher level in the agency).
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(5) Merit pay increases
No section of the proposed regulations received more attention than
initial merit pay determinations for employees who enter into an estab-
lished agency merit pay system. It is significant that among the extensive
comments received on this matter, none agreed with or supported the
Office of Personnel Management's proposal. The most common criticism
was lack of a sufficient period to appraise performance before making a
merit pay determination. In response to this criticism and in recognition
of the probably negligible effect upon most merit pay employees, the
Office has eliminated these provisions from the final regulations
altogether. It is important to note that in many, if not most instances,
employees entering an established agency merit pay system would do so
upon promotion. However, in some instances, employees would enter an
existing system on the basis of a lateral reassignment. Under the
provisions of the final regulations in section 540.105, these employees
will be appraised under the normal operation of the Merit Pay System at
the same time as the General Schedule pay comparability adjustment. The
final regulations do provide in section 540.105, however, that agencies
may consider the time since an employee's last increase in pay and the
amount of that increase when determining the size of a merit pay increase.
The proposed provisions for merit pay increases have been rewritten for
clarity in section 540.105. The final regulations specify that merit
pay determinations may take into consideration (1) the employee's grade
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level; (2) the employee's relative position in the range of basic pay;
and (3) the time since an employee's last increase in basic pay and the
amount of that increase. Agencies may use these optional performance-
related considerations in their merit pay plans to supplement the use of
a current performance appraisal in arriving at merit pay determinations
and the amounts (if any) of merit pay increases.
Three commenters agreed with the requirement that the annual merit pay
adjustment be effective on the same date as the General Schedule pay
comparability adjustment, while two commenters disagreed. The Office
has retained the General Schedule pay comparability adjustment date for
merit pay determinations in section 540.105, and notes that this method
is the only feasible way to comply with the statutory requirement to
spend neither more nor less than that which would have been available
under the step system.
One commenter requested clarification as to whether or not a merit pay
determination includes a determination not to grant an increase. The
final regulations in section 540.105 make clear that the decision not to
grant an increase is also a merit pay determination.
(6) Interrupted service.
One commenter recommended coverage of employees called to active duty in
all of the uniformed services as an extension of the benefit for service
with the armed forces under the interrupted service provisions in
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5 U.S.C. 5402(d). The Office of Personnel Management views this extension
of benefit as legally permissible and that such coverage is equitable
and consistent with the intent of the merit pay legislation. Therefore,
section 540.106 of the final regulations makes the change.
One commenter recommended the inclusion of employees on Intergovernmental
Personnel Act (IPA) mobility assignments covered by subchapter VI of
chapter 33 of title 5, United States Code, under the interrupted service
benefits of the Merit Pay System. This provision would be consistent
with the provisions of 5 U.S.C. 3373. Therefore, Part 334 of-fitle 5,
Code of Federal Regulations, will be revised to include such a provision
in the regulations dealing with mobility assignments.
One commenter disagreed with the proposed regulations for granting
employees with interrupted service the average merit pay adjustment that
occurred in their absence. Another asked what guidance will be used for
determining the average increase for employees returning from interrupted
service. In response to these comments, the final regulations in
section 540.106 provide that employees may receive the benefit of average
adjustments for employees comparably situated under the Merit Pay System
in the agency during the period when the employee's service was interrupted.
Thus, agencies are not constrained to a strict average of funds but
could take into consideration the grade level of the employee, the
employee's relative position in the rate range of basic pay and the
period of time since the employee's last equivalent increase in basic
pay.
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(7) Cash award program.
The final regulations in section 540.107 on the cash award program have
been revised to clarify the relationship between the merit pay cash
award program established under 5 U.S.C. 5403 and the incentive award
program established under chapter 45 of title 5, United States Code.
Agencies are not expected to administer two separate yet essentially
duplicate programs. Instead, agencies must submit to the Office of
Personnel Management for approval, as a part of their merit pay plans
that portion of the cash award program for merit pay employees that is
performance-related. All other non-performance-related aspects of the
cash award program must be administered in accordance with the provisions
of Part 451 of the Code of Federal Regulations, although the statutory
authority of any such cash award provision remains based on 5 U.S.C. 5403.
