[Federal Register: July 29, 2004 (Volume 69, Number 145)]
[Rules and Regulations]
[Page 45547-45554]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29jy04-19]
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Part VII
Office of Personnel Management
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Office of Management and Budget
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5 CFR Parts 430 and 1330
Executive Performance and Accountability; Interim Rule
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 430
OFFICE OF MANAGEMENT AND BUDGET
5 CFR Part 1330
RIN 3206-AJ86
Executive Performance and Accountability
AGENCY: Office of Personnel Management and Office of Management and
Budget.
ACTION: Interim rule with request for comments.
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SUMMARY: The Office of Personnel Management (OPM) is issuing interim
regulations jointly with the Office of Management and Budget (OMB) to
implement a statutory provision that strengthens the relationship
between the performance and pay of senior employees of the Federal
Government. These regulations establish rigorous conditions regarding
an agency's performance appraisal systems for senior employees which,
if met, would allow its appraisal systems to be certified. These
regulations set forth the criteria and procedural requirements for such
certification.
DATES: Effective Date: The regulations are effective on July 29, 2004.
Comment Date: Comments must be received by OPM on or before August
30, 2004.
ADDRESSES: Send or deliver comments to Donald J. Winstead, Deputy
Associate Director for Pay and Performance Policy, Office of Personnel
Management, Room 7H31, 1900 E Street, NW., Washington, DC 20415-8200;
by FAX at (202) 606-0824; or by e-mail at
pay-performance-policy@opm.gov.
FOR FURTHER INFORMATION CONTACT: Barbara Colchao by telephone at (202)
606-2720; by FAX at (202) 606-2395; or by e-mail at
pay-performance-policy@opm.gov.
SUPPLEMENTARY INFORMATION: The President holds the head of each agency
accountable for the performance of that agency. Because an agency's
success depends in large part on the effective leadership provided by
its senior executives and senior professionals, the President also
holds each agency head accountable for effectively managing the
performance of those key members of the agency's top management team.
The Office of Personnel Management (OPM) is issuing interim regulations
jointly with the Office of Management and Budget (OMB) to implement
section 1322 of the Chief Human Capital Officers Act of 2002 (Title
XIII of Public Law 107-296, the Homeland Security Act of 2002; November
25, 2002). This new statutory provision, as implemented by the
regulations set forth below, will assist an agency head in assuring
that the agency's senior employee performance management systems make
meaningful distinctions based on relative performance for an agency's
Senior Executive Service (SES), senior-level (SL), and scientific or
professional (ST) employees, thereby strengthening the linkage between
their performance and their pay.
Section 1322 of the Chief Human Capital Officers Act of 2002, added
a new paragraph (d) to 5 U.S.C. 5307 establishing conditions that, if
met, would permit an agency to apply a higher aggregate limitation on
pay, equivalent to the rate payable to the Vice President, for certain
SES members who are paid under 5 U.S.C. 5383 and employees in senior-
level and scientific or professional positions paid under 5 U.S.C.
5376. However, in order to apply this higher aggregate pay limitation,
the statute requires that an agency first demonstrate that it has
developed and implemented performance appraisal systems for these
employees that make meaningful distinctions based on relative
performance, as certified by OPM, with OMB concurrence.
As a separate but related matter, OPM is issuing under separate
cover regulations to implement section 1125 of the National Defense
Authorization Act for Fiscal Year 2004 (Public Law 108-136, November
24, 2003) which (1) amends 5 U.S.C. 5382 and 5383 by replacing a six-
level pay system for SES members with a single, open-range ``payband''
with only the minimum and maximum rates of pay set by law and (2)
requires certification under 5 U.S.C. 5307 to allow an increase in the
maximum rate of basic pay, from level III to level II of the Executive
Schedule, for SES members.
In these regulations, we provide the criteria an agency must meet
and the procedures it must follow to obtain certification of its
appraisal system(s). These regulations refer to SES members as ``senior
executives'' and SL and ST employees as ``senior professionals.'' When
a distinction between executives and professionals is irrelevant or
unnecessary, the regulations refer to them as ``senior employees.''
Certification of Performance Appraisal Systems
These regulations establish a new subpart D in part 430 of title 5,
Code of Federal Regulations, and a new subpart D in a newly established
part 1330 of title 5, Code of Federal Regulations. This new subpart
includes the criteria and procedural requirements for certifying an
agency's performance appraisal system(s). Agencies may seek
certification of their OPM-approved appraisal systems for their senior
employees. Note that under subchapters I and II of 5 U.S.C. chapter 43,
an agency must establish separate performance appraisal systems for its
senior professionals and its senior executives. However, such systems
are subject to the same certification criteria, and an agency may
choose to establish systems for these groups of employees that are
essentially identical.
In some agencies, the performance appraisal system(s) covers
employees in many organizations and/or components, and their ability to
meet the criteria required by these regulations may vary significantly.
