STATEMENT
BY
AMERICAN
FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO,
COUNCIL
OF HUD LOCALS, 222
BEFORE
THE
SENATE BANKING, HOUSING AND URBAN AFFAIRS SUBCOMMITTEE
FOR
HOUSING AND TRANSPORTATION
JULY
24, 2002
Chairman
Reed and Subcommittee members,
My name is Carolyn Federoff, and I
am President of the American Federation of Government Employees, Council of HUD
Locals. We represent approximately 6500
bargaining unit employees throughout the Department of Housing and Urban Development. Thank you for providing us with an
opportunity to present the views of HUD employees on those areas that GAO
continues to identify as “high risk,” including HUD’s staffing crisis and its
oversight of HUD contractors.
In addition to gathering input
directly from HUD employees, we have also reviewed GAO reports on HUD’s
designation as “high risk” and the government wide human capital management
crises. Our testimony is presented in
two parts, the first focusing on human capital management, and the second on
HUD’s oversight of its contractors in the single-family and rental housing
assistance programs. Nonetheless, it
should be noted that we believe that GAO’s focus on improvements needed in the
single-family and rental housing assistance programs is integrally related to
and exacerbated by HUD’s human capital management.
Because of the impending retirement
of the Baby Boom generation, every American employer faces the potential for a
human capital crisis. HUD, however,
faces a crisis imposed by both demographics and politics. Both agency management and Congressional
critics have, in their turn, starved the agency for needed staff. HUD programs are designed to be implemented
and to operate over long periods of time—in FHA programs, an average of 30 to
40 years. These time periods exceed the
normal career span of most workers.
Setting these programs in motion necessitates a commitment to ensure
quality staff will be available over the life of the program. Additionally, it is unacceptable to merely
plan to contract the work out;
contractors still need quality oversight by employees who are familiar
with the program from inception to close.
HUD will need to recruit. But it will also have to work hard to retain
the employees on board. The results of
a recent Office of Personnel Management survey reveal a HUD workforce whose
morale is generally below that of their private sector counterparts. Only 47% of responding employees are
satisfied with the organization, compared to 63% in the private sector. Issues fueling dissatisfaction include lack
of involvement with decisions affecting work, lack of information received from
management and lack of training received for the job. (See attached copies of HUD intranet.)
We offer the following recommendations to
help HUD meet its staffing challenges and its obligation to preserve the public
trust:
1.
The agency
has averaged 300 FTE below ceiling for the last several years. Rather than taking the staff away, Congress
must insist that ceiling be met.
2.
The agency
contracts out because of a lack of staff and without regard to cost. Congress should insist that the agency only
contract out when it is cost effective and will provide equal or better
service. Congress must also provide
budget authority to hire more staff when it is cost effective, and should
reject arbitrary contracting out quotas.
3.
The agency
largely eliminated its Human Resource capacity in the field in 1995. Lack of access to Human Resource
professionals adversely impacts field managers and supervisors. This staff should be restored.
4.
HUD’s Human
Resource staff is overly bureaucratic, failing to explore innovative ways to
recruit and retain staff. The agency
needs to empower Human Resource staff to find solutions, not roadblocks.
5.
HUD has
little or no data about its staff—it cannot provide retention data for past
intern programs, nor even provide a quarterly list of employees being hired
into or leaving the bargaining unit. It
needs to restore its ability to retrieve hard staffing data on a monthly basis.
6.
The agency
is currently relying of interns to meet hiring needs. These interns are on two year appointments. Although the agency has verbally expressed
an intent to extend permanent positions to these employees, most will feel
compelled to look for other jobs in the last year of their appointment, because
of student loan debt. To retain these
employees, the agency should extend permanent positions to the interns after
one year (the standard probationary time period for new employees).
7.
To help
recruit and retain staff, the agency should negotiate with the union for
quality programs such as loan forgiveness and child care subsidy, and
effectively implement programs already negotiated such as telecommuting.
We are pleased to testify that Secretary Martinez, through Deputy Secretary Jackson, has worked with us on several of these issues. He has expressed a commitment to reject costly contracting out, provided a management directive supporting implementation of telecommuting, and directed his staff to investigate loan forgiveness.
We hope to be able to testify next year
that, with open Congressional support, the administration has made progress
towards achieving the recommendations set forth above.
Human Capital Management: GAO’s four Human Capital
Cornerstones and HUD.
In its report “A Model of Strategic
Human Capital Management,” GAO sets forth four Human Capital Cornerstones
(GAO-02-373SP). GAO intends these
Cornerstones to provide guidance in assessing an agency’s Human Capital
strategy. For each Cornerstone, there
are two Critical Success Factors. The
GAO report sets forth examples of behavior it identifies as Level 1, 2 or 3 in
connection with each Critical Success Factor.
