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The Managerial Flexibility Act

The "Managerial Flexibility Act of 2001" is a key element of the Administration's "Freedom to Manage" initiative. Enactment of this legislative proposal will result in significant simplification and improvement of Federal agencies ability to manage employees, resources, and assets.

Flexibility in Managing Personnel

  • Currently, Federal personnel laws tie the hands of Federal managers who are trying to effectively manage programs. This proposal gives Federal managers the tools and the authority to cultivate a workforce that is able and motivated.

  • The legislation would: (1) provide managers with enhanced authority to use recruitment, retention, and relocation bonuses; (2) permit agencies to easily develop demonstration projects and implement alternative personnel systems, while still protecting veterans rights to preference in hiring; (3) authorize managers to use workforce restructuring tools including early retirement packages; and (4) recruit and treat senior executives more comparably with their private sector counterparts.

Charging Agencies For Full Cost of Federal Retirement and Retiree Health Care Benefits

  • Agencies pay less than half of the Government's share of retirement costs for about 700,000 non-Postal employees hired before 1984 in the Civil Service Retirement System; and members of the non-defense Uniformed Services -- Coast Guard (USCG), Public Health Service (PHS), and National Oceanic and Atmospheric Administration (NOAA) -- still have pay-as-you-go systems. The post-retirement health care costs for all Uniformed Services (including the Department of Defense) retirees under age 65 and the post-retirement health care costs for civilian employees in the Federal Employees Health Benefits Program are all still funded on a pay-as-you-go basis.

  • This bill charges agencies the full Government share of the accruing cost of all retirement and post-retirement retiree health care benefits for Federal employees. Employee retirement benefits would be accrued as they are earned, and unfunded liabilities would be amortized. This proposal will not change any of the benefits provided by these programs, and will not change the level of employee contributions.

Flexibility in Managing and Disposing of Property Assets

  • The Federal Government owns or controls over 24 million acres of land and facilities. Barriers exist with regard to consolidating or releasing underperforming property, renovating property, applying asset management principles to property, and the ability to use business-like financial tools to tap the equity in properties.

  • This proposal facilitates a total asset management approach to Federal property issues by: (1) improving life cycle planning and management; (2) allowing greater flexibility to optimize asset performance; and (3) providing incentives for better property management.


Federal Employment Restructuring Assistance Act of 2001 would create a permanent government-wide buyout authority providing cash incentive of up to $25,000. Requires OMB approval of buyout plan; includes a waiver provision for the one-for-one reduction to allow for workforce restructuring; allows buyouts to be targeted on the basis of organizational unit, occupational series or level, geographic location, specific window periods, skills, knowledge, such other similar job related factors, or a combination of these factors.

Federal Employee Voluntary Early Retirement Amendments would codify and broaden the existing early retirement authority to allow "early outs" for workforce restructuring, not just downsizing. Allows early outs to be targeted on the same basis as buyouts as in item one above.

Civil Service Recruitment and Retention Act of 2001 would make it easier for Federal agencies to use recruitment and retention bonuses and relocation allowances; allows agencies to pay for the cost of academic degrees and employees' licenses, certificates and professional credentials under certain conditions; and improves the effectiveness of special salary rates.

  • Authorizes agencies to pay larger recruitment and relocation bonuses based on the length of an agreed-upon service period, capped at 25 percent of the employee's annual salary multiplied by the number of years the employee would agree to serve in the position (up to a maximum of 4 years).

  • Authorizes agencies to pay recruitment and relocation bonuses in installments. Corrects various pay anomalies that produce unwarranted windfalls or pay reductions; allows an agency to "opt-out" of a special rate authorization.

  • Improves the process of computing annuities involving part-time service under the Civil Service Retirement System (CSRS).

Strengthen the SES would increase the cap on total annual compensation for SES from the current EX-I level ($161,200) to the VP's rate of basic pay in order to allow SES to receive their full awards at the time conferred (instead of spread over two tax years), repeals the recertification requirement, places all SES in the 8 hour leave category, and allows agency heads to offer exceptional candidates 10 full days of annual leave credit as a recruitment incentive.

Federal HRM Innovations Act of 2001 would make the demonstration project authority simpler and easier for agencies to use and would create a mechanism for making successful demo projects permanent and available to other agencies.


  • Eliminates the current limitation on the number of employees who can be covered by a demonstration project (5,000) as well as the limit on the number of projects (ten) that can be implemented concurrently.

  • Requires OPM, before the fifth anniversary of the launching of a demo project, to determine whether the project should be terminated, continued for purposes of evaluation, or converted to a permanent personnel system.

  • Requires an agency to submit a specific plan for implementing an alternative personnel system to OPM for approval.

Federal Human Resources Hiring Flexibility Act would provide agencies with authority to directly hire candidates for certain positions where there is a shortage of candidates or a critical hiring need. Authorizes alternative ranking and selection procedures.

