Assuring Responsive and Accountable Federal Executive Management

OFFICE OF PERSONNEL MANAGEMENT <CFR>5 CFR Part 430</CFR> <RIN>RIN 3206-AO81</RIN> <SUBJECT>Assuring Responsive and Accountable Federal Executive Management</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Personnel Management. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Office of Personnel Management (OPM) is proposing to remove the prohibition of a forced distribution of performance rating levels within the Senior Executive Service (SES) as well as eliminate diversity, equity, and inclusion (DEI) language within SES performance management regulations. Currently, agencies are prohibited from establishing quotas or limits on the number or proportion of the various rating levels assigned, meaning that each senior executive potentially can receive any rating based on their performance, irrespective of how other senior executives perform within the agency. However, governmentwide SES ratings data have consistently shown that virtually all SES receive the highest rating levels ( <E T="03">i.e.,</E> levels 4 and 5) despite documented reports of SES failings. Removing the prohibition on forced distribution would allow agencies to establish and enforce limits on the highest SES rating levels, thereby increasing rigor in the SES appraisal process and leading to a more normalized distribution of SES ratings across the Federal Government. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received on or before June 2, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit comments, identified by RIN number “3206-AO81,” and title using the following method: • <E T="03">Federal eRulemaking Portal: https://www.regulations.gov.</E> Follow the instructions for submitting comments. The general policy for comments and other submissions from members of the public is to make these submissions available for public viewing at <E T="03">https://www.regulations.gov</E> without change, including any personal identifiers or contact information. As required by 5 U.S.C. 553(b)(4), a summary of this rule may be found in the docket for this rulemaking at <E T="03">https://www.regulations.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Noah Peters, Senior Advisor to the Director, 202-606-8046 or by email at <E T="03">SESpolicy@opm.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Background</HD> The Senior Executive Service (SES) is a corps of top-level Federal executives who provide leadership and oversee government operations, bridging the gap between political appointees and career civil servants. The SES was established by the Civil Service Reform Act (CSRA) of 1978 and became effective in July 1979. CSRA envisioned a senior executive corps with solid executive expertise, public service values, and a broad perspective of Government. The CSRA established the SES as a distinct personnel system that applies the same executive qualifications requirements to all members. The system was designed to provide greater authority to agencies to manage their executive resources, including the flexibility for selecting and developing Federal executives within a framework that preserves the larger interests of the Government. In 2004, the SES adopted a pay-for-performance system established under Section 1125 of Public Law 108-136 (November 24, 2003), which amended 5 U.S.C. 5382. The new pay-for-performance system replaced the six-level SES pay structure previously used with an open-range system tied to individual performance. Automatic pay increases were eliminated, and salaries, raises, and bonuses became contingent on rigorous performance evaluations. Agencies also had to obtain performance appraisal system certification from OPM and the Office of Management and Budget (OMB) in order to exceed the standard SES pay cap of level III of the Executive Schedule, allowing top salaries to reach level II. The reforms aimed to increase accountability, attract top talent, and reward high performers. In 2012, OPM issued a model SES performance appraisal system referred to as the “Basic SES Performance Appraisal System,”  <SU>1</SU> <FTREF/> which created a consistent and uniform framework to communicate expectations and evaluate the performance of SES members across agencies. The Basic SES system was refined in 2016 following a 2015 Government Accountability Office (GAO) report and OPM updates to SES performance management regulations. <FTNT> <SU>1</SU>  OPM, “ <E T="03">Senior Executive Service Performance Appraisal System,</E> ” (January 4, 2012) available at <E T="03">https://chcoc.gov/sites/default/files/senior-executive-service-performance-appraisal-system_508.pdf.