In such cases, an agency, at its discretion, may establish separate
performance appraisal systems for these distinct organizations and/or
components to ensure timely certification of their performance
appraisal system(s) for those organizations or components that meet the
criteria. New appraisal systems established for this purpose must be
approved by OPM. However, when an agency establishes a new appraisal
system specifically for the purpose of seeking certification under
these regulations, the agency may submit that system for certification
even if it has not yet been approved by OPM. OPM, with OMB concurrence,
will certify only those systems that OPM approves under subpart B or C
of 5 CFR part 430. In addition, when an agency with a certified
appraisal system(s) fails to maintain such system approval or is
subjected to OPM-mandated corrective action relating to its application
of the provisions of 5 U.S.C. chapter 43 or 5 CFR part 430, its system
certification under these regulations is suspended automatically
without the need for further action by OPM or OMB.
An agency that has not received appraisal system certification may
adjust the rate of basic pay for its SES members only up to the rate
for level III of the Executive Schedule and must apply an aggregate
limitation on pay of level I of the Executive Schedule to its senior
employees. Section 5307(d) of title 5, United States Code, requires
that agencies design and apply performance appraisal systems for their
senior executives and senior professionals that ``make meaningful
distinctions based on relative performance'' in order to receive
appraisal system certification.
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As provided below, an agency's appraisal system(s) for its senior
executives and senior professionals, as applicable, will be certified
only if the agency meets the certification criteria and procedures for
certifying appraisal systems set forth in these regulations. (Note that
agencies not subject to the provisions and requirements of 5 U.S.C.
chapter 43 and 5 CFR part 430 must still meet these criteria and
procedural requirements to obtain certification of their appraisal
systems.)
Certification Criteria. The following nine certification criteria
constitute broad principles designed to guide agencies in the strategic
use of their senior employee performance appraisal system(s) to support
the development of a strong performance culture and the attainment of
the agency's mission, goals, and objectives. The criteria place
requirements on the design and application of agency appraisal systems
that must be met to be certified. Although we have specified one
particular criterion that derives from 5 U.S.C. chapter 43 (i.e.,
consultation), all other requirements of chapter 43 must also be met by
agencies subject to its provisions. Agency systems will differ in how
they are designed and implemented and in how they meet these criteria.
In applying these guidelines, agencies must rate performance in
accordance with performance expectations, as appropriate and as defined
and provided for in these regulations. The regulations define
performance expectations as the critical and other performance elements
and performance requirements established for senior executives, the
performance elements and standards established for senior
professionals, and other appropriate means authorized under performance
appraisal systems not covered by chapter 43 for communicating work
requirements to senior employees.
Alignment--Performance expectations are linked to or
derived from the agency's mission, strategic goals, program/policy
objectives, and/or annual performance plan.
Consultation--Performance expectations are based on senior
employee involvement and input that are communicated at the beginning
of the appraisal period and appropriate times thereafter, consistent
with 5 CFR part 430, subparts B and C.
Results--Performance expectations for senior employees
apply to their respective areas of responsibility; reflect expected
agency or organizational performance; clearly describe performance that
is measurable, demonstrable, or observable; and focus on tangible
outputs, outcomes, milestones, or other deliverables.
Balance--Performance expectations for senior employees
include appropriate measures or indicators of results; customer/
stakeholder feedback; quality, quantity, timeliness, and cost
effectiveness, as applicable; and competencies or behaviors that
contribute to and are necessary to distinguish outstanding performance.
Assessments and guidelines--The agency head, or an
individual specifically designated for such purpose, provides
assessments of performance of the agency overall, as well as each of
its major program and functional areas, such as reports of the agency's
Government Performance and Results Act (GPRA) goals and other program
performance measures and indicators, and evaluation guidelines based,
in part, upon those assessments to senior employees, appropriate senior
employee rating and reviewing officials, and Performance Review Board
members. These assessments and guidelines are to be provided at the
conclusion of the appraisal period but before ratings are recommended,
so that they may serve as a basis for individual performance
evaluations, as appropriate. The guidance provided may not take the
form of quantitative limitations on the number of ratings at any given
rating level, and must conform to subpart B or C of 5 CFR part 430, as
applicable.
Oversight--Rigorous oversight of the appraisal process is
provided by the agency head or designee, who certifies that (1) The
senior employee appraisal process makes meaningful distinctions based
on relative performance; (2) the results of that process take into
account, as appropriate, the agency's assessment of its performance
against program performance measures; and (3) pay adjustments, cash
awards, and levels of pay accurately reflect and recognize both
individual and organizational performance. The agency head or designee
need not perform these duties personally, but does bear responsibility
for seeing to it that they are done. Furthermore, the organizational
performance assessment described in this criterion need not be a
separate assessment done for the purposes of these interim final
regulations, but may be any official or formal organizational
assessment done for the purpose of determining how well the agency and
its individual components have performed during the appraisal period.
Accountability--Senior employee ratings (as well as
subordinate employees' performance expectations and ratings for those
with supervisory responsibilities) appropriately reflect the employee's
performance expectations, relevant program performance measures, and
any other relevant factors.