  • Rather than assigning numerical ratings to individual applicants, an agency could divide qualified candidates into two or more quality categories, based on an evaluation of their knowledge, skills, and abilities. The agency could select any applicant in the highest quality grouping. If fewer than three applicants were assigned to the highest quality grouping, the top two categories could be merged and any candidate in the merged category could be selected. (Preference eligibles (e.g., veterans) would have to be listed ahead of other candidates, within each quality grouping.)

  • Category ranking was tested successfully in a demonstration project at USDA for eight years, and a five-year consultant evaluation showed that more veterans were hired at USDA using category ranking than in comparable units using the traditional hiring method.


Title II of the Managerial Flexibility Act of 2001 would charge agencies the full Government share of the accruing cost of all pensions, retired pay, and retiree health benefits for Federal employees. This Title is part of an initiative to link budget and management decisions to performance by showing the full cost of each year's program operations together with the output produced in that year.

  • In the 1980s, reforms placed pensions for new civilian employees and retired pay for all Department of Defense (DOD) military personnel on a fully funded accrual basis. However, agencies still pay less than half the employer share for non-Postal civilian employees hired before 1984. Retired pay for uniformed members of the Coast Guard (USCG), Public Health Service (PHS), and National Oceanic and Atmospheric Administration (NOAA) are still on a pay-as-you-go basis.

  • Last year, an accrual system was enacted for post-retirement health costs for all Medicare-eligible members of the uniformed services (including DoD). However, health care for uniformed services retirees under age 65, and for all civilian retirees in the Federal Employees Health Benefits Program, is still funded on a pay-as-you-go basis.

Legislative Proposal

  • Title II would require agencies to fund the full Government share of the accruing cost of pensions, retired pay, and retiree health benefits as they are earned by all Federal civilian and military employees. The previously earned unfunded liabilities - a sunk cost - would be amortized by mandatory payments from the general fund. This legislation would not change any retiree benefits or the level of employee contributions.

  • Total budget outlays for the Federal Government would be the same as under current law, because the accrual payments from the employing agencies would be offsetting receipts to the Funds that pay retirement benefits. Only the actual benefit payments would be included in total outlays.

  • Costs to the employing agency could change due to the additional funding for the Civil Service (CSRS), Foreign Service, and CIA retirement systems, and the shift from cash to accrual for other benefits; agency budgets would be held harmless for the initial change in costs due to this conceptual change.

  • Under a forthcoming companion proposal, the full annual cost of all other resources used - including support services, the use of capital assets, and future hazardous waste cleanup from Federal operations - would be charged to the budgets of agencies and programs that provide goods, services, grants, transfers, credit, and regulation for the public.
  • Together, the two parts of the Budgeting and Managing for Results legislation would facilitate aligning annual budgetary cost with the outputs produced and the outcomes achieved. A consultative process of improving presentation, program/activity lines, and occasionally budget accounts could strengthen attention to program performance in making budget decisions in the Executive and Legislative branches. The improvement in alignment would facilitate more efficient program management and greater accountability for program results.


  • This reform proposal seeks to strengthen the Federal Property and Administrative Services Act of 1949, as amended (Property Act). This Act provides the statutory authority for agencies to manage and dispose of more than 24 million acres of land and facilities that were acquired over the years to support various Federal missions. (In addition to property under the authority of the Property Act, there are several hundred million acres of Federal land that were acquired as part of the public domain and are used for national purposes such as parks, forests, wildlife refuges, etc. These lands are managed under separate special legislation, which is not subject to this reform proposal.)
  • The Property Act was written over 50 years ago when the biggest challenge regarding Federal property was how to establish an orderly process for disposing of vast property holdings acquired to support the war effort, but no longer needed for that purpose. The Act gave Federal agencies the first claim to property that was excess to other agencies' needs, then made such property available for below-market (including free) conveyances to state and local governments for various public purposes. Federal property that no one else wanted could be sold and the proceeds deposited in the Treasury.

Legislative Proposal

  • Establish a policy framework for real property asset management across the Executive Branch. Provides GSA the authority to publish asset management principles and performance measures that address all phases of the real property lifecycle, from acquisition through disposal; requires agencies to develop asset management plans consistent with those principles and the agencies' own strategic plans and to establish internal accountability for those plans; and strengthens current authorities to require agencies to maintain and report accurate and timely information on their real property holdings.
  • Provide agencies with tools to obtain value from obsolete and underused facilities, e.g., the authority to exchange or sell obsolete facilities and use the proceeds for replacement purposes; or to sublease or outlease underused space and buildings to other agencies or private tenants. Under certain circumstances, agencies would also be permitted to enter into public-private partnerships for the redevelopment or improvement of selected Federal holdings.
  • Give agencies incentives to improve the utilization of their real estate holdings and to dispose of unneeded property. Allows agencies to retain the bulk of all real property outlease and sales proceeds and use them to meet their capital asset needs.