</E> </FTNT> <HD SOURCE="HD1">SES Performance Management</HD> SES performance is managed through a structured performance appraisal system that includes annual appraisals of senior executives based on individual and organizational performance as they apply to the senior executive's area of responsibility and control. Subpart C of 5 CFR part 430 provides the requirements for managing the performance of senior executives. Each agency is required to have a performance management system that incorporates standards specified in 5 CFR 430.305. Senior executives are appraised at least annually and are assigned a numerical rating ranging from Level 1 “Unsatisfactory” to Level 5 “Outstanding.” OPM does not anticipate that the appraisal process for an individual employee will change under this proposed rule. Nothing is changing in terms of how a rating official issues an initial summary rating and agencies will still be required to provide training to SES members on the appraisal system. All SES within an agency will be fairly evaluated against the SES appraisal system performance requirements and performance standards. SES initial summary ratings will continue to be derived through a “point score” calculation and agency-level Performance Review Boards (PRB) will likely rank SES based on their appraisal point scores to delineate those SES who will be recommended for the highest ratings. It will be up to the agency-level PRB to make recommendations to the appointing authority on SES annual summary ratings consistent with the forced distribution rating limit. OPM expects that, in accordance with the Presidential Memorandum titled “Restoring Accountability for Career Senior Executives” (90 FR 8481; Jan. 30, 2025) (“Restoring Accountability Memo”), re-constituted PRBs made up of individuals committed to full enforcement of the SES performance standards will make fair recommendations on SES annual summary ratings. Good performance management requires ongoing feedback in which an employee is not only kept informed about how he or she is doing but is also given guidance and assistance to do even better in the future. <SU>2</SU> <FTREF/> This starts with developing clear performance expectations and rigorous performance standards against which performance is assessed. <FTNT> <SU>2</SU>  U.S. Merit Systems Protection Board, Office of Policy and Evaluation, Performance Management is More than an Appraisal, (Washington, DC: December 2015), available at <E T="03">https://www.mspb.gov/studies/publications/Performance_Management_is_More_than_an_Appraisal.pdf.</E> </FTNT> The agency should then ensure only employees who have demonstrated the highest levels of performance receive the highest ratings and rewards. Indeed, a key part of effective performance management is ensuring that meaningful distinctions are made based on relative performance. Agencies are required by statute to develop performance appraisal systems that allow for the accurate evaluation of performance based on criteria related to the position, that identify the critical elements of that position, that provide for systematic appraisals of performance by senior executives, that encourage excellence in performance, and that provide a basis for making retention determinations and SES performance awards. <E T="03">See</E> 5 U.S.C. 4312(a). Congress designed the SES to “ensure that the executive management of the Government of the United States is responsive to the needs, policies, and goals of the Nation and otherwise is of the highest quality.” 5 U.S.C. 3131. Specifically, the statute directs OPM to administer the SES to achieve fourteen goals, four of which are of particular relevance to this rulemaking. Of these four, the first requires OPM to “ensure that compensation, retention, and tenure are contingent on executive success,” while specifying that success should be based on individual and organizational performance. 5 U.S.C. 3131(2). Second, members of the SES must be held accountable and responsible for the effectiveness and productivity of their subordinate employees. 5 U.S.C. 3131(3). Third, OPM's administration of the SES is intended to “recognize exceptional accomplishment” by senior executives. 5 U.S.C. 3131(4). Finally, OPM must ensure accountability for an “honest, economical, and efficient Government.” 5 U.S.C. 3131(10). <HD SOURCE="HD2">Historical Underperformance</HD> Unfortunately, the current SES performance rating system falls short of these statutory requirements, in particular in failing to meaningfully differentiate among excellent, mediocre, and poor performance. SES data have consistently shown that the vast majority of executives' annual summary ratings are above the “Fully Successful” level. In January 2015, the Government Accountability Office (GAO) published a study on SES ratings and performance awards concluding that most of the federal agencies studied were not making meaningful distinctions in performance ratings for senior executives. <SU>3</SU> <FTREF/> In that report, about 85 percent of career executives received an “Outsta ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 49k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━