Performance Differentiation--(1) The appraisal system
includes a rating level that reflects outstanding performance or, for
equivalent systems that do not use summary ratings, provides for clear
differentiation of outstanding performance, as defined in these
regulations; and (2) the appraisal process results in meaningful
distinctions in relative performance based on senior employees' actual
performance against rigorous performance expectations. ``Relative
performance'' in this context has the meaning given that term in
Sec. Sec. 430.402 and 1330.402. It does not require ranking senior
employees against each other. Indeed, such ranking is prohibited for
the purpose of determining performance ratings. For the agency's senior
executives covered by 5 CFR part 430 subpart C, appraisal systems must
include at least four, but not more than five, summary rating levels--
an outstanding level, a fully successful level, an optional level
between outstanding and fully successful, a minimally satisfactory
level, and an unacceptable level. For the agency's senior professionals
covered by 5 CFR part 430 subpart B, appraisal systems must include at
least three, but not more than five, summary rating levels--an
outstanding level, a fully successful level, an optional level between
outstanding and fully successful, an unacceptable level, and an
optional level between fully successful and unacceptable.
Pay Differentiation--Individual pay rates and pay
adjustments, as well as their overall distribution, reflect meaningful
distinctions among executives based on their relative contribution to
agency performance. An agency's highest performing senior employees
should receive the largest pay adjustments and/or highest pay levels
(including both basic pay and performance awards), particularly above
the rate for level III of the Executive Schedule. Agencies must provide
for transparency in the processes for making pay decisions. For
example, agencies should consider communicating the overall results of
performance management decisions to senior employees, if individual
confidentiality can be assured.
Certification Procedures. To receive appraisal system
certification, an agency must provide documentation, including its
performance ratings history where summary ratings are used, to
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demonstrate that its appraisal system(s) meets the criteria and
procedural requirements of the regulations. Based on that documentation
and any additional information that OPM and OMB deem necessary, OPM,
with OMB concurrence, may grant the agency's system(s) full
certification for 2 calendar years.
Alternatively, in the case of an agency that has designed, but not
yet fully implemented an appraisal system(s) for its senior executives
and/or senior professionals, as applicable, and which may not have a
history of performance ratings that meets the certification criteria
and procedural requirements, OPM, with OMB concurrence, may grant
provisional certification for 1 calendar year. OPM may extend
provisional certification into the following calendar year in order to
permit an agency to take any actions needed to adjust pay based on
annual summary ratings, ratings of record, or other performance
appraisal results determined during the calendar year for which the
system was certified.
Agencies with fully or provisionally certified systems may set a
senior executive's rate of basic pay up to the rate for level II of the
Executive Schedule, consistent with 5 CFR part 534, subpart D, as and
when such subpart is put into effect. In addition, such agencies'
senior employees who are covered by a fully or provisionally certified
appraisal system may receive aggregate compensation in a calendar year
up to an amount equivalent to the total annual compensation payable to
the Vice President (consistent with 5 CFR part 530, subpart B, as and
when regulations relevant to the higher aggregate limitation on pay are
put into effect).
A senior executive whose rate of basic pay is higher than the rate
for level III of the Executive Schedule may not suffer a reduction in
pay because his or her agency's applicable performance appraisal system
certification is suspended under 5 CFR 430.405(h) and 1330.405(h). The
senior executive will continue to receive his or her current SES rate
and is not eligible for a pay adjustment until the senior executive is
assigned to a position that would allow the employee to receive a pay
adjustment or until certification of the employing agency's applicable
performance appraisal system is reinstated under 5 CFR part 430,
subpart D, and part 1330, subpart D.
Agencies with provisionally certified appraisal systems must
reapply for certification in order to continue setting the rate of
basic pay for senior executives up to the rate for level II of the
Executive Schedule and applying the higher aggregate limitation on pay
to its senior employees. OPM expects that most agencies granted
provisional certification for 2 consecutive years will qualify for full
certification. However, these agencies must request full certification
by following the procedures contained in these regulations. OPM, with
OMB concurrence, also may suspend (with appropriate advance notice) an
agency's appraisal system certification if it determines that the
agency is not in compliance with applicable certification requirements.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities, because they
will apply only to Federal agencies and employees.
Waiver of Notice of Proposed Rulemaking and Delayed Effective Date
Pursuant to section 553(b)(3)(B) of title 5 of the United States
Code, I find that good cause exists for waiving the general notice of
proposed rule making. Also, pursuant to 5 U.S.C. 553(d)(3), I find that
good cause exists for making this rule effective in less than 30 days.
These regulations implement section 1322 of the Chief Human Capital
Officers Act, which became effective on January 25, 2003, and permits
the application of higher pay rates for members of the Senior Executive
Service up to the rate for level II of the Executive Schedule as well
as access to a higher aggregate limitation on pay up to the salary of
the Vice President for certain employees. The waiver of the
requirements for proposed rulemaking and a delay in the effective date
are necessary to ensure timely implementation of the law as intended by
Congress and to activate an important tool for the retention of high-
performing senior executives that provides some relief for pay
compression and provides for paying executives based on their
individual performance and contribution to agency performance.