5 CFR Part 451 will be revised to incorporate these changes.
One commenter recommended that the Office add detailed guidance on the
cash award program to the final regulations. The Office will publish
Federal Personnel Manual guidance from time to time on the cash award
program.
The proposed regulations required agencies to provide documentation of
the reasons for cash awards to recipients of cash awards. This require-
ment has been removed from the final regulations in recognition that in
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many instances it would be impractical and unnecessary to provide employees
with the actual detailed documentation of a cash award. Instead, procedures
for documentation are a matter of agency discretion. The Office expects,
however, that a letter of commendation or some other written communication
will accompany each cash award.
(8) Agency plans for the Merit Pay System.
In the proposed regulations, each agency was required to establish and
furnish the Office of Personnel Management with a copy of its merit pay
plan. Three commenters recommended that the Office provide criteria or
additional information for merit pay plans. The Office has given further
consideration to its responsibilities and relationship to the agencies
under the Merit Pay System and the nature and scope of agency merit pay
plans. The Office concluded that the requirement for agencies to submit
merit pay plans for approval is needed. The requirement for review of
agency performance appraisal systems by the Office of Personnel Management
exists in law, and the Office believes that the controversial nature of
merit pay and its lack of precedent in the Federal personnel system make
it imperative that reasonable quality control be exercised over the
proposed programs, while at the same time agencies be given as much
flexibility as possible in plan design. Therefore, the Office specifies
the minimal criteria for merit pay plans in the final regulations and
also requires, in section 540.108, that plans be submitted at least 180
days before they are scheduled to become effective. The Office notes
that under the provisions of section-540.108, April 1, 1981, will be the
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(9) Reports.
There are no substantial changes to the provisions on reports in
section 540.109 of the final regulations.
(10) Implementation.
The proposed regulations provided for early implementation of the Merit
Pay System for a group or category of employees in October 1979 or 1980.
However, due to (1) the publication of the final merit pay regulations
so close to the October 1979 pay adjustment and (2) the fact that
agencies are not prepared to implement the pay provisions of the Merit
Pay System in October 1979 (based on information provided by the agencies
in a questionnaire distributed at the Interagency Advisory Group Committee
on Merit Pay), the provision for early implementation in October 1979
has been removed from section 540.110 of the final regulations.
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Text of Law
For the use of readers in understanding the regulations, the text of
the relevant laws is set forth below:
(1) The principal statutory provisions concerning the Merit Pay System
appear in chapter 54 of title 5, United States ?Code, the text of which
follows:
"CHAPTER SI?MERIT PAY AND CASH AWARDS
" 54 01 . Purpose.
"5402. Merit pay system.
"5403. Cash award program.
"5404. Report
"5405. Regulations.
"?5401. Purpose
"(a) It is the purpose of this chapter to provide for?
"(1) a merit pay system which shall?
" (A) within available funds, recognize and reward quality
performance by varying merit pay adjustments;
"(B) use performance appraisals as the basis for determin-
ing merit pay adjustments;
? "(C) within available funds, provide for training to
improve objectivity and fairness in the evaluation of perform-
ance; and
"(D) regulate the costs of merit pay by establishing appro-
priate control techniques; and
"0) a cash award program which shall provide cash awards
for superior accomplislunent and special service.
"(b) (1) Except as provided in paragraph (it) of this subsection,
this chapter shall apply to any supervisor or management official (_as
defined in paragraphs (10) and (11) of section 7103 of this title,
respectively) who is in a position which is in GS-13, 14, or 15 of the
General Schedule described in section 5104 of this title.
"(2) (A) Upon application under subparamph (C) of this para-
graph. the President may, in writing, exclude an agency or any unit
of an agency from the application of this chapter if the President
considers such exclusion to be required as a result of conditions arising
from?
"(i) the recent establishment of the agency or unit, or the im-
plementation of a new program,
"(ii) an emergency situation. or
"(iii) any Other situation or circumstance.'
"(B) Any exclusion under this paragraph shall not take effect
earlier than 30 calendar days after the 'President transmits to each
House of the Congress a report describing the agency or unit to be
excluded and the reasons therefor.
