from the outside will have to go through before they can be admitted to the career portion of the senior executive service.

Chairman RIBICOFF. We all know, though, that in every organization there are men and women of unusual ability and there they have no intention of waiting around many years when if they have the qualifications to skip a number of grades.

Mr. CAMPBELL. There is a legislative problem in this regard which the Commission has long felt inappropriate; that is, the Whitten amendment, which requires that an employee be in a grade a minimum of a year before he or she may be promoted. Certainly, it is possible today, even with that limitation, for career civil servants to move up the ladder quite rapidly And it is certainly our intent that the kind of person you described would be able at a quite early age to move into the Senior Executive Service. We are not trying to create a locked step system.

Chairman RIBICOFF. Among the concerns that have been raised by this present legislation is that the increased flexibility given to managers will make the system more vulnerable to political manipulation.

I think this is what is bothering Senator Mathias. Could you tell the committee what are the safeguards in your proposals against such political endangerment?

Mr. CAMPBELL. I will ask vice chairman Sugarman, who has been working in this area, to respond.

Mr. SUGARMAN. The chairman identified a number of items before in terms of the Merit Systems Protection Board, the special counsel, fixing the responsibility on agency heads to avoid prohibited personnel practices and on all of those who have delegations of personnel authority.

In addition to that, we have introduced what we believe are some of the strongest performance appraisal requirements in terms of the separation of individuals, in terms of the pay rewards for the higher level executives, the performance of senior executives, merit pay for the grade 13 to 15 employees which do require a very vigorous system to be in place in the agency that will govern the kinds of judgments they make.

I think the problem that people have raised is not only politicization in a party sense, but also personal favoritism. And we think that the performance appraisal systems will go a long way toward making sure that the agency has in effect a system that is sound.

But ultimately it comes down to a series of checks and balances, the ability of the special counsel to prosecute, to investigate any matter where favoritism, of a personal or political nature, is alleged; the ability of the Merit Systems Protection Board to discipline those individuals, something that hasn't happened in 95 years of civil service history; and the ability of the General Accounting Office to report to the Congress directly on its oversight of the operation of the merit system.

We think that taken together we have the strongest set of protections that have ever existed in the civil service system.

Chairman RIBICOFF. How important is it that the MSPB be independent?

Mr. CAMPBELL. I think it is at the heart of the proposal that the Merit Systems Protection Board be an independent body.

What we are attempting to do here is to have an agency which has the obligation to move and take action regardless of what may be the interest or the concern of other political officials in the Government.

And in that sense, its independence is, we believe, the guarantee that the new kind of managerial flexibilities that we are hoping to accomplish, both through the establishment of the Office of Personnel Management and through other changes in the law, will not be abused.

And it is the Merit Systems Protection Board's function to guarantee that.

Chairman RIBICOFF. The bill provides that the OPM may appeal an MSPB decision to the court.

What are your reasons for choosing this method for resolving conflicts between the OPM and the MSPB?

Mr. SUGARMAN. Our concern here, Senator, is that there has to be an ultimate arena where a decision can be made about the lawfulness of a decision by the Merit Systems Protection Board. We think it is quite possible, although not very often, that there will be conflicts between the Merit Systems Protection Board and the Office of Personnel Management as to what the laws of the land require. Those ought to be resolved in informal consultation, wherever that is possible.

We would expect a continuing dialogue between OPM and the Merit Systems Protection Board, but the Board has to make its decisions and in judicial fashion. And this is essentially our appeal route, to go to a Circuit Court of Appeals to get a conflict resolved which cannot be resolved informally.

We do not think that that can appropriately be done by the President because he would, in effect, be interfering with what is a quasi-judicial body, the Merit Systems Protection Board.

Chairman RIBICOFF. You don't believe from your experience there will be many appeals of this nature?

ty.

Mr. SUGARMAN. Very few.

Chairman RIBICOFF. Senator Percy.

Senator PERCY. I would like to ask a question about the Authori

Is it not true that the President's reorganization authority does not provide a legal basis for the President to propose the Federal Labor Relations Authority, because the functions that are involved exist only by virtue of an Executive order, whereas, the Reorganization Act permits proposing only transfers of functions which have been actually created by law?

Mr. CAMPBELL. We worked on that issue and the Justice Department has advised us that it is appropriate.

Senator PERCY. Was that a written opinion from the Justice Department?

Mr. CAMPBELL. No, it was not. We could ask for one if you would like.

Senator PERCY. Could we ask that it be committed to writing and submitted to us for our analysis because it raised a question in our

I wonder if you could go back to fundamentals, Mr. Campbell, and tell us how the civil service reform package will specifically affect the rank and file Federal employee and motivate him or her to do a better job.

What does it mean to the rank and file person?

Mr. CAMPBELL. I think that the most important thing that it will mean to the rank and file employee is that it will be possible for that employee to be confident that the management which is in charge of his agency will have the power to take those actions, relative to employees, that are consistent with the mission and purpose of the agency; that is, that the managers themselves are being judged in terms of their effectiveness and competence as

managers.

Their effectiveness and competence as managers will be in part determined by how well they manage their own work force.

It is our belief that this will create a new kind of environment within many Federal agencies where it is clear that there is a management which is concerned about performance, which itself will be rewarded on the basis of performance, and that the employees first will be aware that there is a system to protect them from arbitrary and capricious actions.

On the other hand, it is also a system which will in fact be capable of disciplining the employees who do not perform satisfactorily.

It is in many ways a change in environment that we are seeking, and we are attempting to accomplish that primarily by changes in the managerial system.

We believe there will be spinoffs from that, that will create a much healthier and more productive environment for rank and file employees in the system.