E.O. 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with E.O. 12866.
List of Subjects in 5 CFR Part 430 and 5 CFR Part 1330
Government employees.
Office of Management and Budget.
Joshua B. Bolten,
Director.
Office of Personnel Management.
Kay Coles James,
Director.
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Accordingly, OPM and OMB are amending title 5 of the Code of Federal
Regulations as follows:
5 CFR Chapter I--Office of Personnel Management
PART 430--PERFORMANCE MANAGEMENT
0
1. The authority citation for part 430 is revised to read as follows:
Authority: 5 U.S.C. chapter 43 and 5307(d).
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2. In part 430, a new subpart D is added to read as follows. The text
of the subpart is the same as the common rule text set out at the end
of this document.
Subpart D--Performance Appraisal Certification for Pay Purposes
Sec.
430.401 Purpose.
430.402 Definitions.
430.403 System certification.
430.404 Certification criteria.
430.405 Procedures for certifying agency appraisal systems.
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3. The text of the new subpart is the same as the common rule text set
out at the end of this document, with the following amendments:
0
a. In Sec. 430.403, the references to ``Sec. ----.402,'' ``Sec. --
--.404,'' and ``Sec. ----.405'' are revised to read ``Sec. 430.402,''
``Sec. 430.404,'' and ``Sec. 430.405,'' respectively.
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b. In Sec. 430.404, the reference to ``Sec. ----.402'' is revised to
read ``Sec. 430.402.''
0
c. In Sec. 430.405, the references to ``Sec. ----.402,'' ``Sec. --
--.403,'' and ``Sec. ----.404'' are revised to read ``Sec. 430.402,''
``Sec. 430.403,'' and ``Sec. 430.404,'' respectively.
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d. Add the following note to subpart D:
Note to Subpart D: Regulations identical to this subpart appear
at 5 CFR part 1330, subpart D.
5 CFR Chapter III--Office of Management and Budget
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1. 5 CFR chapter III is amended by establishing a new subchapter C
consisting of part 1330, subpart D, to read as follows:
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Subchapter C--Joint Regulations with the Office of Personnel Management
PART 1330--HUMAN RESOURCES MANAGEMENT
Subparts A--C [Reserved]
Subpart D--Performance Appraisal Certification for Pay Purposes
Sec.
1330.401 Purpose.
1330.402 Definitions.
1330.403 System certification.
1330.404 Certification criteria.
1330.405 Procedures for certifying agency appraisal systems.
Authority: 5 U.S.C. 5307(d).
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2. The text of the new subpart is the same as the common rule text set
out at the end of this document, with the following amendments:
0
a. In Sec. 1330.403, the references to ``Sec. ----.402,'' ``Sec. --
--.404,'' and ``Sec. ----.405'' are revised to read ``Sec.
1330.402,'' ``Sec. 1330.404,'' and ``Sec. 1330.405,'' respectively.
0
b. In Sec. 1330.404, the reference to ``Sec. ----.402'' is revised to
read ``Sec. 1330.402.''
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c. In Sec. 1330.405, the references to ``Sec. ----.402,'' ``Sec. --
--.403,'' and ``Sec. ----.404'' are revised to read ``Sec.
1330.402,'' ``Sec. 1330.403,'' and ``Sec. 1330.404,'' respectively.
0
d. Add the following note to subpart D:
Note to Subpart D: Regulations identical to this subpart appear
at 5 CFR part 430, subpart D.
Text of the Common Rule
The text of the common rule for 5 CFR part 430, subpart D, and 5
CFR part 1330, subpart D, adopted as set forth above, reads as follows:
Subpart D--Performance Appraisal Certification for Pay Purposes
Sec.
----.401 Purpose.
----.402 Definitions.
----.403 System certification.
----.404 Certification criteria.
----.405 Procedures for certifying agency appraisal systems.
Sec. ----.401 Purpose.
(a) This subpart implements 5 U.S.C. 5307(d), as added by section
1322 of the Chief Human Capital Officers Act of 2002 (Title XIII of
Public Law 107-296, the Homeland Security Act of 2002; November 25,
2002), which provides a higher aggregate limitation on pay for certain
members of the Senior Executive Service (SES) under 5 U.S.C. 5382 and
5383 and employees in senior-level (SL) and scientific or professional
(ST) positions paid under 5 U.S.C. 5376. In addition, this subpart is
necessary to administer rates of basic pay for members of the SES under
5 U.S.C. 5382, as amended by section 1125 of the National Defense
Authorization Act for Fiscal Year 2004. The regulations in this subpart
strengthen the application of pay-for-performance principles to senior
executives and senior professionals. Specifically, the statutory
provisions authorize an agency to apply a higher maximum rate of basic
pay for senior executives (consistent with 5 CFR part 534, subpart D,
when effective) and apply a higher aggregate limitation on pay
(consistent with 5 CFR part 530, subpart B) to its senior employees,
but only after OPM, with OMB concurrence, has certified that the design
and application of the agency's appraisal systems for these employees
make meaningful distinctions based on relative performance. This
subpart establishes the certification criteria and procedures that OPM
will apply in considering agency requests for such certification.
