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Special Defense Department Briefing on Proposed Regulations for The National Security Personnel System

Presenters: Navy Secretary Gordon England; Dan Blair, Acting Director, Office of Personnel Management; Charlie Abell, Principal Deputy Undersecretary of Defense for Personnel and Readiness; Mary Lacey, Program Executive Officer; and George Nesterczuk, Senior OPM
February 10, 2005

            BRYAN WHITMAN (Pentagon deputy spokesman): Well welcome, and good afternoon. Today we're here to discuss the proposed regulations for the National Security Personnel System, or as many of you know it as NSPS. You may recall that NSPS was signed into law in November of 2003. And for the past year or so, DOD and OPM officials have been working to design a modernized performance-based civilian personnel system.


            NSPS has many qualities, some of which are improving the way in which the department hires, assigns, compensates, rewards its employees while preserving the core merits of the merit principle, the veterans preference, important employee protections that are in the current system.


            These proposed regulations that are going to be discussed today are the result of a broad-based effort that included input from employees, DOD employees, supervisors, managers, senior leaders, union representatives, as well as public interest groups.


            And with us today to do this is at least one gentleman that's no stranger to you, but joins us in many different settings on different topics, but today Navy Secretary Gordon England, who serves as the Department of Defense's senior executive who oversees the National Security Personnel System, and with him is Dan Blair, who is the acting director of the Office of Personnel Management. And Charlie Abel has joined us, I think most of you know the principal deputy undersecretary of Defense for Personnel and Readiness. And with him, I'd just like to also recognize Mary Lacey, who is the program evaluation office -- heads the Program Evaluation Office for NSPS, as well as George Nesterczuk, who is the senior adviser to OPM director on defense matters.


            With that, I will turn it over to these two gentlemen who will provide you with some overview and then take your questions.


            Mr. Secretary.


            SEC. ENGLAND: Bryan, thanks very much. And good afternoon to everyone. It is a pleasure to be with you.


            It's nice to have Dan Blair with us. Normally it would be Director Kay Coles James. As you may know, she retired at the end of January. And Kay Coles James/OPM has been a partner with us during this whole first phase of the program. And OPM will continue in that role. We will continue to have this great relationship with OPM, and I'm pleased that Dan is with us today and working with us.


            We are pleased to announce that this Monday we will have published in the Federal Register the proposed regulations for the National Security Personnel System. And this is the end of one phase, the very first phase of developing the NSPS system. And Monday we begin a new phase.


            Now this first -- the phase we're about to complete started last April, and since then, as Bryan said, we've had this very, very broad- based collaborative process. It's involved literally hundreds of our employees, supervisors, managers, our labor partners, senior leaders and many public interest groups. We've held over 100 town-hall meetings and we've had over 50 focus groups.


            And I want to thank everyone who has contributed since last April to helping us design this system.


            Now NSPS is going to replace a 50-year-old system. It's an outdated system, frankly, and we're going to replace it with a very modern system that we need to attract, recruit, retain, compensate fairly and manage our employees. The focus of this system is indeed on performance, flexibility and accountability. It will be much more responsive to the national security environment, and as Bryan said, it will fully preserve our employee protections, our veterans preference and employee benefits.


            Now the next collaborative phase starts on Monday. The proposed regulations will be available for public review and comment for 30 days through March 16th. Now this will be an opportunity during this 30 days for all of our employees, our unions, and any interested party to review the proposed regulations and submit their comments. And we encourage everyone to participate.


            We will then collect and analyze the comments and give them full and fair consideration.


            Now, in recognition to union special status, as many of our -- for many of our employees, their representatives, the congressional statute provides for a meet and confer process with those leaders at the end of the 30 days' review and comment periods. Thirty days review and comment, then a meet and confer period. And we have encouraged our unions to work constructively with us, and also with the federal mediation and conciliations services so we can find common ground and make this an even better system. At the completion of that process, we will report the results and the outcomes to the Congress before finalizing the regulations.


