What Should The Next President Do With OPM?

By on November 10, 2016 in Human Resources with 0 Comments

Image of OPM logo overlaid with question mark

A recent report from Transitions in Governance 2016 includes a section titled Reform/Eliminate Office of Personnel Management.  That section says “Wide-spread dissatisfaction exists on the role of the Office of Personnel Management (OPM).

Some suggest reforms be implemented to streamline the agency and focus OPM on value-added roles. Others believe OPM should be abolished with functions assigned to other agencies – and savings used to bolster management assistance to federal agencies on core HR capabilities.

The new Administration should not assume that OPM as it exists today is the right structure for the future of federal workforce management. A solid Management Agenda should answer the question: “What should be done with OPM?”

I think they punted on this one by saying the next administration should include the answer in their management agenda. It is easy to say OPM should be reformed or eliminated, but much more difficult to say how.

I have written a series of articles on federal HR management reform, and OPM reform is a big part of that, so I have some suggestions regarding OPM and what, specifically, the next President should do with it.

The Mission

Any discussion of reform has to start with the mission of OPM. Why does it exist? Without a clear understanding of OPM’s raison d’être, it is impossible to know what should be done with the agency.

OPM itself described its mission in the agency’s 2014 – 2018 Strategic Plan as “Recruit, Retain, and Honor a World-Class Workforce to Serve the American People.” That mission statement is more of a bumper sticker than a description of what OPM should be expected to do, so I am basing my recommendations on the more specific legal requirements.

OPM was created by the Civil Service Reform Act of 1978. Its primary mission is in 5 U.S. Code § 1103. Simply put, it gives OPM the authority to “design a set of systems, including appropriate metrics, for assessing the management of human capital by Federal agencies.”

It goes on to set requirements for those systems, saying they must include standards for aligning human capital strategies of agencies with the missions, goals, and organizational objectives of those agencies; integrating those strategies into the budget and strategic plans of those agencies; ensuring continuity of effective leadership through implementation of recruitment, development, and succession plans; developing and implementing a knowledge management strategy supported by appropriate investment in training and technology; and holding managers and human resources officers accountable for efficient and effective human resources management in support of agency missions in accordance with merit system principles.”

Other laws give OPM the authority to manage the Federal Employees Health Benefits program (FEHB) and to negotiate contracts with insurers, and to administer the Federal Employees Group Life Insurance program (FEGLI). OPM also has statutory authority for administering civil service retirement programs (other than the Thrift Savings Plan).

In addition, OPM also has authority to conduct background investigations and to operate a revolving fund to cover costs of the investigations. The revolving fund authority, found in 5 USC 1304(e), authorizes OPM to use the revolving fund for “…training, and such other functions as the Office is authorized or required to perform on a reimbursable basis, including personnel management services performed at the request of individual agencies (which would otherwise be the responsibility of such agencies).

What the OPM Mission Should Be

The Governing for Results report suggested that one option is to eliminate OPM and move the work elsewhere. It is not a new idea. The problem is that getting rid of OPM really means moving much of what it does to another agency or group of agencies. After decades of dealing with OPM, I have come to the conclusion that little good would come from eliminating OPM. The real answer is rethinking what they do and getting them focused on performing a more narrowly defined mission.

If I could decide what OPM’s mission should be, OPM would play several key roles in federal HR. It should be the leader in identifying policy requirements, writing regulations, and providing advisory services to agencies. It should run health and life insurance and retirement programs. It should provide oversight of federal HR. Finally, I believe OPM should be responsible for developing and delivering training for federal HR professionals.

Insurance

I am not going to waste a lot of words on this. OPM does an excellent job of managing the FEHB and FEGLI programs. Although I have heard a lot of folks who want to do away with OPM suggesting that these could be moved to another department (usually Health and Human Services), there is little to be gained and much risk in tampering with what is working.

Retirement

OPM administers the CSRS and FERS programs, as well as the processing of retirement claims. The actual program administration is done very well. The bulk of negative press OPM gets on retirement is in the claims processing, where persistent backlogs have been a problem for years. It makes sense for OPM to keep these programs and devote more attention to the backlogs.