Level 1 is the worst, while Level 3 is the optimum according to
GAO. We address each of the four
Cornerstones at they apply to HUD separately:
1. Leadership: The agency has a Human Capital crisis because throughout the 1990s
HUD devalued human capital and Human Capital Resource managers.
HUD goes through organization charts
the way a person with a cold goes through Kleenex. On some level, this constant shifting devalues human
capital. But between the years of 1994
and 1998, the agency actively undertook reforms that exacerbated the human capital
crisis and precipitated the virtual elimination of human capital resource
management at HUD. We offer two
examples from many:
In 1995, the agency reorganized the
Office of Administration, severely slashing HUD Human Resource Departments in
the field by consolidating ten personnel departments into three. The goal was to reduce the ratio of HR staff
to HUD staff from 1:60 to 1:100. Access
to personnel specialists became more difficult for managers, supervisors and
employees. Personnel records have been
poorly maintained.
Also in 1995, the magic 7500 number was
the focus of much attention. As
confirmed by GAO and HUD IG reports, this number might as well have been drawn
from a hat; the agency had no basis for
believing this was the optimum number of staff. The contracting out problems we face today are a direct result of
this baseless FTE goal.
Comparison to the GAO Critical Success
Factors Table (GAO-02-373SP at p. 10) demonstrates that with regard to its
staff, the agency was at Level 1—the agency viewed employees as “costs to be
cut rather than as assets to be valued.”
The agency was below Level 1with regard to the role of the Human Capital
Function—human capital management was so severely reduced that it could not
even be described as a support function.
It is our opinion that the past
devaluation of the Human Capital function is critically interfering with the
current administration’s ability to evaluate and address the Human Capital
crisis at HUD. Among other things, it
interferes with recruitment and retention.
For example, the agency has consistently been 300 FTE below ceiling for
several years. Despite what we
generally agree are good efforts to recruit and hire staff, agency projections
indicate that we will continue to be below ceiling at the end of this fiscal
year. Additionally, we have proposed,
and the administration has expressed interest in, several retention strategies
such as a loan forgiveness program.
Lack of adequate Human Resource staff has delayed rapid review and
implementation of this and other retention programs.
Agency managers, supervisors and
employees need a commitment from Congress and the Administration to rebuild the
Human Capital Management function at HUD.
We need Human Resource employees to evaluate staffing needs, actively
recruit, create retention strategies, and to otherwise assist employees, their
supervisors and managers in the accomplishment of HUD’s mission.
Agency management has little or no
data with which to make Human Capital decisions; they no longer receive staffing lists, information on accessions
and separations, nor retention rates for special hires; and estimates of needed staff are
suspect.
It was not always so.
Attached are excerpts from the last “Monthly Staffing List” of which I
am aware. It is dated September 1990
and covers Region I. It is an example
of the kind of data that used to be routinely available and provided to field
managers and union representatives. It
includes a summary of staff on board, hires, separations, and projections for
the coming month. It discloses the
total number of employees authorized versus those actually appointed in each
office and each program area. It
provides information on total number of permanent, temporary, part-time, and
summer help. The sample page is a
detail from the Office of Counsel, showing total number of staff, vacancies,
temporary appointments (EXC APPT NTE 08-11-91), and duty stations other than
Boston (D/S: Manchester). The total
report includes similar pages for each program area in Region I.
Sometime shortly after 1990, the
agency stopped providing the Monthly Staffing List. With the loss of this single report, managers in Region I no
longer had the information necessary to firmly determine if staff turnover
continued to be 17%, or one in six, as it had been the previous year. They would no longer clearly know that their
ceiling had increased 20 positions since last year, or that they were 46 employees,
or 10%, under ceiling. Having this data
helped managers focus on potential problem areas in Human Resource management,
such as retention issues and recruitment needs. But this sort of data no longer exists, or is no longer shared.
We suspect that it simply no longer
exists. During the past six months, we
have asked HUD’s Labor Relations staff to please provide quarterly reports on
accessions and separations from the bargaining unit. We just want to know who has joined HUD and who has left during a
quarter. Labor Relations has been
unable to meet our request, because the information systems do not support this
simple retrieval of information.
The fundamental lack of data hampers
this administration’s ability to address the Human Capital crisis. We continue to make decisions in the dark.