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"(C) An application for exclusion under this paragraph of an
agency or any unit of an agency shall be filed by the. head of the agency
with the Office of Personnel Management, and shall set forth reasons
why the agency or unit should be excluded from this chapter. The
Office shall review the application and reasons. undertake such other
review as it consider. appropriate to determine whether the agency
or unit should I w excluded from the coverage of this chapter, and upon
completion of its review. recommend to the President whether the
agency or unit should be so exclud.,:?.
"(D) Any agency or unit which is excluded pursuant to this para-
graph shall. insofar as practicable. make a sustained effort to eliminate
the conditions on which the exclusion is based.
"(E) The Office shall periodically review any exclusion from cover-
age and may at any time recommend to the President that an exclusion
under this paragraph be revoked. The President may at any time
revoke, in writing, any exclusion Under this paragraph.
"? 5402. Merit pay system
"(a) In accordance with the jetrpose set forth in section r401 (a) (1)
of this title. the Office if Personncl iaaenent establish a merit
pay system which shall provide for a range of basic pay for each
grade to which t e system applies. which range shall be limited by the-
minimum arid maximum rates of basic pay payable for each grade
under chapter of t tit ie.
"(b) (1) Vale regalations-pres,:Tilwd by the Office, the head of each
agency may provide for inereases within the range of basic pay for any
employee covet-id by the merit pay system.
??(2) Determinations to provide pay increases under this sub-
section?
(A) may take into aecount individual performance and
organizational accomplishment. and.
"(11) shall be based on factors such as?
NO any improvement in efficiency, productivity, and
quality of work or service, including any significant reduction
in paperwork :
"(ii) cost effieiencv :
"(iii) timeliness of performanee: and
"(iv) other indications of the effectiveness, productivity,
and quality of performance of the employees for whom the
employee is responsible
"(C) shall be subject to review only in accordance with and to
the extent provided by procedures established, by the head of the
agency; and
"(D) shall be made in accordance with regulations issued by
the Office which relate to the distribution of increases authorized
under this subsection.
"(-3) For any fiscal year. the head of any agency may exercise
authority under paragraph (1) of this subsection only to the extent of
the funds available for the purpose of this subsection.
"(4) The. funds available for the purpose of this subsection to the
head of any agency for any fiscal year shall be determined before the
beginning of the fiscal year by the Office on the basis of the. amount
estimated by the Office to be necessary to reflect?
"(A) within-grade. step increases and quality step increases
which would have been paid under subehapter III of chapter 53
of this title during the fiscal year to the employees of the agency
covered by the merit pay system if the employees were not so
covered; and
"(B) adjustments under section 5305 of this title which would
have been paid under such subchapter &urine- the fiscal Year to
such employees if the employes were not so covered, less an
amount reflecting the ad justn iont under subsection (c) (1) of this
section in rates of basic pay payable to the employees for the fiscal
year.
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"(c) (1) Effective at the beginning of the first applicable pay perio,l
commencing on or after the first day of the month in xvhich an adjust-
ment takes effect under seetion 5:;o5 of this title, the rate of basic pay
for any position under this chapter shall be adjusted by an amount
equal to the greater of?
"(A) one-half of the percentage of the adjustment in the
annual rate of pay which corresponds to the percentage generally
applicable to positions not covered by the merit pay system in the
same grade as the position ; or
? "(13) such greater amount of such percentage of such adjust-
ment in the annual rate of pay as may be determined by the Office.
"(2 ) Any employee whose position is brought under the merit pay
system shall, so long as the employee continues to occupy the position.
he entitled to receive basic pay at a rate of basic pay not less than the
rate the employee was receiving when the position was brought under
the merit pay system, plus any subsequent adjustment under para-
graph (1) of this subsection.
"(3) No employee to whom this chapter applies may be paid less
than the minimum rate of basic pay of the grade of the employee's
position.
"(d) Under regulations prescribed by the Office, the benefit of
advancement through the range of basic .pay for a grade shall be
preserved for any employee covered by the merit pay system whose
continuous service is interrupted in the public interest by service with
the armed forces, or by service in essential non-Government civilian
employment during a period of war or national emergency. ?