Policy, Advisory Services and Oversight

OPM’s most critical missions are policy and oversight. They are the reason the agency and its predecessor, the Civil Service Commission, were created.

I believe policy and the advisory services that go with it have gotten a bit lost in the shuffle in OPM.

Policy initiatives that could make a tremendous difference for the government, such as simplifying job classification and hiring, improving performance management, improving the SES, and other reforms that can be done through better and more flexible regulations, do not get the attention they deserve.

In the past, OPM was the goto place for HR offices who needed help understanding HR laws and regulations. The OPM team of experts was superb. These were folks who were typically involved in developing HR regulations and government-wide policies and they knew their business inside and out.

Today OPM does not have enough people doing policy and advisory work work and it does not give the ones it has the resources they need to do the work well. It takes years to get regulations out of OPM.

Phased retirement was a great example. OPM took more than 2 years to get the regulations written and issued.

A more recent example is a change in eligibility for conversion from career-conditional to career status. OPM issued draft regulations in January 2014 and issued the final regulation on November 8, 2016 – almost 3 years later. A reformed OPM must devote sufficient resources to do this work effectively. It is the single most critical step the next administration can take to improve federal HR.

Oversight is another area that is under-resourced. OPM’s oversight is much more than the area where OPM says “gotcha” to agencies. Good oversight can identify problems as they are happening and ensure they do not get out of hand. As OPM attention and resources devoted to oversight have dwindled, agencies have been asked to do more of their own oversight. In turn, many agencies have cut the dollars they devote to their own reviews. The result is rampant over-grading of jobs, questionable hiring practices, and little likelihood that people who run bad HR programs will get caught. That undermines the credibility of the civil service, both with the federal workforce and with the public. OPM should do more oversight through analysis of the massive amounts of data they collect from agencies.

Background Investigations

OPM currently devotes 66% of its $2.1 billion budget and 52.3% of its manpower to background investigations. When one mission area represents more than half of your money and people, it has to get a lot of management attention and it detracts from other mission areas that are the real reason the agency exists. The same law that authorizes OPM to do background investigations also gives the President authority to assign background investigations for groups or classes of employees to the FBI “when the President considers it in the national interest.” OPM should get out of this business and it should be moved to the FBI or to the intelligence community. The FBI is a law enforcement agency whose reason for being is conducting investigations. The intelligence community is also well-suited to the mission. Either would have the ability to manage this program more effectively than OPM or most other agencies. Yes, moving this work out of OPM would cut the agency and its budget in half, but it would also result in a far more focused agency that is not trying to run its own mini-FBI.

Trust Funds

OPM manages five Earned Benefits Trust Funds:

  •  FEHB – Federal Employees Health Benefits
  •  FEGLI – Federal Employees Group Life Insurance
  •  CSRDF – Civil Service Retirement and Disability Fund
  •  PSRHB – Postal Service Retiree Health Benefits
  •  FSA FEDS – Flexible Spending Accounts for Federal Employees.

Much more detail regarding the Trust Funds and the revolving fund is included in the FY 2017 Congressional Budget Justification. The trust funds should remain as-is, managed by OPM.

Revolving Funds

OPM’s revolving fund authority has been the subject of IG reports, congressional hearings, and more angst than anything in OPM (other than the cyber breach). OPM uses the revolving fund so agencies can pay for OPM services that are not covered by appropriated funds. OPM’s 2017 budget justification includes $1,738,228,457 in planned revolving fund authority. The six OPM programs that use revolving funds are listed below, along with their 2017 budget:

  •  Federal Investigative Services ($1,451,183,080)
  •  Human Resources Solutions ($194,797,495)
  •  Enterprise Human Resources Data Warehouse ($34,522,441)
  •  Human Resources Line of Business ($3,000,000)
  •  Human Resources Tools & Technology ($40,821,931)
  •  USAJOBS ($13,903,510)

If the background investigation business is moved out of OPM, the bulk of the revolving fund dollars go with it. That would reduce OPM’s revolving funds to $287,045,377. I recommend they retain the HR Line of Business, because it is an important enabler of shared services that save the taxpayers significant dollars. Likewise, the Enterprise HR Data Warehouse serves a useful purpose and should be retained. The remaining three programs are a bit more complicated.