(b) Senior executives generally may receive an annual rate of basic
pay up to the rate for level III of the Executive Schedule under 5
U.S.C. 5382 and 5 CFR part 534, subpart D, when effective. Senior
employees generally may receive total compensation in a calendar year
up to the rate for level I of the Executive Schedule under 5 U.S.C.
5307(a) and 5 CFR 530.203(a). Only employees covered by an appraisal
system that OPM, with OMB concurrence, certifies under this subpart are
eligible for a maximum annual rate of basic pay for senior executives
up to the rate for level II of the Executive Schedule (consistent with
5 U.S.C. 5382 and 5 CFR part 534, subpart D, when effective) and a
higher aggregate pay limitation equivalent to the total annual
compensation payable to the Vice President (consistent with 5 U.S.C.
5307(d) and 5 CFR 530.203(b)).
Sec. ----.402s Definitions.
In this subpart--
Appraisal system means the policies, practices, and procedures an
agency establishes under 5 U.S.C. chapter 43 and 5 CFR part 430,
subparts B and C, or other applicable legal authority, for planning,
monitoring, developing, evaluating, and rewarding employee performance.
This includes appraisal systems and appraisal programs as defined at
Sec. 430.203 and performance management systems as defined at Sec.
430.303.
GPRA means the Government Performance and Results Act of 1993.
OMB means the Office of Management and Budget.
OPM means the Office of Personnel Management.
Outstanding performance means performance that substantially
exceeds the normally high performance expected of any senior employee,
as evidenced by exceptional accomplishments or contributions to the
agency's performance.
Performance evaluation means the comparison of the actual
performance of senior employees against their performance expectations
and may take into account their contribution to agency performance,
where appropriate.
Performance expectations means critical and other performance
elements and performance requirements that constitute the senior
executive performance plans (as defined in Sec. 430.303) established
for senior executives, the performance elements and standards that
constitute the performance plans (as defined in Sec. 430.203)
established for senior professionals, or other appropriate means
authorized under performance appraisal systems not covered by 5 U.S.C.
chapter 43 for communicating what a senior employee is expected to do
and the manner in which he/she is expected to do it, and may include
contribution to agency performance, where appropriate.
Program performance measures means results-oriented measures of
performance, whether at the agency, component, or function level, which
include, for example, measures under the Government Performance and
Results Act.
PRB means Performance Review Board, as described at Sec. 430.310.
Relative performance means the performance of a senior employee
with respect to the performance of other senior employees, including
their contribution to agency performance, where appropriate, as
determined by the application of a certified appraisal system.
Senior employee means a senior executive or a senior professional.
Senior executive means a member of the Senior Executive Service
(SES) paid under 5 U.S.C. 5383.
Senior professional means an employee in a senior-level (SL) or
scientific or professional position (ST) paid under 5 U.S.C. 5376.
Sec. ----.403 System certification.
(a) The performance appraisal system(s) covering senior employees
must be certified by OPM, with OMB concurrence, as making meaningful
distinctions based on relative performance before an agency may apply a
maximum annual rate of basic
[[Page 45552]]
pay for senior executives equal to the rate for level II of the
Executive Schedule or apply an annual aggregate limitation on payments
to senior employees equal to the salary of the Vice President under 5
U.S.C. 5307(d)). OPM, with OMB concurrence, will certify an agency's
appraisal system(s) only when a review of that system's design,
application, and administration reveals that the agency meets the
certification criteria established in Sec. ----.404 and has followed
the procedures for certifying agency appraisal systems in Sec. --
--.405.
(b) Except as provided in paragraph (c) of this section, agencies
subject to 5 U.S.C. chapter 43 and 5 CFR part 430 seeking certification
of their appraisal systems must submit systems that have been approved
by OPM under Sec. 430.312 or Sec. 430.210, as applicable. In some
agencies, the performance appraisal system(s) covers employees in many
organizations and/or components, and their ability to meet the
certification criteria in Sec. ----.404 may vary significantly. In
such cases, an agency may establish and/or submit separate performance
appraisal systems for each of these distinct organizations and/or
components to ensure timely certification of those performance
appraisal system(s) that meet the criteria. New appraisal systems
established under 5 CFR part 430, subpart B or C, as applicable based
on the employees covered, must be approved by OPM.
(c) When an agency establishes a new appraisal system for the
purpose of seeking certification under this subpart, the agency may
submit that system for certification even if it has not yet been
approved by OPM under Sec. 430.312 or Sec. 430.210, as applicable.
OPM will certify, with OMB concurrence, only those systems that OPM
determines meet the approval requirements of 5 CFR part 430, subpart B
or C, as applicable.