"(e) For the purpose of section 5941 of this title, rates of basic pay
of employees covered by the merit pay system shall be considered rates
of basic pay fixed by statute.
15403. Cash award program
"(a) The head of any agency may pay a cash award to. and incur
necessary expenses for the honorary recognition of, any employee
covered by the merit pay system who?
) by the employee's suggestion. invention. superior accom-
plishment, or other personal effort, contributes to the efficiency?
economy, or other improvement of Government operations or
achieves a significant reduction in paperwork; or
"(2) performs a special act or service in the public interest in
connection with or related to the employee's Federal employment. -
"(b) The President may pay a cash award to. and incur necessary
expenses for the honorary recognition of. any employee covered by
the merit pay system who?
"(1) by the employee's suggestion, invention. superior accom-
plishment, or other personal effort, contributes to the efficiency,
economy, or other improvement of Government operations or
achieves a significant reduction in paperwork; or
"(2) performs an exception.14e,-neritorious special act or serv-
ice in the public interest in tGLI4ect iun with or related to the
employee's Federal employment.
A Presidential cash award may be in addition to an agency cash award
under subsection (a) of this section.
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"(c) A cash award to any employee under this section is in addi-
tion to the basic pay of the employee under section 5402 of this title.
Acceptance of a cash award under this section constitutes an agree-
ment that the use by the Government of any idea. method, or device
for which the award is made does not form the basis of any claim of
any nature against the Government by the employee accepting the
award, or t employee's heirs or assigns.
"(d> A cash award to. and expenses for the honorary recognition of,
any employee covered by the merit pay system may be paid from the
fund or appropriation available to the activity primarily benefitiag.
or the various activities benefiting, from the suggestion, invention.
superior accomplishment, or other meritorious effort of the employee.
The head of the agency concerned shall determine the amount to he
contributed by each activity to any a rencv cash a ward under ttb5crtion
(a) of this section. The President shall determine the amount to be
contributed by each activity to a Presidential award under subsection
(b) of this soction.
"(e) (1) Except as providad in paragraph (2) of this subsection, a
cash award under this section may not exceed $10,C00.
"(2) If the head of an agency certifies to the Office nf Personnel
Management that the suggestion, invention, superior accomplishment,
or other meritorious effort of an employee for which a cash award is
proposed is highly exceptional and unusually outstanding, a cash
award in excess of :10,000 but not in excess of $.25.000 may be awarded
to the employee on the approval of the Office.
"(f) The President or the head of an agency may pay a cash award
under this section notwithstanding the death' or separation from the
service of an employee, if the suggestion, invention, superior accom-
plishment. or other meritorious effort of the employee for which the
award is proposed was made or performed- while the employee was
covered by the merit pay system.
"? 5404. Report
"The Office of Personnel Management shall include in each annual
report required by section 130S(a) of this title a report on the opera-
tion of the merit pay system and the. cash award program established
under this chapter. The report shall include?
"(1) an analysis of the cost and effectiveness of the merit pay
system and the cash award program; and
"(2) a statement of the agencies and units excluded from the
coverage of this chapter under section 5401(b) (2) of this title, the
reasons for which each exclusion was made, and whether the.
exclusion continues to be warranted.
"?5405. Regulations
"The Office of Personnel Management shall prescribe regulations to
carry out-the purpose of this chapter.".
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(2) Under 5 U.S.C. 5401(b)(1), the Merit Pay System applies to those
employees in positions classified in GS-13, 14, or 15 who are "super?
visors" or "management officials," as those terms are defined in
paragraphs (10) and (11) of 5 U.S.C. 7103. The text of paragraphs
(10) and (11) follows:
"(10) 'supervisor means an individual employed by an agency
having authority in the interest of the agency to hire, direct,
assign. promote, reward, transfer. furlough. layoff, recall, sus-
pend, discipline, or remove employees. to adjust their grievanees.
or to effectivelv. recommend such action, if the exercise of the
authority is not merely routine or clerical in nature but requires
the consistent exercise. of independent judgment. except that,
with respect to any unit which include, fin fighters or nurses_the
term 'supervisor' includes only those individuals who devote a
preponderance of their employnient time to exercising such
nut hority ;
"(11) 'management official' means an individual employed by
an agency in a position the duties -and responsibilities of which
require or authorize the individual to formulate. determine, or
influence the. policies of the agency; "
(3) Section 504 of Pub. L. 95-454 contains certain special provisions
relating to the initial implementation of the Merit Pay System. The
text of section 504 follows:
SEC. 504. (a) The provisions of this title shall take effect on the
first day of the. first applicable pay period which begins on or after
October 1, 1981, except that such provisions mar take effect with
respect. to any category or categories of positions before such day to
the extent prescribed by the Director of the Office of Personnel
Manag-enient.
