The lessons and legacy of NSPS

Just two years ago — a lifetime in the minutiae of government policy — the National Security Personnel System was fresh in the minds of many members of the federal workforce. The Defense Department’s long experiment in pay-for-performance had only recently been rescinded by Congress.

NSPS by the numbers

Last employee converted out of NSPS: Dec. 18, 2011.

225,342 total employees transitioned out of NSPS by Dec. 31. deadline.

Pay comparison

  • 43,066 employees transitioned from NSPS to GS system with pay retention.
  • 137, 521 employees received a pay increase when placed on GS step
    • average increase: $1,464

  • 16,872 employees transitioned to pay grade that matched NSPS pay
Source: DoD Civilian Personnel Management Service


Conceived in 2003 as an attempt to give the Pentagon greater flexibility in hiring and paying its civilian employees, the soon-embattled program quickly drew fire from federal employee labor unions.

When a small notice appeared in the Federal Register toward the end of last year marking the official end of NSPS, few appeared to notice.

After all, the Pentagon had, well before then, shifted most employees out of the system and back into the General Schedule, as a provision attached to the 2010 Defense Authorization bill mandated.

Now, the battles are long over, the headaches about pay calculations for transitioning employees have mostly dissipated and the ink has long since dried on the legislation abolishing NSPS. The only thing left is to reflect on the legacy of the system and what it means — or doesn’t mean — for other pay-for-performance programs in the federal government.

But it might be a stretch to try to draw too many conclusions from the life and death of NSPS, said John Palguta, vice president for policy at the Partnership for Public Service.

Momentum of the moment

NSPS was borne of a specific historical moment, shortly after the Sept. 11 terrorist attacks.

“The system allows …DoD to be a more competitive and progressive employer at a time when the country’s national security demands a highly responsive system of civilian personnel management,” Pentagon leaders explained the system.

But the problem from the beginning was “overreach,” Palguta said.

The bill creating NSPS, as an attachment to the 2004 DoD authorization bill, also included provisions limiting the scope of bargaining with unions. It also would have allowed the defense secretary to circumvent agreements between union and management in the name of national security.

Another portion of the bill, equally problematic, dealt with employee due process. It allowed DoD to create an alternative due process system for employees facing disciplinary action, rather than an automatic appeal to the Merit Systems Protection Board.

Unions decried these measures.

NSPS timeline

Nov. 2003 Nov. 2005 May 2007 Oct. 2009 Jan. 2010 Jan. 2012
Provision in 2004 National Defense Authorization Act grants DoD ability to create NSPS.

Group of unions files lawsuit challenging DoD’s final regulations on NSPS. U.S. Appeals Court finds in DoD’s favor, ending a legal challenge to NSPS. Congress approves repealing NSPS in 2010 Defense Authorization Act. DoD announces NSPS transition office. All DoD employees shifted out of NSPS. Most returned to General Schedule.

The guts of the legislation

But the “guts” of NSPS, Palguta said, dealt with the ability to pay employees differently based on performance.

The General Schedule, largely unchanged since it was introduced in 1949 and criticized by some as antiquated, is weighted heavily toward seniority in determining pay.

In part because of the union objections, DoD decided to apply the system only to its white-collar, nonunionized workforce. “The thought was, ‘We’re going to demonstrate that this can work for folks who we don’t have to bargain with. And then we’ll kind of roll it out … to the rest of Defense.'” Palguta said.

But DoD leaders may have been too concerned with making sure the system was “perfectly defensible” particularly on pay, that the overly complex system it created ended up helping sink it in the end, he said.

“They made it a fairly elaborate process in terms of performance standards, the review that managers would have to do, the documentation they would have to have to support their judgments about performance ratings and pay decisions,” Palguta said. “And for managers, it was starting to become a burden.”

It wasn’t exactly a win-win. Managers felt the complicated processes were too onerous. And employees, if they received a poor rating, were still unhappy with the system.

The system was also dogged by suspicions, founded or not, “that managers were still, despite all the attempts to make it as objective as possible, playing favorites,” Palguta added.

Still, for most NSPS-ers, pay actually went up, with many earning more than those who stayed under the old system.

The headaches came when DoD was forced to go back to the General Schedule. The shift took place over two years, with the bulk of the transitions occurring throughout 2010.

Lessons and legacy

Lessons of NSPS

John Palguta, vice president for policy at the Partnership for Public Service, shares lessons learned from NSPS.

1) Think simpler, relatively speaking. Don’t take on too much at once. Don’t freight a system down with unnecessary provisions.

2) Involve employees in a very meaningful way. That includes employee representatives, such as unions.

3) Be flexible. “Not only in the initial designs but also in your willingness to make changes as you go forward,” Palguta said.

4) Build into the change process some check-ins. “Evaluate how things are going and be ready to make some mid-course corrections.”

5) Start with pilot projects. “You don’t have to implement the change agencywide or governmentwide … You can test out some alternatives — make sure it works as intended … and you don’t have employee backlash.”

Palguta said the measures changing collective bargaining and due process rights became “the poison pill” for NSPS.

DoD officials could have worked more cooperatively with unions, Palguta said, and perhaps ended up with a hybrid system between recognizing seniority along with performance ratings.

But even after NSPS’s quiet death on Jan. 1, Palguta said it’s not time to give up on reforming the federal pay system.

Simply moving employees back to the GS system is not a solution to the problem DoD set out to solve nearly a decade ago.

Palguta’s organization, the Partnership for Public Service, has argued the General Schedule system isn’t market-sensitive and doesn’t track pay for similar careers in the private sector.

There are still examples, though, albeit on a much smaller scale of alternative pay systems more strongly linking pay with performance. Many of the smaller financial agencies have alternative pay systems — the SEC, the Federal Housing Finance Agency, the National Credit Union Administration, among others.

“I don’t think the end of NSPS means the death knell of any possible future changes to the rest of government,” he added. Although, it could present an example of what not to do.

“The hope was that NSPS was going to be the model for the rest of government,” Palguta said. “It didn’t turn out that way, so it’s somewhat back to the drawing board.”