(d) An agency must establish an appraisal system(s), as defined in
Sec. ----.402, for its senior professionals that meets the
requirements of 5 CFR part 430, subpart B, and is separate from the
system(s) established to cover its SES members under 5 CFR part 430,
subpart C. For the purpose of certification under this subpart, such
senior professional appraisal system(s) must meet the certification
criteria set forth in Sec. ----.404. At its discretion, an agency may
include system features in its senior professional appraisal system(s)
that are the same as, or similar to, the features of its SES appraisal
system(s), as appropriate, including procedures that correspond to the
higher level review procedures under Sec. 430.308(b) and PRB reviews
of summary ratings under Sec. 430.308(c).
(e) For agencies subject to 5 U.S.C. chapter 43 and 5 CFR part 430,
OPM approval of the agency performance appraisal system(s) is a
prerequisite to certification. Agencies not subject to the appraisal
provisions of 5 U.S.C. chapter 43 and 5 CFR part 430 and which are
seeking certification of their appraisal system(s) under this subpart
must submit appropriate documentation to demonstrate that each system
complies with the appropriate legal authority that governs the
establishment, application, and administration of that system.
Sec. ----.404 Certification criteria.
(a) To be certified, an agency's applicable appraisal system(s) for
senior executives or senior professionals must make meaningful
distinctions based on relative performance and meet the other
requirements of 5 U.S.C. chapter 43, as applicable, in addition to the
particular criterion cited here (i.e., consultation). Such system(s)
must provide for the following:
(1) Alignment, so that the performance expectations for individual
senior employees derive from, and clearly link to, the agency's
mission, GPRA strategic goals, program and policy objectives, and/or
annual performance plans and budget priorities;
(2) Consultation, so that the performance expectations for senior
employees meet the requirements of 5 CFR part 430, subparts B and C, as
applicable, and/or other applicable legal authority; are developed with
the input and involvement of the individual senior employees who are
covered thereby; and are communicated to them at the beginning of the
applicable appraisal period, and/or at appropriate times thereafter;
(3) Results, so that the performance expectations for individual
senior employees apply to their respective areas of responsibility;
reflect expected agency and/or organizational outcomes and outputs,
performance targets or metrics, policy/program objectives, and/or
milestones; identify specific programmatic crosscutting, external, and
partnership-oriented goals or objectives, as applicable; and are stated
in terms of observable, measurable, and/or demonstrable performance;
(4) Balance, so that in addition to expected results, the
performance expectations for individual senior employees include
appropriate measures or indicators of employee and/or customer/
stakeholder feedback; quality, quantity, timeliness, and cost
effectiveness, as applicable; and those technical, leadership and/or
managerial competencies or behaviors that contribute to and are
necessary to distinguish outstanding performance;
(5) Appropriate assessments of the agency's performance--overall
and with respect to each of its particular missions, components,
programs, policy areas, and support functions--such as reports of the
agency's GPRA goals, annual performance plans and targets, program
performance measures, and other appropriate indicators, as well as
evaluation guidelines based, in part, upon those assessments, that are
communicated by the agency head, or an individual specifically
designated by the agency head for such purpose, to senior employees,
appropriate senior employee rating and reviewing officials, and PRB
members. These assessments and guidelines are to be provided at the
conclusion of the appraisal period but before individual senior
employee performance ratings are recommended, so that they may serve as
a basis for individual performance evaluations, as appropriate. The
guidance provided may not take the form of quantitative limitations on
the number of ratings at any given rating level, and must conform to 5
CFR part 430, subpart B or C, as applicable;
(6) Oversight by the agency head or the individual specifically
designated under paragraph (a)(5) of this section, who certifies, for a
particular senior employee appraisal system, that--
(i) The senior employee appraisal process makes meaningful
distinctions based on relative performance;
(ii) The results of the senior employee appraisal process take into
account, as appropriate, the agency's assessment of its performance
against program performance measures, as well as other relevant
considerations; and
(iii) Pay adjustments, cash awards, and levels of pay based on the
results of the appraisal process accurately reflect and recognize
individual performance and/or contribution to the agency's performance;
(7) Accountability, so that final agency head decisions and any PRB
recommendations regarding senior employee ratings consistent with 5 CFR
part 430, subparts B and C, individually and overall, appropriately
reflect the employee's performance expectations, relevant program
performance measures, and such other relevant factors as the PRB may
find appropriate; in the case of supervisory senior employees, ratings
must reflect the degree to which performance standards, requirements,
or expectations for individual subordinate employees
[[Page 45553]]
clearly link to organizational mission, GPRA strategic goals, or other
program or policy objectives and take into account the degree of rigor
in the appraisal of their subordinate employees;
(8) Performance differentiation, so that the system(s) includes at
least one summary level of performance above fully successful,
including a summary level that reflects outstanding performance, as
defined in Sec. ----.402, and so that its annual administration
results in meaningful distinctions based on relative performance that
take into account the assessment of the agency's performance against
relevant program performance measures, as described in paragraph (a)(6)
of this section, employee performance expectations, and such other
relevant factors as may be appropriate. Relative performance does not
require ranking senior employees against each other; such ranking is
prohibited for the purpose of determining performance ratings. For
equivalent systems that do not use summary ratings, the appraisal
system must provide for clear differentiation of performance at the
outstanding level; and
(9) Pay differentiation, so that those senior employees who have
demonstrated the highest levels of individual performance and/or
contribution to the agency's performance receive the highest annual
summary ratings or ratings of record, as applicable, as well as the
largest corresponding pay adjustments, cash awards, and levels of pay,
particularly above the rate for level III of the Executive Schedule.
