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Office of Management and Budget
News Release



President Bush Proposes Legislation to Improve Management of Federal Agencies

Freedom to Manage Act and Managerial Flexibility Act
Will Eliminate Statutory Barriers to Effective Management

Washington, DC, October 15, 2001 -- The Bush Administration submitted to Congress today two pieces of legislation that give federal agencies the tools they need to manage their programs more effectively. The Freedom to Manage Act of 2001 will permit management reform measures to receive expedited congressional consideration. The Managerial Flexibility Act of 2001 will reform various personnel, budgeting, and property management laws. Together, these measures comprise key components of the Bush Administration's "Freedom to Manage" initiative, an innovative and comprehensive plan to eliminate legal barriers to effective management. Additional components of this initiative will be submitted to Congress in the coming months.

"We've been drawing up these reforms for months. Now their necessity is clearer than ever. At a time of national emergency, it is critical that the government operates effectively and spends every taxpayer dollar wisely. President Bush insists on a government where results matter and customer satisfaction is paramount," said OMB Director Mitchell E. Daniels, Jr.

Details of the Legislative Proposals

  1. Freedom to Manage Act of 2001: This legislation establishes a procedure under which heads of departments and agencies can identify statutory barriers to good management. Congress, in turn, would quickly consider those obstacles and act to remove them.
  2. Managerial Flexibility Act of 2001: This legislation provides federal managers with increased flexibility in managing personnel; assigns agencies the responsibility for funding the full government share of the accruing cost of all retirement and retiree health care benefits for Federal employees; gives agencies greater flexibility in managing property.
    • Reform Personnel Management: This proposal gives federal agencies and managers increased discretion and flexibility in attracting, managing, and retaining a high quality workforce. It empowers federal agencies to determine when, if, and how they might offer new employee incentives, and it enhances the agencies' authority to use recruitment, retention, and relocation bonuses to compete better with the private sector. The bill permits agencies to develop alternative personnel systems to attract and hire employees that best fit the position, and it will enable managers to offer early retirement packages. By enacting important changes to the Senior Executive Service, this proposal also permits high-level Federal managers to be treated more like their private sector counterparts, by results-based performance standards that hold them accountable.

    Examples of how the reforms will work:

    • Downsizing over the last decade has resulted in an imbalance of NASA's skill mix. This Act would authorize NASA to offer recruitment bonuses in greater amounts and through various payment methods, such as lump sum, bi-weekly, and after the completion of a service period. This proposal would provide NASA with more flexibility to fill skill gaps and use tools comparable to those used widely in the private sector.

    • The Department of the Navy successfully experimented with performance-oriented pay for more than a decade, but the authority could not be expanded to other agencies or made permanent without special authorizing legislation. The Managerial Flexibility Act allows successful demonstration projects to be made permanent at the agency where they have been tested and made available for other agencies to adopt.

    • Managers often complain that the Federal hiring process takes too long and is too complicated, often preventing them from hiring the most qualified candidates. The Managerial Flexibility Act would allow Federal managers to hire the most qualified individuals as efficiently as possible by using alternative ranking and selection procedures while maintaining veterans' preference. This proposal is modeled after streamlined hiring authority, which the Department of Agriculture has tested successfully for more than a decade.

    • Budgeting and Managing for Results -- Full Funding for Federal Retiree Costs: This proposal charges federal agencies the full accruing cost of all retirement and retiree health care benefits for federal employees. This proposal is the first government-wide step in linking the full cost of resources used with the results achieved, which will make management in the Executive Branch more performance-oriented. This proposal will not change any of the benefits provided by these programs, and will not change the level of employee contributions.

      In the 1980s, federal civilian and military employee retirement systems were redesigned so that agencies began paying the full accruing cost of pensions for new civilian hires and retired pay for military personnel. However, agencies still pay less than half of the government's share for about 700,000 non-postal employees hired before 1984 in the Civil Service Retirement System (CSRS). This legislation fills the gaps by allowing retirement costs to be funded as they are earned, and by permitting the large unfunded liabilities to be amortized. It will charge agencies the full government share of the accruing cost of CSRS benefits, and make conforming changes to the Foreign Service Retirement and Disability System and the Central Intelligence Agency Retirement and Disability System. It would also establish accrual retirement systems for uniformed services in the Coast Guard, Public Health Service, and National Oceanic and Atmospheric Administration (NOAA). Agencies will also be charged the full accruing cost of the government's share of post-retirement health benefits for Federal civilian employees in the Federal Employees Health Benefits (FEHB) Program, and the bill will adjust the recently enacted accrual of military health benefits for Medicare-eligible retirees to include military health care for all retirees from the uniformed services and charge the non-defense uniformed services for their accruing costs.


    • Reform Federal Property Management: The federal government owns or controls more than 24 million acres of land and facilities, but existing rules restrict the government's ability to consolidate or release underperforming property. In many instances, federal agencies lack the incentives and authority to renovate the property or tap its equity. This proposal facilitates a total asset management approach to Federal property issues by: improving life cycle planning and management; allowing greater flexibility to optimize asset performance; providing incentives for better property management. Modernizing these processes enhances government-wide property management, bringing the practices federal agencies use to manage their assets into the 21st century.

    Examples of how the reforms will work:

    • The L. Mendel Rivers Federal Building is a seven-story, 100,000 square foot office building owned by the General Services Administration that sits vacant on a 2.18 acre site in downtown Charleston, SC. The building is contaminated with asbestos and the best option for future use of this site is to demolish the building and rebuild. The building is in a highly desirable location with a strong potential for private sector demand. One proposal is to outlease the land to a private developer, who would obtain his own financing and redevelop the site with a larger, more efficient building. Federal agencies and/or private tenants would then lease back space in the new building. With the wide range of tools proposed in the Freedom to Manage initiative, GSA will be able to implement this outlease/leaseback proposal if the market and other conditions made that the best choice. The proposed tools will also authorize GSA to sell this site and use the proceeds to rebuild elsewhere, if that were the preferred option.

    • GSA also owns a courthouse in downtown Jacksonville, FL that will be vacated in less than a year. Although there are federal agencies in the Jacksonville area that need space, the agencies would prefer to locate in suburban locations because of access and parking constraints downtown. The City of Jacksonville has expressed interest in acquiring this building. The Freedom to Manage proposal will give GSA the authority to sell the building to the city and use the proceeds to build in a suburban location that would be more desirable for prospective Federal tenants and probably cheaper.

A summary of the Managerial Flexibility Act and the Freedom to Manage Act of 2001 are attached.


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