Human Resources Solutions includes several of OPM’s core programs that I believe they should retain, including the Center for Leadership Development (operator of the excellent Federal Executive Institute and Eastern and Western Management Development Centers), the Administrative Law Judge Program (5 U.S.C. § 1104(a)(2)), and the training and Management Assistance Program (full disclosure: ICF participates in TMA via the new HCATS contract with GSA and OPM). There has been a fair amount of controversy regarding TMA over the years, but the program is on sound footing with the new vehicle and GSA’s management of the contract. Human Resources Solutions also includes OPM’s traditional staffing programs where it advertises jobs and evaluates applicants for agencies.

OPM should expand its training business to include a full range of training for HR professionals. That kind of training used to be provided for new hires in HR. It included one or two-week long classroom sessions on every discipline in HR. Most of that training is gone and many HR specialists have little formal training. Every CHCO I talk with tells me the same thing – the availability of experienced HR talent is shrinking and has become critical. A revitalized OPM should fill that gap with a full suite of HR training classes.

Where I believe OPM should get out of the market and stop competing with industry is in HR technology. OPM is spending a lot of money building tools that agencies can buy from industry.

I was very involved in the discussions between the CHCO Council and OPM that resulted in OPM in-sourcing USAJobs. Part of the logic at that time was that because Monster Government Solutions provided both USAJobs and a staffing tool used by several agencies, Monster had a competitive advantage that could, in time, have resulted in the other companies that provided similar tools (Acendre, Econsys and Avue) being completely pushed out of the market. That would lead to less innovation and higher costs.

At the time, the biggest players in the market were Monster and OPM’s USA Staffing, with roughly equal market shares. The Department of Defense was using a defunct commercial product called Resumix that was no longer supported. So – OPM brought USAJobs in-house. DoD’s attempt to replace Resumix with a commercial product failed (for a lot of reasons that I cannot go into), so DoD decided to use OPM’s product. Because DoD was using an unsupported product that presented many risks, the DoD decision was driven as much by the desire to avoid a contract competition and the resulting protests as it was by functionality of USA Staffing. The result was that, overnight, OPM had 70% of the federal market for staffing systems.

With that newfound market strength, OPM has continued to expand into HR software. The 2017 budget justification says “Investments for FY 2017 include the enhancement and integration of USAHire, USA Survey, and USA Performance into the USA Suite of Services, and expanded connectivity with USA Staffing® and other OPM HR systems.”

All of these products have commercial competitors and there is no compelling reason for OPM to be in the business of competing with the private sector. In fact, what is now happening is the beginning of what the CHCO Council wanted to avoid by bringing USAJobs in-house. We have one provider (OPM) that owns the entire federal job board market and 70% of the staffing system market, and it is expanding its reach even more into assessment tools, training tools, and more. I believe it is time for OPM to get out of the software business entirely.

If OPM gets out of the investigations business and stops competing with the private sector in the technology business, the result would be a much smaller and more focused agency. That leaves the question of whether OPM should continue to be an independent agency, its funding, and its relationship with the Office of Management and Budget unanswered. My next post will address those subjects.

This column was originally published on Jeff Neal's blog, ChiefHRO.com, and has been reposted here with permission from the author. Visit ChiefHRO.com to read more of Jeff's articles regarding federal human resources and other current events along with his insights on reforming the HR system.

© 2016 Jeff Neal. All rights reserved. This article may not be reproduced without express written consent from Jeff Neal.

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About the Author

Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. He formerly served in the Obama Administration as Chief Human Capital Officer for the Department of Homeland Security and Chief Human Resources Officer for the Defense Logistics Agency. Jeff is also a Fellow at the National Academy of Public Administration and a Partnership for Public Service SAGE.

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