For example, the union has raised
concerns with the dependence on intern programs to meet hiring needs. Based upon anecdotal evidence, we are
concerned that interns may have lower retention rates than other employees
hired under traditional civil service authorities. To explore this, we have asked the Office of Human Resources to
provide data comparing the retention rates of the last major intern program
that occurred in 1989 and 1990, to the retention rates for other employees
hired through traditional means during the same time period. The agency has been unable to provide this
data. The agency is putting all of its
hiring eggs in one basket without sufficient knowledge of the strengths or
weaknesses of that basket.[1]
At Congressional direction, the
agency is working towards better estimation of staffing needs. But employees, supervisors and managers
remain unconvinced that accurate estimations will be produced by either REAP or
TEAM—Resource Estimation and Allocation Process and Total Estimation Allocation
Mechanism. REAP was intended to provide
a benchmark for staffing needs, while TEAM is intended to periodically update
the benchmark. However, despite hours
of review, many of us cannot understand what REAP has actually measured—does it
measure what staff should be doing, or what staff are actually doing? The process for both REAP and TEAM asked
staff to record what they are actually doing.
It seems obvious that we would have enough staff to do that which staff
are doing. But the question remains, do
we have enough staff to do that which we are supposed to do by law, rule or
regulation? Do we have enough staff to
protect the public’s interest and deliver the mission of the agency? We remain unconvinced that REAP or TEAM
achieve this.
To this Administration’s credit, the
Deputy Secretary has specifically advised managers to provide staffing
projections based upon REAP or any other supportable evidence. To our knowledge, REAP is being used as a floor,
not a ceiling. But we urge Congress to
also consider REAP as a floor
Comparison to the GAO Critical
Success Factors Table for this cornerstone (GAO-02-373SP at p. 11) indicates
that the agency is at or below Level 1—agency managers and supervisors lack fundamental
information that can help them determine human capital needs and strategies for
effective recruitment and retention, much less how human capital approaches
link to organizational performance objectives.
Agency managers, supervisors and
employees need a commitment from Congress and the Administration to rebuild
sources of data concerning human capital resources at HUD. Additionally, we need wide spread sharing of
data, so that managers, supervisors and union representatives can hone in on
problems before they become crises.
3. Acquiring, Developing, and Retaining Talent:
Bureaucracy persists in HUD’s approach to Human Resource Management
As
employees of HUD, we can commiserate with HUD’s clients about HUD’s proclivity
for bureaucracy; we are its daily
victims, driving down employee morale.
Although the 1994 HUD program reorganizations included strategies to
focus HUD employees on results not processes, on finding solutions not red
tape, Human Resources has not consistently adopted this same strategy. Managers, supervisors and employees too
often hear, “it can’t be done that way.”
The “can’t do” philosophy is at striking odds to the “can do” philosophy
HUD employees endeavor to apply to HUD’s programmatic work.
A
small example: Some Human Resource
offices have advised supervisors that they may not authorize the accumulation
of credit hours for travel.[2] They cite restrictions on the use of
overtime for travel, equating credit hours to overtime despite the fact that
credit hours are specifically excluded from the definition of overtime [see 5
U.S.C. Section 6121(6)]. Being able to
authorize employees to accumulate credit hours helps supervisors better
accomplish the agency’s mission while preserving resources; if a field review takes six hours, and
travel will take four, a supervisor can authorize the employee to accomplish
the work in one ten hour day, rather than ordering the employee to take two
days and authorizing the use of scarce travel dollars for hotel and per diem. These simple solutions, however, are
withheld from agency supervisors and employees.
Comparison to the GAO Critical Success
Factors Table for this cornerstone (GAO-02-373SP at p. 12) indicates that the
agency is at or below Level 1—the agency has yet to explore the range of tools
and flexibilities available under current laws and regulations.
Agency
managers, supervisors and employees need a commitment from this administration
that it will bring to Human Resources the same “can do” spirit other areas of
HUD are encouraged to display. Working
together, we can craft solutions that meet HUD’s mission and employees’ needs.
4. Results-Oriented Organizational Cultures: The Human Capital crisis makes it
less likely employees will focus on results rather than processes.
GAO
has identified “empowerment and inclusiveness” as key components of a
results-oriented organization. The
agency took steps to empower and include supervisors and employees in the 1994
reorganization. Program employees were
specifically authorized to remove impediments to the accomplishment of
organizational goals when the employee could determine that an alternative
process would meet both client and agency needs.
Comparison to the GAO Critical
Success Factors Table for this factor (GAO-02-373SP at p. 13) indicates that in
the mid-1990s, the agency hovered between Levels 2 and 3—the agency was
lessening its reliance on standardized approaches and was encouraging
employees, supervisors and managers to work together towards innovation and
problem-solving.