(b) The Director of the Office of Personnel Management shall
includr, in the first report required under section 5404 of title 5, United
States Code (as added by this title.), information with respect to the
progress and cost of the implementation of the merit pay system and
lie eash award program established under chapter 54 of such title (as
added by this title).
Accordingly, the Office of Personnel Management is adding to Chapter I
of Title 5 of the Code of Federal Regulations a new Part 540, as
set forth below:
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PART 540--MERIT PAY SYSTEM
sec.
540.101 General.
540.102 Ranges of basic pay and employee coverage.
540.103 Determination and allocation of merit pay funds.
540.104 Merit pay determinations.
540.105 Merit pay increases.
540.106 Interrupted service.
540.107 Cash award program.
540.108 Agency plans for Merit Pay System.
540.109 Reports.
540.110 Implementation.
AUTHORITY: 5 U.S.C. 5401-5405; Pub. L. 95-454, 8 504.
8 540.101 General.
Chapter 54 of title 5, United States Code (5 U.S.C. 5401-5405),
provides for a Merit Pay System to recognize and reward quality performance
by supervisors and management officials (as defined in 5 U.S.C. 7103(10)-
(11)) in positions classified in GS-13, 14, or 15. This part contains
the regulations which the Office of Personnel Management has prescribed
for the Merit Pay System. This part supplements and implements the
provisions of 5 U.S.C. 5401-5405, and section 504 of Pub. L. 95-454
(concerning the implementation of the Merit Pay System), and must be
read together with those provisions of law.
8 540.102 Ranges of basic pay and employee coverage.
(a) Under 5 U.S.C. 5402(a), the Office of Personnel Management is
required to establish a Merit Pay System which provides a range of basic
pay for each grade of the Merit Pay System. The Merit Pay System shall
consist of three grades, as follows:
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(1) G117-13, which shall consist of supervisors and management
officials who are in positions classified in GS-13;
(2) GM-14, which shall consist of supervisors and management
officials who are in positions classified in GS-14; and
(3) GM-15, which shall consist of supervisors and management
officials who are in positions classified in GS-15.
(b) The range of annual rates of basic pay for each grade of the
Merit Pay System shall be the same as the range of annual rates of basic
pay for the corresponding grade of the General Schedule, including any
rates authorized under 5 U.S.C. 5303 for any position covered by such
authorization.
(c) The head of each agency shall identify employees who are
supervisors or management officials for purposes of coverage by the
Merit Pay System.
El 540.103 Determination and allocation of merit pay funds.
(a) Under 5 U.S.C. 5402(b)(4), the Office of Personnel Management
must determine the funds available for merit pay purposes. In order to
allow the Office to do this, each agency covered by the Merit Pay System
shall submit such data as the Office may require.
(b) Before the beginning of each fiscal year, the Office of Personnel
Management shall issue a Merit Pay Fund Computation Table, together with
instructions for its use. Each agency covered by the Merit Pay System
shall use this table to determine the amount of the merit pay fund
available to the agency.
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(c) Each agency covered by the Merit Pay System is required to
establish procedures to ensure that the merit pay fund in the agency is
allocated in a fair and objective manner. Variations in the level of
merit pay funding provided different organizational elements in the
agency must be based solely on differences in the Merit Pay System
payroll for the different organizational elements, unless the agency
determines that variations should also be based on differences in
organizational accomplishments of the different elements. If differences
in organizational accomplishments are to be taken into consideration,
those differences must be determined on the basis of a fair and objective
assessment of each organization's performance in relation to that of
other organizations within the agency, and the basis for the deter-
mination must be fully documented.