            Our plan, then, is to begin the implementation this summer. We'll learn through doing. We'll do this in phases. And we will progressively add more and more employees, learn as we go until completion at the end of 2008. A lot of the people that were introduced earlier, they're here today and can answer a lot of detail questions. If you have any detail questions, we're pleased to respond to whatever level you may have today. But before we open it to questions, I do want to ask Mr. Dan Blair -- again, he's the acting director of OPM -- to offer some remarks.




            MR. BLAIR: Thank you, Mr. Secretary.


            Good afternoon, everyone. I appreciate the kind words and introduction. I also appreciate on Kay's behalf your kind words towards her. She thought very highly of you and your organization during this whole process.


            SEC. ENGLAND: Thank you.


            MR. BLAIR: And I know that she's excited that it's been brought to this milestone today.


            The publication of these proposed regulations mark -- will mark a significant point in our efforts to reform not only DOD's civilian personnel system, but it gives us much needed momentum to our efforts to transform and modernize the entire civil service. We expect these proposed rules to generate a number of comments and spur a healthy debate. We will work hard at assimilating those comments and in smoothing out any potential rough spots.


            Frankly, it'll be hard to overestimate the interest these new rules will generate for not only DOD's employees and from other stakeholders, but from groups interested in the health and welfare of the nation's civil service. With this proposed system, we've reached a tipping point. Combining with the Department of Homeland Security and a myriad of other agencies whom Congress has granted personnel flexibilities in the past, more federal workers will be covered by reformed and modernized systems than the current general schedule. These changes haven't come easily. But this new system, coupled with the DHS system, show that transformation can take place in an environment which honors merit and ensures collaboration and cooperation.


            While the new system breaks ground for what it changes, it should also be noted for what doesn't change. And these core values represent the fundamental premise underlying our merit-based civil service system. Merit system principles remain unchanged. Veterans' preference in hiring and retention remains unchanged. Anti- discrimination laws remain unchanged. Whistle-blower protections remain unchanged. Prohibited personnel practices are to be fully enforced. Fundamental due process is assured. Employee benefits remain the same.


            Our next steps include the statutory 30-day comment period and the 30-day meet and confer process, while keeping Congress notified of the results of these deliberations. Once completed, we expect the department will proceed with its implementation plans later this summer, I'm told.


            Today's announcement marks an important milestone, and we're going to work hard to make sure we get it right.


            Thank you very much.


            SEC. ENGLAND: Dan, thanks very much.


            With that, we will open it to questions. And again, if they're very detailed, we have a lot of people here to help us.


            Pam, is your hand up?


            Q It is.


            SEC. ENGLAND: Okay. Pam.


            Q I was trying not to be rude right off the bat ?


            SEC. ENGLAND: (Laughs.) Please, don't be rude even later. (Laughs.) (Laughter.)


            Q I'll see what I can do.


            One of the main concerns about this program is the pay-for-performance aspect, considering that so much of the power, particularly here in DOD, is held by political appointees and they would be gauging the performance of civil servants who might not agree with them politically. What kind of protections are there in this to make sure that there's no sort of political payback for people that aren't seen as supporters of whatever administration's in power?


            SEC. ENGLAND: Well look, there's about 650,000 people who are under this system in Department of Defense. I'm not sure how many political appointees, but obviously very few compared to the 650,000. I mean this affects people around the world who work for DOD. People --


            Q Yeah, but the political appointees are high.


            SEC. ENGLAND: But they don't review people. I mean, we only review the people who work for us, and all the supervisors, managers, almost all of our federal employees, of course, are not here in Washington, D.C. They're certainly not here in the Pentagon. I mean, a relatively small number --


            Q Let's take the political adjective out of it. Personal problems. What do you do if you're somebody down low and your supervisor just doesn't like you and is using these streamlined ways of evaluating your performance and you've evaluated badly.