Senator PERCY. The Personnel Management Project has prepared a series of charts showing a complex system required not only for removing Federal employees but also for hiring, promoting, and recruiting of employees.

How would this legislative package streamline procedures for these other personnel activities aside from employee removals? Mr. CAMPBELL. Do you want to respond?

Mr. SUGARMAN. Senator Percy, those charts relate, at least the most famous of them, relates to internal agency procedures, the 21foot chart. Basically, all the things that happened in that agency were driven by their concern about what would eventually happen in the appellate system.

They introduced all of those procedures to try in effect to make sure that they had done everything that would be necessary to comply with what the courts or the appeals review board or the Federal appeals authority would require.

By setting forth a much clearer standard of what is expected in order to discipline an employee, we think that the agencies will be able to significantly compress both the time and the number of steps involved in taking the actions and they will be able to move within the time limits that are required within the law, which in the case of unsatisfactory performance is 30 days.

Senator PERCY. Mr. McIntyre has testified on the incentive package contained in there civil service reform proposals. This is one of

the primary attempts in the legislation to improve performance of Federal managers.

I think financial incentives are perfectly logical, the most logical way to do it. Cash bonuses for superior performance are provided. What tools would this set of proposals place in the hands of Federal managers to help them better run their own offices? Just take a typical manager and case history and discuss how these proposals would really enable him to do a better job?

What steps does he take? Let's say he has got someone who deserves a bonus, and someone who doesn't. What steps would he take and what time of the year would he take them?

Mr. SUGARMAN. The act requires a system to be in place, Senator, in which the agency and the employee know in advance what the standards of performance are that will be expected from, let's say, a grade 14 manager.

The determinations of pay, pay increases, are then made on an annual basis. And I might just read a brief section from the act itself because I think it is very critical. It says that those decisions may take into account both individual performance and organizational accomplishment and shall be based on factors such as improvements in efficiency, productivity, quality of work or service, cost savings, and timeliness of performance.

So this is not just an abstract judgment on the part of a manager that the GS-14 is a good fellow, but there has to be some showing that he has in fact met one or more of the factors that are involved here.

If the employee feels dissatisfied with the appraisal that has been given and the increase that has been given, he has an opportunity to request a review within the agency.

There is also provision in the senior executive service for a board within the agency that appraises the individuals to assure that this won't be just one person's judgment, an arbitrary kind of judgment. The range of increase in the pay of a manager from grade 13 to 15 can be from zero to 12 percent.

For a manager in the senior executive service, it can be from zero to 20 percent.

But in both cases, the requirements of the law as proposed are that there must be a specific showing that there have been improvements or cost savings or timeliness of performance.

Senator PERCY. Mr. Chairman, is someone on the staff keeping track of the time?

Chairman RIBICOFF. I think the Senator has 3 more minutes. Senator PERCY. Thank you.

At no point in S. 2640 is an employee accused of misconduct given a firm right to a hearing, either before or after being fired. Hearings are made discretionary with the agency or the Merit Systems Protection Board. Recent court decisions, particularly the 1974 Supreme Court case of Arnett v. Kennedy, suggest that at least a postdetermination hearing might be constitutionally mandated by due process of law.

Have you considered this constitutional aspect of the question and how do you resolve it?

Mr. CAMPBELL. May I say, perhaps the Vice Chairman will wish to supplement it, that the situation in relation to the agency is as

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it is now; that is, there is no guarantee that an employee be given a hearing within the agency before action is taken. And I would point out that only two agencies in the Federal Government now provide for a hearing within the agency. They are HEW and the National Labor Relations Board. And I believe HEW is about to make a change in their situation.

As to a hearing following the action, we believe that what we have provided is indeed a requirement that there be a hearing whenever there is any contest over matters of fact; that a summary decision may be made in the same way as it can be in the courts when there is no dispute over the facts in the situation.

Senator PERCY. S. 2640 also appears to place the burden of proof on employees in a removal proceedings to prove that the agency has not acted in an "arbitrary or capricious" manner rather than requiring the agency to show that the employee was in fact guilty of the alleged problem.

Is it fair to require the employee to prove the negative charge or to have his job taken without first having the agency establish its case?

Mr. CAMPBELL. We believe that the three grounds upon which an employee may challenge the action of the agency are appropriate. We believe that the arbitrary and capricious language, at least we are so advised by counsel, contains the right for the substantive issue to be considered within that language; third, we believe that to say that it places a burden of proof exclusively on the employee is not a fair picture of the situation.

The employee indeed brings the challenge and in bringing the challenge requires the agency, obviously, to make its case. And in that sense, it is a shared burden of proof which is in contrast to the way the system has developed over the years, where the burden has been interpreted to be almost exclusively on the agency.

That is one of the things that accounts for the long time consumed in building a case before an agency is willing to take action, even though that style has developed, we would not maintain that the current law necessitated the development in that direction. Do you wish to add to that?

Senator PERCY. Thank you very much.

Chairman RIBICOFF. Senator Sasser?

Senator SASSER. Dr. Campbell, I would like to discuss just a moment the appeals procedure with regard to the employee who might be faced with termination or an employee who has performed unsatisfactorily.

Could you spell out for us specifically how the provisions in this legislation would speed up the appeals process and in so doing, also tell us what provisions make it easier for an aggrieved employee to get a fairer hearing? Touch on that just a moment.

Mr. SUGARMAN. If I could, Senator Sasser, from section 4303, which deals with the unsatisfactory performance, the process here is that the agency gives the employee notice that performance is unsatisfactory, gives the employee 30 or 60 days, or in exceptional cases a longer period, to improve that performance, and then promptly makes a decision within the 30 days after the end of the notice period, a decision which has to be concurred in by a superior official as well as the individual who originally proposed an action.