Agencies must provide for transparency in the processes for making pay
decisions, while assuring confidentiality.
(b) Consistent with the requirements in section 3(a) of the
Inspector General Act of 1978, an agency's Inspector General or an
official he or she designates must perform the functions listed in
paragraphs (a)(5) and (6) of this section for senior employees in the
Office of the Inspector General.
Sec. ----.405 Procedures for certifying agency appraisal systems.
(a) General. To receive system certification, an agency must
provide documentation demonstrating that its appraisal system(s), in
design, application, and administration, meets the certification
criteria in Sec. ----.404 as well as the procedural requirements set
forth in this section.
(b) Certification requests. In order for an agency's appraisal
system to be certified, the head of the agency or designee must submit
a written request for full or provisional certification of its
appraisal system(s) to OPM. Certification requests may cover an
agencywide system or a system that applies to one or more agency
organizations or components and must include--
(1) A full description of the appraisal system(s) to be certified,
including--
(i) Organizational and employee coverage information;
(ii) Applicable administrative instructions and implementing
guidance; and
(iii) The system's use of rating levels that are capable of clearly
differentiating among senior employees based on appraisals of their
relative performance against performance expectations in any given
appraisal period reflecting performance evaluation results that make
meaningful distinctions based on relative performance, and which
include--
(A) For the agency's senior executives covered by 5 CFR part 430,
subpart C, at least four, but not more than five, summary rating
levels--an outstanding level, a fully successful level, an optional
level between outstanding and fully successful, a minimally
satisfactory level, and an unsatisfactory level;
(B) For the agency's senior professionals covered by 5 CFR part
430, subpart B, at least three, but not more than five, summary
levels--an outstanding level, a fully successful level, an optional
level between outstanding and fully successful, an unacceptable level,
and an optional level between fully successful and unacceptable; and
(C) For agencies not subject to 5 CFR part 430, subparts B and C, a
summary rating level that reflects outstanding performance or a
methodology that clearly differentiates outstanding performance, as
defined in Sec. ----.402;
(2) A clearly defined process for reviewing--
(i) The initial summary ratings and ratings of record, as
applicable, of senior employees to ensure that annual summary ratings
or ratings of record are not distributed arbitrarily or on a rotational
basis, and
(ii) In the case of senior employees with supervisory
responsibilities--
(A) The performance standards, requirements, or expectations for
the employees they supervise to ensure that they clearly link to
organizational mission, GPRA strategic goals, or other program and
policy objectives, as appropriate, and
(B) The performance standards, requirements, or expectations and
the performance ratings of the employees they supervise to ensure that
they reflect distinctions in individual and organizational performance,
as appropriate;
(3) Documentation showing that the appraisal system(s) meets the
applicable certification criteria, as follows:
(i) For provisional certification, the requirements in Sec. --
--.404(a)(1)-(4); and
(ii) For full certification, all of the requirements in Sec. --
--.404.
(4) For full certification, data on senior executive annual summary
ratings and senior professional ratings of record, as applicable (or
other documentation for agencies that do not use summary ratings), for
the two appraisal periods preceding the request, as well as
corresponding pay adjustments, cash awards, and levels of pay provided
to those senior employees; and
(5) Any additional information that OPM and OMB may require to make
a determination regarding certification.
(c) Certification actions. At the request of an agency, the
Director of OPM, at his or her discretion and in accordance with the
requirements of this subpart and with OMB concurrence, may grant full
or provisional certification of the agency's appraisal system(s). OPM,
with OMB concurrence, may--
(1) Grant full certification of an agency's senior employee
appraisal system(s) for 2 calendar years when an agency has
demonstrated that it has designed and fully implemented and applied an
appraisal system(s) for its senior executives or senior professionals,
as applicable, that meets the certification criteria in Sec. ----.404
and the documentation requirements of this section.
(2) Grant provisional certification of an agency's senior employee
appraisal system(s) for 1 calendar year when an agency has designed,
but not yet fully implemented or applied, an appraisal system(s) for
its senior executives or senior professionals, as applicable, that
meets the certification criteria in Sec. ----.404. OPM may extend
provisional certification into the following calendar year in order to
permit an agency to take any actions needed to adjust pay based on
annual summary ratings, ratings of record, or other performance
appraisal results determined during the calendar year for which the
system was certified; or
(3) Suspend certification under paragraph (h) of this section if,
at any time during the certification period, OPM, with OMB concurrence,
determines that the agency appraisal system is not in compliance with
certification criteria.