            SEC. ENGLAND: Well look, this is going to be -- look, it is pay for performance. That means in advance, employees and supervisors will know what is expected in terms of performance over the next period, and there will be measures and metrics that they will agree to in terms of did they accomplish those objectives.


            So there will be a very strict process in place. And in fact the managers and supervisors will also be evaluated, because they now are responsible to do this program correctly. So they will be evaluated at their very next level, to make sure that they actually run this program fairly and accurately.


            Then we do have appeal process also put into the system. So there are safeguards built in.


            But look, this is a very important attribute of this program. I mean, today we basically have time and grade, and people get paid for time, as opposed to performance. So it's very, very important for us to be able to recruit and retain the very best people, that we pay them for their performance. So this is a critical attribute for us to be able to recruit and retain very excellent people that we need in the federal government.


            MR. BLAIR: May I just supplement that for a moment? We're going to be holding our managers accountable for results. That's what pay-for-performance is about. I think the secretary hit the nail on the head when he said we're changing the culture. We're changing the culture from a longevity-based culture to one that will be performance-based. It's going to take training. It'll take time, implementation. But the work that this department does is too important not to move in that direction.


            SEC. ENGLAND: Can we try someone else?


            Q Secretary, can you explain specifically why you think this type of system will help the Defense Department defend the country more ably?


            SEC. ENGLAND: Well, it's a much more flexible and agile system. First of all, we should be able to recruit the very best people. And we need to be able to recruit scientists and engineers, and people who enter the federal government -- they want to know that, based on their performance, they can be promoted and be paid based on their performance and not their time and grade. And they don't want to look out in the future and say, "Gosh, if I'm here a very long period of time, I can work my way up." We need to be able to hire very good people, and we need to be able to provide them opportunities to advance in this department.


            So it starts with our recruiting. It's a way to retain our people. We have much more flexibility in terms of our assignments, the speed that we can act. It's a much more agile system.


            This is the modern system. This is a system that many, many companies have incorporated, and we need to be able to compete with the marketplace for those people, plus we have a national security mission. So we need to be able to pull resources and move resources, and reassign people. I mean we need to do what is necessary to respond to the threat that emerges and the threat that we face every day. So we need this flexibility in the workforce.


            I mean it's very, very difficult in many of our circumstances today to respond quicker, even to the hire -- if we need to hire specialty people today, it's very, very difficult. It's a lengthy process. So this makes for a much faster and agile system for the Department of Defense.


            Q You talked about performance measures and metrics. I was wondering, are those in the proposed regs, or are those going to be developed later?


            SEC. ENGLAND: Here's the way the system will work. I mean, the secretary of Defense has certain objectives for this department and I have certain objectives in the Department of the Navy, and I will pass those on to the people who work for me and they will cascade through the organization. So, as we say in the Navy, even on the deckplate, the person on the deckplate will know the job that that man or woman does to meet the objectives of the secretary of Defense. So these objectives cascade down, and the system does now require -- I mean, the power of this system is this system now requires that we manage our human capital. So our supervisors and managers will get with their people -- throughout the organization they will get with their people in advance and discuss objectives and how those objectives will be measured. So they will be myriads of objectives throughout the organization, all different; you know, attuned to that particular work to be accomplished, and in a way to measure that accomplishment. If you're going to pay for performance, you have to be able to measure for that pay for performance. So that will be a critical attribute of the system.


            Let's go to this side a minute.


            Q Sir. Secretary England, how much of this plan will condense the time that it takes for somebody coming from the outside who needs a security clearance, for example, that right now can take a year with the bureaucracy and the clearance procedure, to get a job? Is that going to be effected?


