System Failure: Implementing Pay for Performance in the Department of Defense's National Security Personnel System

The National Security Personnel System (NSPS) was to be a transformational reform of the federal civil service, designed to increase manager's flexibility, discretion and effectiveness in supervising some 700,000 Defense Department civilian employees. The new system replaced the traditional GS classification and rating system with a pay for performance model. The NSPS used broad pay bands, pay pools, “performance shares,” distribution formulas, a new five-level rating system, and important changes to labor relations and collective bargaining subjects, all without significant participation and support from employee unions. It didn't work. After five years of troubled implementation, widespread employee dissatisfaction and mistrust of the new system, lawsuits and lobbying, Congress dismantled the NSPS and directed that more than 200,000 participants be returned to the GS system. This article reviews the history of pay for performance in the federal government, then reviews the failed implementation of NSPS, and concludes with a preview of the future of pay for performance within the federal government after the demise of the NSPS.