Before a person can run,
however, he must first be able to walk.
Similarly, before employees can innovate and explore alternative
processes, they must first be adept at the current process, understanding the
whys and wherefores. When they
understand why a rule is in place, they can better craft a solution that meets
the agency’s and client’s needs simultaneously.
HUD’s Human Capital crisis
threatens this capability. Daily, we
are losing the employees that know the whys and wherefores. Our programs typically include 40 year
commitments between HUD and the client.
Even if programs are eliminated, they are only eliminated as to future
clients. Our relationship to current
clients continues for that program. We
need staff expertise for a period of time greater than the normal career of any
one employee. Succession planning must
be the norm, not the exception for an agency such as HUD.
Additionally, the nature of
HUD programs tends to result in an ebb and flow of problems; if there’s a problem, it’s likely to
manifest itself either at the beginning or at the end of its 40 year term. For example, problems associated with a new
development will either happen shortly after it begins renting up (i.e.
problems with projected market-share, etc.) or will happen towards the end of
its involvement (i.e. tenants need alternative affordable housing options,
development has physical problems associated with its age, etc.).
Succession planning at HUD is
hard! Making sure that we always have
the quality and quantity of staff to be results-oriented is hard! It takes commitment from both Congress and
the administration.
HUD clients deserve nothing
less.
HUD’s continuing “High Risk” designation in the
Single-Family and Rental Housing Assistance programs relate directly to HUD’s
Human Capital Crisis
In
its January 2001 report entitled “Major Management Challenges and Program
Risks” (GAO-01-248) (hereinafter January 2001 Report), GAO identifies the need
for improvement to reduce HUD’s single-family mortgage insurance risk and to
effectively and efficiently use HUD’s rental housing assistance programs. We believe that HUD’s Human Capital crisis
has directly contributed to these program problems. The lack of human capital has prompted HUD to contract out work
without regard to cost, effectiveness or efficiency. Continued loss of staff capacity has lead to poor contractor
oversight. We will consider examples of
this in each of these programs.
Contracting Out Single Family Mortgage Insurance Work:
Employee warnings go unheeded.
The
GAO report briefly describes the downsizing history of Single-family
Housing; in 1994, the agency began to
consolidate its Single-family function, culminating in the 2020 Management
Reform Plan establishment of four Homeownership Centers. This consolidation reduced the total staff
dedicated to Single-family programs by about 50%. Some of this reduction was achieved through increased
efficiencies or program changes. A
significant portion was accomplished through contracting out. (January 2001 Report at p. 15.)
The
Office of Single-Family always had a high level of contracting out, and most of
this contracting out was appropriate.
For example, when a bank foreclosed on a property and returned the title
to HUD for the mortgage insurance proceeds, HUD became the property owner. As such, we became responsible for being a
good neighbor, keeping the yard and house maintained while new owners were
found. HUD employees agree that this
was a positive use of contractor dollars.
But
even then, GAO and the HUD IG reported that HUD lacked staffing resources and
travel funds to monitor its contractors (see, for example,
GAO/RECD-98-65). Unfortunately, HUD was
not always a good neighbor.
How
did HUD respond? Instead of increasing
contractor oversight, HUD contracted out more functions. Previously, HUD would market the properties,
seeking always to use this resource to further multiple objectives such as
promoting safe neighborhoods and affordable housing for working Americans
(i.e., the Officer Next Door program), while working to maximize return on the
sale of the properties.
In
1999, HUD contracted out this marketing function. The result? In January
2001, GAO reported a projected cost of $997 million over 5 years (at p. 14). Six months later, GAO reported that FY 2000
year cost alone was $390 million, for a projected five year cost of $1.9
billion or twice as much as the original 5 year projection (see GAO-01-590 at
p. 3). In exchange for the high
expenditures, HUD has seen a mere net increase of ½% in the recovery of sales
(January 2001 Report at p. 18). We’ve
also seen an increase in the number of for-profit investor owners. Prior to 1999, we understand that HUD sales
to owner-occupants averaged 65%. Since
1999, it has generally decreased and is now as low as 34% in Cincinnati.
This
is not a result of poor contractor oversight.
This is the result of contracting out.
The contractor does not have the same incentive to pursue policy
objectives as HUD employees have.
Monetary incentives cannot replace commitment to the mission.
Despite
contracting out and downsizing, HUD employees have been vigilant in protecting,
or seeking to protect, the mission of the agency. HUD employees advised the HUD IG of the “flipping” scandal reported by GAO in its report at page
20. HUD employees continue to report
issues to the HUD IG about duplicate payments to contractors, vandalism of HUD
properties, and interference with their ability to report fraud, waste and
abuse directly to the IG. Employees recognize
that a change of administration results in delays in responding to the issues
identified by employees. But it has now
been 18 months, and employees want to know when their voices will be heard. Single-family employees are experiencing
serious morale problems because of the loss of program integrity and job
satisfaction.