            SEC. ENGLAND: We are not -- the National Security Personnel System does not address the clearance process. Nick, that is an issue. We'd like to work that quicker, but you know, we did take some steps here about two years ago to speed up that process. You know, at one time we literally had, I believe, as I recall, a couple hundred thousand in backlog, and that system was redesigned two or three years ago, as I remember, to speed up this process. So there have been actions taken on that side, but the National Security Personnel System itself, you know, is not involved with the security clearance process. That's a separate, independent process.


            Q Sir, if you're going to get this going in the summer, there's going to have to be a pretty good training effort for both workers and supervisors, obviously. When is that going to start?


            When are you going to start that?


            And second, pay banding, all of this compressing the jobs series, is that going to be affected by the regulation


            SEC. ENGLAND: Yeah, let me answer the first one. I'll turn to Dan for the second one, if I can.


            The first one, we started the process -- I guess now it's been about two weeks ago. We had the kick-off down in Florida. We brought in all of our senior people. And between now and July, we will have orientation and training. The first group of employees will be about 60,000. And it's volunteer -- I mean, these groups have volunteered -- not every individual employee but the particular groups have come forward and volunteered. We've had all these people together to start the orientation and training process. So between now and July, we will be in that orientation and training phase to be sure that our supervisors and managers are ready for the initiation of the first 60,000 people.


            I would comment, by the way, at the end of six months of that first group we will receive feedback from how the process is working, and we will then use that feedback to improve the process as we move the system along. So we'll constantly be learning as we go and improving this system, and that will be training and all aspects of the system.


            Now, Dan, if you could --


            MR. BLAIR: Certainly. Thank you, Mr. Secretary.


            One of the key components of this new system is the move from a 15-grade 10-step general schedule to a series of pay bands, which have occupational clusters in them. This is based on the experience that the federal government has had over the past 20 years at places like China Lake with the Navy and other DOD installations.


            I think that this is a vast improvement over the current classification and general schedule system. We'll be working that through the next few months, but I think that that's a key component in the changes that we've been promoting and have seen -- that can work and that we anticipate will be working within DOD.


            MR. WHITMAN: Could we go to Mr. Barr (sp) in the back?


            SEC. ENGLAND: Sure. Steven Barr (sp). (Cross talk.)


            Q Secretary England, could you give us a couple of examples of the efficiencies that this change will bring to the department?


            SEC. ENGLAND: Well, first of all, I hope -- and my expectation, Steve, is that in every single group we will see increased efficiency, because, again, underlying this are specific objectives, literally for everyone in the work place. I mean, there will be a structure in place that we will have objectives -- from the top to the bottom of the organization -- linked so everyone will know what is to be -- what the objective is and what's to be accomplished over a period of time.


            My feeling, frankly, is that the greatest value of this system -- this system requires interaction between the management staff and all the employees at every single level of the organization. It requires a dialogue, and on a continuing basis. I mean, if a person's having trouble, then how do we help them? Do they need training? Do they need education? I mean, this is not just a question of lay out objectives and check at the end of the year. This is a continuing process to make sure that we get very excellent performance.


            Frankly, my judgment, this is magnificent for our employees in terms of their productivity in terms of how it operates, and also for the entire department.


            Dan, I'll let you add.


            MR. BLAIR: I couldn't have said it better myself on that one.


            SEC. ENGLAND: Okay, do you want to circle around again?


            Q Yes, please.


            SEC. ENGLAND: You're going to be nice still, right? (Chuckles.)


            Q Still very polite, officially.


            SEC. ENGLAND: Okay, thank you.


            Q Negotiated grievance procedures with arbitration is retained, it says, but certain matters are excluded. What matters are excluded that used to be covered under arbitration?


            SEC. ENGLAND: Okay, let's get an expert in. (cross talk)


            RONALD P. SANDERS (associate director, Strategic Human Resources, OPM): Among other things, the proposed rules provide that performance appraisal grievances will now go through a special administrative process. Because they're so important to the pay-for-performance system and the credibility of that system depends on a fair hearing, if an employee believes that appraisal is not appropriate, we're going to set up a special administrative process to handle those. That's the kind of thing that's excluded.