(d) Each agency covered by the Merit Pay System is required to
establish procedures to ensure that the sum of merit pay increases
awarded each year under section 540.105 of this part to Merit Pay System
employees in the agency is no less than 95 percent and no more than
105 percent of the agency's merit pay fund (unless the Office of Per-
sonnel Management has granted prior approval for a lesser or greater
obligation).
Ei 540.104 Merit pay determinations.
(a) A merit pay determination is to be made for each employee
covered by the Merit Pay System on October 1 of each year, or on the
closest date before or after October 1 that is determined by the agency
to be administratively feasible (but in no event more than 90 days
before or 60 days after October 1).
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(b) Each merit pay determination is to be based on a current performance
appraisal (which shall include an appraisal of the employee's performance
in meeting affirmative action goals and achieving equal employment
opportunity requirements, to the extent the employee's position involves
such responsibilities). Except in the case of agencies or employees not
covered under chapter 43 of title 5, United States Code, performance
appraisals are to be made under a performance appraisal system that has
been approved by the Office of Personnel Management under 5 U.S.C.
4304(b)(1).
(c) If the agency determines it is appropriate to do so, a merit
pay determination may also take into consideration the accomplishments
of the organizational element within which the employee is employed. If
organizational accomplishments are taken into consideration, the accomplishments
of the organizational element must be determined on the basis of a fair
and objective assessment of that organization's performance in relation
to that of other organizations within the agency, as documented under
section 540.103(c) of this part.
(d) No merit pay determination may take into consideration any
preestablished or forced distribution of levels of performance among
Merit Pay System employees.
(e) Agency procedures for making merit pay determinations must
Include a requirement for a concurrence in each merit pay determination
by an official of the agency who is at a higher level than the official
who made the merit pay determination (unless there is no official at a
higher level in the agency).
(f) The reasons for each merit pay determination are to be docu-
mented and shall be made available to the affected employee at his or
her request.
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(g) No merit pay increase resulting from a merit pay determination
may be put into effect until the requirements of this section have been
met.
540.105 Merit pay increases.
(a) Each agency shall establish a procedure for determining in a
fair and objective manner the amount of merit pay increase that shall be
granted each Merit Pay System employee. The amount of merit pay increase
(if any) for each Merit Pay System employee each fiscal year shall be
based on the merit pay determination made with respect to October 1 of
that fiscal year under section 540.104 of this part, but may also take
into consideration the grade level of the employee, the position of the
employee's existing rate of basic pay within the range of basic pay for
the employee's grade, the period of time since the employee's last
increase in rate of basic pay (other than an increase under 5 U.S.C. 5303,
5305, 5307, 5343(a), 5363(a)(B), or 5402(c)(1)), and the amount of such
last increase in rate of basic pay. The amount of merit pay increase
for each Merit Pay System employee may not take into consideration any
preestablished or forced distribution of dollar or percentage amounts of
individual merit pay increases.
(b) All merit pay increases each fiscal year shall be made effective
on the same day the pay adjustment under 5 U.S.C. 5402(c)(1) becomes
effective in that fiscal year. If, under section 540.104(a) of this
part, a merit pay determination is not made until after a pay adjustment
under 5 U.S.C. 5402(c)(1) becomes effective, the resulting merit pay
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increase (if any) shall be made retroactive to the effective date of the
pay adjustment under 5 U.S.C. 5402(c)(1). In no event shall the retroactive
payment be made later than December 31 of the calendar year during which
such pay adjustment takes effect.
(c) A Merit Pay System employee's rate of basic pay may not be
less than the minimum nor more than the maximum rate of basic pay for
the employee's grade in the Merit Pay System. Notwithstanding any merit
pay determination--
(1) Each Merit Pay System employee's rate of basic pay must
be increased, effective on the same day a pay adjustment under
5 U.S.C. 5402(c)(1) becomes effective, by any amount necessary to
raise the employee's rate of basic pay to the new minimum rate for
the employee's grade; and
(2) No Merit Pay System employee's rate of basic pay may be
increased by an amount that would cause that rate of basic pay to
exceed the maximum rate for the employee's grade.
8 540.106 Interrupted service.