Contracting out Rental Housing Assistance Oversight:
No benefit for tenants or taxpayers, only state and private bureaucracies.
The
January 2001 GAO report states that “to ease staffing shortages caused by staff
reductions,” HUD contracted for third-parties to administer project-based
Section 8 housing assistance payments contracts (at p. 36). GAO indicates that the estimated cost was $200
million annually. This contract was awarded
solely because of staffing shortages and without regard to cost. In fact, before even one contract was
signed, HUD’s IG reported that the agency’s cost projections were faulty and
the contracts “could adversely affect the integrity of the Section 8
program.” (See HUD IG 99-PH-163-0002,
at p. 17.)
HUD
has awarded 41 of 52 available contracts.
With incentives, these contracts cost $220 million annually--$20 million
more than originally estimated. If the
remaining contracts are awarded, the cost will increase by $61 million, or 40%
more than originally estimated.
But
whether the cost is $200 million or $281 million, it is far in excess of the
cost of hiring staff to meet the staffing shortages fueling these contract
awards. According to inflated staffing
figures rejected by HUD’s Inspector General, HUD would need 1400 staff to do
this work (IG Report at p. 16). HUD’s
Office of Budget reports an average cost per HUD employee in 2002 is $88,000. This would put the maximum cost at $123
million, or less than half the cost of these contracts.
Finally, the real tragedy of
these contracts is borne by Section 8 tenants and families waiting for Section
8 subsidies. The cost of these
contracts comes from the Section 8 budget.
$158 million would fund an additional 31,200 Incremental Vouchers in the
FY’03 budget. And in exchange for a
loss of Section 8 funds, current Section 8 tenants are left to work with
multiple bureaucracies, including HUD, the contractor, and in some instances, a
subcontractor.
The
January 2001 GAO report focuses on the challenge HUD faces in closing the gap
between the number of households eligible to receive housing assistance and the
availability of assistance (at p. 27).
Congress needs to step to the plate and provide HUD with the means to
close the gap; Congress needs to
provide HUD with the funding to hire the staff necessary to forego the Section
8 Contract Administration contracts.
There
will be mounting pressure for Congress to allow this wasteful spending to
continue. Contractors in their states
are making ludicrous amounts of money under these contracts. For example, MassHousing (formerly the
Massachusetts Housing Finance Authority) makes $13 million annually to replace
the work done by 20 staff in HUD’s Boston Office. Rather than bowing to the pressure of contractors, Congress
should consider the 2220 families in Massachusetts that could be receiving
rental assistance in 2003, and the 31,200 nationwide.
Conclusion
Frequently
with Congress’ support, HUD has maintained a history of ineffective human
capital management. Consequently, the
crisis that faces all American employers with the impending retirement of the
Baby Boom generation is exacerbated at HUD.
And because HUD’s programs are implemented and operated over a 30-50
year period, HUD needs time for departing staff to mentor new staff. We cannot replace journey-level experienced
staff with entry-level staff. It takes
years to learn the programs sufficiently that employees can take educated risks
to meet client needs while meeting HUD program objectives. This level of expertise cannot be replaced
by contractors. Even if it could be
replaced by contractors, it defies explanation to replace it at costs far in
excess of hiring staff.
Finally, to compete against the
rest of the marketplace hungering for workers to replace Baby Boomers, HUD must
think and act innovatively and flexibly by offering programs such as loan
forgiveness, child care subsidies and telecommuting; HUD must empower its employees by providing them with
information, training and involvement in the decision-making process. HUD must show that it is a responsive
employers. And Congress must support
HUD in these endeavors.
[1] The union is also without hard data. Nonetheless, based upon our interviews with interns, we believe critical to the retention of interns is their knowledge that they will be offered permanent positions well in advance of the expiration of their two year term. At the end of their first year (the standard probationary period for civil service employees), the agency should decide and inform interns which of them will be offered permanent positions. Faced with thousands of dollars of student loan debt, after their first year, interns will be forced to actively seek other employment. We can only stem the tide by timely extending permanent positions.
[2] “Credit hours” are hours “in excess of an employee’s basic work requirement and which the employee elected to work so as to vary the length of a workweek or workday.” See 5 U.S.C. Section 6121(4). Most employees at HUD work under a flexible work schedule established under 5 U.S.C. Section 6121.