            Q Anything else excluded?


            MR. SANDERS: No, not from standard negotiated grievance procedures.


            Q I have some other questions, a broad question on the problem that you all are facing. You say there are 650,000 employees that this affects. What's the dead weight in there? What's the percentage that you think are getting rewarded that perhaps shouldn't be? I've got to assume that you would have done that sort of analysis before sweeping through this the system?


            SEC. ENGLAND: Well, we have some people, obviously unsatisfactory performers who get rated unsatisfactory. I don't know what that percentage is, frankly. I would hope, I would hope that this makes every employee a productive employee. I mean, again, this improves the management process, which every employee wants to have improve. So this is not a process to eliminate poor performers -- you may have to do that; you may have poor performers. But the real process is to make every employee as good a performer as they can.


            You know, my approach to this -- and I've always been a firm believer management's first role is to provide an environment for employees to excel. I mean, that's the first requirement, the first thing that leaders are required to do is provide an environment so every employee can excel.


            So what you want to do is raise up everyone in the employ -- I mean, hopefully, you know, the boat will raise for everyone in this organization. We want this to be a win for every employee, a win for the department, and a win for America. This is a win-win-win, and that's what we're striving for, a triple win.


            Q Okay. One of the things --


            SEC. ENGLAND: Can I -- wait. Can we get someone else?


            Q For Director Blair. Frank Blankman. I'm with NPR. I wanted to -- something you mentioned earlier on was the relation of this to plans to make sort of broad changes in pay-for-performance throughout the government.  Is this plan and the one at DHS going to be sort of a template for what we might see from legislation coming out of OMB soon?


            Could you talk a little bit about sort of the broad goals?


            MR. BLAIR: Well, the broad goal was enunciated in the president's budget when he indicated he wanted to extend the pay-for-performance culture that we're implementing here at DOD and at DHS government-wide. We're working on that right now and developing these proposals. It's premature for me to talk about the specifics of that, but I think you can certainly gain insights on what we're looking at from the efforts that we've done with DHS and DOD.


            Q Can you clarify, either one of you, union rights under this system? I mean, the unions are basically saying that their -- particularly collective bargaining, that their rights are being threatened by this system.


            MR. BLAIR: They are assured the right to organize. Their right to exist is not infringed at all. We have done -- the process ensures collaboration and cooperation. I think that, if anything, that what it's done is streamline the process. But it's also looked at what was not working, and we wanted to make sure that we improved and had a better system in which we could manage our employees, given the state that we find ourselves today in the world and the mission that DOD has.


            Q I have two questions. If I could ask one and then just follow up.


            First, what kind of a -- you know, my company actually has a performance review system, and it seems to put a burden on the managers that work with -- what kind of bureaucracy are you creating for the managers? How often or frequently are they going to be doing this? How much time are they going to be spending filling out these forms?


            SEC. ENGLAND: Well, look, it's not a burden on managers. And we have pay-for-performance systems because we get better performance for our employees and for the organization. You're right; it is a bigger job for managers. But frankly, that's what managers are supposed to do. They're supposed to manage the human capital resources.


            This is an incredibly valuable resource, our human capital. You've heard me say before, you know, we can spend $5 (billion) or $6 billion for an aircraft carrier and it has no asset value to the nation until we put people on board. So people are the most valuable resource, and our management team -- like in any company, the management team has to spend time with their people so we accomplish the objective of the organization, so our people grow in terms of their knowledge, capability and experience, and we continue both to improve the employees and the organization. You're right; it takes management time and attention, and we will evaluate our managers. That's part of their job task and responsibility, and we will evaluate them to that basis.


            It's exactly what we want to do.


            MR. BLAIR: There's really no incentive in the current system to do that. Good performers, average performers, poor performers, for the most part, all get paid the -- all get the same pay raise. And so what we're trying to do here is change the culture to give incentives to good performers, that we can keep and retain them and reward their -- and reward the work that they're performing for the government.