(a) An employee covered by the Merit Pay System, whose continuous
service is interrupted in the public interest by service with the
uniformed services or by service in essential non-Government civilian
employment during a period of war or national emergency, is entitled to
have his or her pay fixed in accordance with this section upon:
(1) Reemployment in a position under the Merit Pay System
not later than 52 calendar weeks after separation from active duty
in the uniformed services;
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(2) Restoration to a position under the Merit Pay System
after separation from active duty in the uniformed services (or
hospitalization continuing thereafter) as provided by law; or
(3) Reemployment in or restoration to a position under the
Merit Pay System without a break in service after service in
essential non-Government civilian employment during a period of war
or national emergency.
(b) An employee under the Merit Pay System who is entitled to have
his or her pay fixed under this section shall have his or her pay fixed
within the range of basic pay for the employee's position at a rate
which is the lesser of--
(1) The maximum rate of the range of basic pay, or
(2) The sum of--
(i) The employee's rate of basic pay under the Merit Pay
System immediately before the interruption of service entitling
the employee to coverage under this section;
(ii) The adjustments that would have been made in the
employee's rate of basic pay under 5 U.S.C. 5402(c)(1) had the
employee's service not been interrupted; and
(iii) The average adjustments under 5 U.S.C. 5402(b) that
were received by comparably situated employees under the Merit
Pay System in the agency during the period when the employee's
service was interrupted.
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8 540.107 Cash award program.
(a) 5 U.S.C. 5403 authorizes a cash award program as part of the
Merit Pay System. Each agency covered by the Merit Pay System shall
establish a cash award program for its Merit Pay System employees in
accordance with the provisions of 5 U.S.C. 5403 and this section.
(b) Each agency's cash award program shall provide for the administration
of cash awards for Merit Pay System employees, except as provided in
paragraph (c) of this section, as a part of and in conjunction with the
Merit Pay System, and shall establish procedures to ensure that:
(1) Cash awards are made in a fair and objective manner; and
(2) The reasons for each award are documented in such manner
as the agency may prescribe.
(c) Cash awards that are not related to the Merit Pay System employee's
performance in his or her position are to be administered in accordance
with the provisions of Part 451 of this chapter and the agency's incentive
award program established pursuant to Part 451.
(d) The Office of Personnel Management shall establish and publish
in the Federal Personnel Manual procedures for considering agency certifications
for cash awards under 5 U.S.C. 5403(e)(2).
8 540.108 Agency A.ans for Merit Pay System.
(a) Each agency with employees who are subject to the Merit Pay
System shall establish a plan for administering the Merit Pay System
within that agency. Each agency's plan shall be consistent with the
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provisions of 5 U.S.C. 5401-5403 and this part, and shall include, in
addition to provisions to carry out the requirements of sections 540.103,
540.104, 540.105, and 540.107 of this part, provisions for--
(1) Communication to the agency's Merit Pay System employees
of the purpose of the Merit Pay System and how it works; and
(2) Training in the operation of the Merit Pay System for
employees who are subject to that System and for employees who are
responsible for its operation.
(b) Each plan for administering the Merit Pay System (and each
subsequent change in that plan) shall be submitted to the Office of
Personnel Management not less than 180 days before the plan (or change
in the plan) is scheduled to become effective. The Office shall advise
the agency within 90 days of receipt of the plan (or change in the plan)
whether the plan (or change in the plan) is approved. The agency may
not implement the plan (or change in the plan) unless it has been approved
by the Office.
8 540.109 Reports.
Under 5 U.S.C. 5404, the Office of Personnel Management is required
to include in its annual report to the President under 5 U.S.C. 1308 a
report on the operation of the Merit Pay System and the cash award
program established under chapter 54 of title 5, United States Code, and
the provisions of this part. In order to provide information needed for
this report, each agency shall maintain such records and submit to the
Office such reports as the Office may require.
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El 540.110 Implementation.
(a) Except as provided in paragraph (b) of this section, the Merit
Pay System shall be effective on October 1, 1981, and a merit pay
determination shall be made for each Merit Pay System employee on that
date, or on the closest date before or after that date that is deter-
mined by the agency to be administratively feasible (but in no event
more than 90 days before or 60 days after October 1, 1981).