[[Page 45554]]
(d) Pay limitations. Absent full or provisional certification of
its appraisal system(s), an agency must--
(1) Set a senior executive's rate of basic pay at a rate that does
not exceed the rate for level III of the Executive Schedule, consistent
with 5 CFR part 534, subpart D, when effective; and
(2) Limit aggregate compensation paid to senior employees in a
calendar year to the rate for level I of the Executive Schedule,
consistent with 5 CFR 530.203(b).
(e) Full Certification. (1) OPM, with OMB concurrence, may grant
full certification when a review of the agency's request and
accompanying documentation demonstrates that the design, application,
and administration of the agency's appraisal system(s) meet the
criteria in Sec. ----.404 and the documentation requirements of this
section.
(2) An agency with a fully-certified appraisal system(s) may set
the rate of basic pay under 5 CFR part 534, subpart D, when effective,
for a senior executive covered by a certified system at a rate that
does not exceed the rate for level II of the Executive Schedule and pay
senior employees covered by certified system(s) aggregate compensation
in a certified calendar year in an amount up to the Vice President's
salary under 3 U.S.C. 104.
(3) Full certification of an agency's appraisal system will be
renewed automatically for an additional 2 calendar years, if--
(i) The agency meets the annual reporting requirements in paragraph
(g) of this section; and
(ii) Based on those annual reports, OPM determines, and OMB
concurs, that the appraisal system(s) continues to meet the
certification criteria and procedural requirements set forth in this
subpart.
(f) Provisional certification. (1) OPM, with OMB concurrence, may
grant provisional certification when the design of an agency's
appraisal system(s) for senior executives or senior professionals, as
applicable, meets the requirements set forth in this subpart, but
insufficient documentation exists to determine whether the actual
application and administration of the appraisal system(s) meet the
requirements for full certification. OPM, with OMB concurrence, may
grant provisional certification to an agency more than once.
(2) During the 1-year period of provisional certification, an
agency may set the rate of basic pay for a senior executive covered by
the provisionally certified system at a rate that does not exceed the
rate for level II of the Executive Schedule (consistent with 5 CFR part
534, subpart D, when effective) and pay senior employees covered by
provisionally certified systems aggregate compensation in the certified
calendar year in an amount up to the Vice President's salary under 3
U.S.C. 104 (consistent with 5 CFR part 530, subpart B).
(3) An agency must resubmit an application requesting provisional
certification for every calendar year for which it intends to maintain
provisional certification. An agency with a provisionally certified
appraisal system(s) may request that OPM, with OMB concurrence, grant
full certification upon a showing that its performance appraisal
systems for senior executives and senior professionals, as applicable,
meet the certification criteria in Sec. ----.404 and the documentation
requirements in this section, particularly with respect to the
implementation and administration of the system(s) over at least two
consecutive performance appraisal periods.
(g) Annual reporting requirement. Agencies with certified appraisal
systems must provide OPM with a general summary of the annual summary
ratings and ratings of record, as applicable, and rates of basic pay,
pay adjustments, cash awards, and aggregate total compensation
(including any lump-sum payments in excess of the applicable aggregate
limitation on pay that were paid in the current calendar year as
required by Sec. 530.204) for their senior employees covered by a
certified appraisal system at the conclusion of each appraisal period
that ends during a calendar year for which the certification is in
effect, in accordance with OPM instructions.
(h) Suspension of Certification. (1) When OPM determines that an
agency's certified appraisal system is no longer in compliance with
certification criteria, OPM, with OMB concurrence, may suspend such
certification, as provided in paragraph (c)(3) of this section.
(2) An agency's system certification is automatically suspended
when OPM withdraws performance appraisal system approval or mandates
corrective action because of misapplication of the system as authorized
under Sec. Sec. 430.210(c), 430.312(c), and ----.403(e).
(3) OPM will notify the head of the agency at least 30 calendar
days in advance of the suspension and the reason(s) for the suspension,
as well as any expected corrective action. Upon such notice, and until
its system certification is reinstated, the agency must set a senior
executive's rate of basic pay under 5 CFR part 534, subpart D, when
effective, at a rate that does not exceed the rate for level III of the
Executive Schedule. While certification is suspended, an agency must
limit aggregate compensation received in a calendar year by a senior
employee to the rate for level I of the Executive Schedule. Pay
adjustments, cash awards, and levels of pay in effect prior to that
notice will remain in effect unless OPM finds that any such decision
and subsequent action was in violation of law, rule, or regulation.
(4) OPM, with OMB concurrence, may reinstate an agency's suspended
certification only after the agency has taken appropriate corrective
action.
(5) OPM may reinstate the certification of an appraisal system that
has been automatically suspended under paragraph (h)(2) of this section
upon the agency's compliance with the applicable OPM-mandated
corrective action(s).
[FR Doc. 04-17319 Filed 7-26-04; 4:54 pm]
BILLING CODE 6325-39-P