            SEC. ENGLAND: Pardon me. If I can add one more thing, see, I would say today that managers -- the time they spend with their employees -- they probably are skewed to spending their time with the poorer-performing employees, rather than the very good-performing employees. What you want to do is spend time certainly with your good employees and with all your, you know, average-performing at least as much as you with those that aren't performing well. So this system, again, is designed to work with all of our employees. And again, that is a manager's job and our expectation for that manager.


            Q If I could just ask that second question, sir --


            SEC. ENGLAND: Oh, I'm sorry.


            Q Yeah. That's okay.


            SEC. ENGLAND: Yeah.


            Q It's slightly off-topic, but you're here, so I'm going to ask. The Washington Post today has a story about sexually oriented interrogation techniques being used at Guantanamo. Do you know if any of the investigations that have been launched has confirmed any of those?


            SEC. ENGLAND: I know nothing at all about -- I know nothing at all about those investigations.


            Q What role do the FLRA and the MSPB have under the new system?


            SEC. ENGLAND: Ron, you want to come up here and explain their new role?


            MR. RON SANDERS (OPM): Yup.


            Let me take MSPB first. Merit Systems Protection Board adjudicates federal employee removals and demotions and long- term suspensions. The MSPB stays in place. It is still available by the law that established the National Security Personnel System. It is still available for employees to appeal.


            And in fact, the department, at its discretion, has commissioned the Merit Systems Protection Board's administrative judges to continue to hear cases in the department. The department will review those cases, but an employee still has the ultimate right to go to the board, and if he or she doesn't like the board's decision, they can go to the federal circuit court of appeals. So there's, at that level, no change from current law. The NSPS statute does change the criteria of review by the board. That's been legislated.


            The Federal Labor Relations Authority will have some duties left under the National Security Personnel System, but the proposed rules establish something called the National Security Labor Relations Board. That will assume most of the FLRA's functions, adjudicating unfair labor practices, resolving questions of management rights and scope of bargaining.


            The FLRA remains in place to handle union elections and things like that.


            However, the decisions of the National Security Labor Relations Board, whose members are appointed by the secretary, are subject to outside review, first by the FLRA and then by the courts of appeals. So there is an external review to the National Security Labor Relations Board's determinations.


            But the NSLRB is created so that you have a body in place adjudicating labor disputes that knows something about the department's mission and has some expertise in that regard.


            Q Ron, Can you expand on the new criteria of MFPB?


            MR SANDERS: The MFPB criteria for review of a Department of Defense adverse action mirrors the criteria that the Federal Circuit Court of Appeals applies to MSPB today. So they simply drop that down a level.


            MR. WHITMAN: We have time for about one or two more.


            SEC. ENGLAND: When the proposed regulations come out Monday, then it may be appropriate we get together again at some point in a couple weeks, talk about where we are and a little more about the proposed regulations themselves. But maybe one or two more.


            Q You mentioned that 60,000 employees will be covered by the system, hopefully beginning in July, some point this summer. I wonder if you could take us through when they will be converted, when they will get their performance appraisals evaluated and when their actual pay will be changed based on those evaluations.


            SEC. ENGLAND: I believe I know that precisely, but let me make sure I have that. So maybe somebody -- Mary, can you do that?


            MS. LACEY: Good afternoon. Actually, we are looking at moving all Department of Defense employees under the labor relations portion of the system when the system goes live or when the final rules are published. Relative to the human resources portion of the system, we're going to start with about 60,000 folks. We will not evaluate them or make any adjustments to their pay until they've had almost a year of run time under the new performance objectives. I mean, it's just not fair to do anything else. We have to have their performance objectives in place, evaluate them, and then and only then will there be an adjustment to their salaries.