(b) An agency may implement the Merit Pay System for any group
or category of supervisors or management officials in positions classified
in GS-13, 14, or 15 on October 1, 1980, provided that the agency advises
the Office of Personnel Management of such implementation not later than
March 31, 1980.
OFFICE OF PERSONNEL MANAGEMENT
Beverly M. Jones
Issuance System Manager
6325-01
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Should the Agency's SPS positions and encumbents be included in
the new Senior Executive Service (SIS)?
There are virtually no advantages to retaining the existing SPS
category as an alternative to incorporating the Agency's SPS ceiling
into the new SIS ceiling and inviting all SPS officers to join the
SIS.
The argument that SPS officers would lose their unique status
may be partially true at least on the surface, but in fact this need
not be so. The special skills required for certain positions now
within the SPS category would still be needed and would be recognized
and dealt with accordingly, as in the past, by the concerned offices.
The only difference would be that the SPS officer concerned would be
assigned to one of the six SIS levels rather than to one of the nine
SPS steps. Career development and progression, as at present, would
depend on concerned career services.
The principal disadvantage to SPS officers in retaining the
existing SPS category is financial.
o Currently, the salary of all SPS officers (as well as GS
and EP-V officers) is limited to $47,500. As a result,
all SPS officers in steps 3 through 9 are at the same pay
rate (i.e., $47,500). If the separate SPS category is
retained, SPS officers will be eligible for an increase in
compensation only if the $47,500 ceiling is increased by the
Congress.
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o Conversely, if the SPS category is not retained and SPS
positions and encumbents are included in the new SIS,
former SPS officers will be eligible for (a) performance
awards of up to 20 percent of their base pay and (b) for
meritorious and distinguished executive ranks ($10,000
and $20,000 respectively).
o Any statutory increase in the existing pay ceiling of $47,500
eevua-e- wv4.14
would, at the discretion of the DCI, apply -6044 to SPS
4-vt 014-'0
officers to the Agency's SIS officers.
4
The disadvantage to the Agency of retaining the SPS
category relates to ceiling and to the number of performance
awards which can be approved--not to mention the problem
(or inconvenience) of maintaining what would seem to be an
unnecessary separate pay category.
o The OMB-imposed Agency SPS ceiling is II, but (as of
31 July 1979) only Iiipositions are so classified and
only SPS officers are on duty.
o If the SPS ceiling (along with the SG and EP-V/IV ceiling)
is included in the new SIS, the Agency SIS ceiling will be
if the SPS ceiling is excluded, the SIS ceiling will
be OR less, or 1111 Corresponding encumbents (as of
31 July 1979) would be respectively; SIS
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ceiling flexibility (i.e., "vacancies") would be
respectively.
o Since performance awards are limited to 50 percent of SIS
ceiling positions, such awards would be possible with
no SPS category, and if the SPS category is retained.
Thus, the number of performance awards would be 21 greater
if the existing SPS ceiling is included in the SIS ceiling,
and in such case former SPS officers would be eligible
for performance awards.
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Ard, 4X.e. ? 7,1
SENIOR INTELLIGENCE SERVICE - Option II, Page 22
Implementation of CIA SIS with number of SIS positions to be
established by current authorized SG, SPS, EP-V and EP-IV ceiling.
PROS:
1. Simpler accounting
2. Avoid confusion now existing between ceiling and positions.
CONS:
1. Would require a misclassification of approximately 26 positions.
(System used today would be corrupted. Possible OMB question of
misclassification. Subject to possible criticism. Impact on incumbent.)
STATI NTL
2. Put indisarray jobs underneath the misclassified position.
Distorts pecking order.
3, Takes away status now enjoyed by GS-15's in these 26 positions.
4, Makes less attractive cross-fertilization of GS-I4's.
5, Possible promotion of less qualified.
6. Creates unnecessary PRA's.
7. Fact have more positions than allowances has been used to
defend against excess allowances. Been used in defending SG allowances
with HAC who impressed with our classification.
What would be the savings in establishing Class A performance at
15%, Class B at 8% and Class C at 5%?
Answer: Based on the 50% of Mceiling, it would be a savings
of $379,050.
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