            Q So you're saying the summer of 2006? Would that be about right? About a year after --


            MS. LACEY: Well, we're an event-driven program, and right now, notionally, we'd like to move folks in in the July time frame, and we're likely to do their performance evaluation after a year. Now that said, we don't want everybody in the department on different performance cycles, so for those first couple groups that roll in, we may have to make some adjustments. So we might be nine months as opposed to a year, so that we can start to get everybody on cycle in a given organization.


            Q The earliest someone's pay would be affected?


            MS. LACEY: Would be a year from now -- a year from July would be the earliest.


            Q So the GS grade would go away in July.


            MS. LACEY: The GS grade goes away when someone is converted into the human resource part of the system.


            So for those 60,000, yes.


            Q Okay.


            MS. LACEY: That part would go away for those folks. And they're -- they would be converted into the National Security Personnel System at the pay that they're getting right now.


            Q Will disciplinary changes take effect immediately at MSPB for everyone?


            MS. LACEY: No. That is part -- that is tied to the human resources portion. It's just the labor portions that come in play all at once.


            SEC. ENGLAND: How about one last -- well, somebody who hadn't -- okay. Barry, last one.


            Q Well, I just wanted to talk about the pay. I seem to hear her saying that pay raises will not necessarily be given out in January every year, that you might be going to a different cycles, at least for some people. And then there's, secondarily, the larger issue with the pay is where does the money for pay-for-performance come from, what do the people give up in order to have that pool created, and what kind of commitments are you going to make to the employees regarding adequate funding going into that pool?


            MS. LACEY: Okay, let's start with the middle question: where does -- where does the money come from? Right now the department is going to use the money that traditionally goes into the within-grade raises, the longevity raises, as well as money that we normally use for promotions, and what -- plus the general performance increase that comes out every year. That will go in what we call a pay pool. And that pay pool are the funds that will be available for distribution across an organization to make those salary adjustments.


            Now, how are we going to make sure that money's there? We're going to do that by policy. We're putting that money at risk, if you will, where it normally would have automatically gone to employees. So, by policy in the Department of Defense, we are going to protect that money to ensure that it is available as part of our covenant with our people.


            Q If everything goes well, then everybody gets lower raises? Is that how it works? (Laughter.)


            SEC. ENGLAND: Say what again?


            Q You said that you wanted everybody to do well in this. And if everyone's drawing from the same fund and everyone does well, then everyone gets a smaller raise?


            SEC. ENGLAND: Oh, look, everyone will not do this.  I mean, people are people.


            Q (Off mike.)


            SEC. ENGLAND: There will be -- every single person is not going to be superior. There will be a range of performance, so there will be a range of pay-for-performance out of a centralized pay pool. You know, every year, I mean, the pay is -- basically, the pay pool is determined by the Congress, so funds are made available by the Congress. Now, instead of that being just equally distributed in terms of an annual pay raise, it will go into a kitty for pay-for- performance.


            MR. BLAIR: One of the key aspects of these reforms is that we develop pay-for-performance systems that make meaningful distinctions in relative performance. And so if you can encourage everyone to make those kinds of improvements in performance, I think you're getting a better bang for the buck on the part of the government and the taxpayer.


            SEC. ENGLAND: All right. Okay, this is the last one this time. Steve?


            Q On the -- following up on the pay question. So if I heard Ms. Lacey right, the locality pay adjustments that all employees get will continue to be given to all Defense Department employees, so they're protected from inflation?


            MS. LACEY: When we start, the locality pay will be as it is today. But we have provided for in the proposed rules is over time for that locality pay to be adjusted based on market conditions. So we could, working hand in hand with OPM, determine that we had special circumstances in a given area, that we needed to make different locality adjustments from -- then this happening in other -- for other government agencies.


            SEC. ENGLAND: Okay.


            Q Thank you.


            SEC. ENGLAND: Good. Thanks very much. Good to see you all today. Thank you.


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