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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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Suggested Citation:"4 NIST Option." National Research Council. 1994. The Army Research Laboratory: Alternative Organizational and Management Options. Washington, DC: The National Academies Press. doi: 10.17226/9030.
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NIST OPTION 78 4 NIST Option The National Institute of Standards and Technology (NIST) is the principal laboratory of the Department of Commerce, charged with helping U.S. industry through standards development and research. NIST has expanded its responsibilities to industry significantly under the Technology Competitiveness Act of 1988. The NIST option is shorthand for a conversion plan that copies the NIST model. It is not an option that combines ARL with NIST. The NIST option involves maintaining the Army Research Laboratory as a government-operated laboratory in the Department of the Army, while adopting certain relationships, policies, and practices of NIST to improve ARL's performance. Specifically, this option would replicate a Personnel Demonstration Program established under the NIST Authorization Act for fiscal year 1987 (Public Law 99-574), which gives NIST greater control over its personnel procedures, including a simplified pay grade system, more local authority over hiring, and more effective rewards for extraordinary individual performance. The option would also replicate healthy features of NIST's governance, including its external review and oversight bodies. In other respects, such as its personnel and contracting procedures, it would be equivalent to the ARL Enhanced option. In the NIST option, the percentage of internal research is assumed to remain the same as that planned for ARL in fiscal year 1997, with 20 percent contracted out. (This percentage is the same as in the ARL Enhanced option, which is the baseline for comparison.) THE NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY NIST was founded in 1901 as the National Bureau of Standards, responsible for both aiding industry and “ . . . developing, maintaining, and retaining custody of the national standards of measurement.” In 1988, under the Omnibus Trade and Competitiveness Act, the agency was renamed and its responsibilities broadened “ . . . to assist industry in the development of technology . . . needed to improve quality, to modernize manufacturing

NIST OPTION 79 processes, to ensure product reliability . . . and to facilitate rapid commercialization . . . of products based on new scientific discoveries.” The Institute reports to the Under Secretary of Commerce for Technology, an arrangement that ensures high-level support (National Institute of Standards and Technology, 1992). NIST has built a tradition of vigorous interaction with customers and clients from industry, government, universities, and foreign countries. The industry-focused R&D is conducted by about 3,200 regular employees and 1,200 guest researchers at major sites in Gaithersburg, Maryland, and Boulder, Colorado. The regular employees include 1,580 full-time scientists and engineers, of whom 47 percent hold Ph.D.s. (Kramer, 1993). In fiscal year 1993, NIST had an operating budget of about $500 million plus more than $100 million for construction of research facilities. Consistent with its partnership philosophy, NIST's operating budget includes $218 million of funding from customer and client organizations—namely, $111 million in other-agency research funding (58 percent of it from DOD) $68 million in in-kind transfers, and $39 million in fees (Kammer, 1993). The Institute spans a wide range of technical fields, including physics, chemistry, lightwave electronics, semiconductor devices, biotechnologies, advanced materials, high-performance computing and information technologies, and automated manufacturing. The guest research involves customers and clientele closely, providing important channels of technology transfer. Ties with industry are also fostered by Cooperative Research and Development Agreements, authorized by the Technology Transfer Act of 1986, through which government and private sector entities can share the costs and results of R&D projects carried out in partnership. In fiscal year 1993, NIST worked with 181 research partners on 209 Cooperative Research and Development Agreements in 128 areas of research (Kammer, 1993). The need for better manufacturing methods gives a distinctive character to NIST's R&D programs and involves the Institute in partnerships with government agencies as well as industry. For example, NIST operates the Navy's Center of Excellence for precision automated manufacturing as part of the Institute's automation program. Since 1988, NIST has established seven regional Manufacturing Technology Centers, budgeted in fiscal year 1993 at a total of $17 million (Kammer, 1993). The concept includes technical outreach activities to help smaller manufacturers improve their productivity and competitiveness by learning from larger manufacturers, from academia, and from NIST itself. NIST recently undertook the Advanced Technology Program of grants to U.S. industry for high-risk, precompetitive research on commercially promising technologies, budgeted in fiscal year 1993 at $68 million (with a roughly equal amount provided by recipients). The priorities are set by industry, fostering market pull rather than technology push, but grantees are

NIST OPTION 80 selected for technical and business merit by outside experts. The Advanced Technology Program grants are expected to grow dramatically over the next several years, as proposed by the Clinton Administration. Such growth would significantly expand NIST resources and greatly increase its technological influence. NIST has two sources of external program oversight and stewardship: the Visiting Committee on Advanced Technology, and the Board of Assessment of NIST Programs. The Visiting Committee on Advanced Technology, written into the NIST enabling act, oversees NIST's budget and operations at the policy level. It functions much like a corporate Board of Directors, providing general guidance. The Board of Assessment has existed at the will of the Commerce Department since 1959. Each of NIST's 8 major laboratories has an assessment panel of about 20 technical experts, mainly from industry and academia, who meet annually to critique the laboratories' technical programs. Each panel issues an annual report; these reports are published by the National Research Council (NRC), to provide overall feedback to the lab directors, the NIST director, and Office of Management and Budget, and congressional decision makers. The Board of Assessment is made up of about ten technical experts, largely drawn from past chairs of the assessment panel. ENHANCEMENTS The NIST option offers several important enhancements over the baseline ARL Enhanced option, described in Chapter 3. The NIST Personnel Demonstration Program goes substantially beyond the personnel measures of DOD's proposed Laboratory Demonstration program—the basis for the ARL Enhanced option—in giving managers discretion over the hiring, firing, and pay of research and development personnel; in fact, an act of Congress would be required to implement these policies. The option's external oversight boards would also be a break with ARL's current governance structure, which is dominated by the RDECs that are ARL's main customers (see Chapter 1 and Chapter 2). Flexible Personnel Policies and Procedures ARL currently operates under the civil service personnel system. The result, as explained in Chapter 2, is difficulty in attracting and retaining high quality scientists and engineers. The hiring process is slow, salaries are uncompetitive, and it is difficult to compensate high performers as well as weed out misfits and nonperformers. NIST, in contrast, has devised flexible

NIST OPTION 81 personnel policies and procedures that reinforce the NIST commitment to achieving excellent personnel. They are embodied in the NIST Personnel Demonstration Program (Cassady, 1991). The NIST Authorization Act for fiscal year 1987 (Public Law 99-574) established a five-year project to demonstrate an alternative personnel management system (National Institute of Standards and Technology, 1987). The goals are to improve hiring of high-quality personnel and to compensate and retain high performers. Implemented in January 1988, the project and its innovations are proving successful. The demonstration project has significantly changed NIST management of human resources. Evaluations and feedback from managers and employees show that these changes have significantly improved NIST's ability to recruit and retain quality staff. Personnel demonstration projects were a creation of the Civil Service Reform Act of 1978 (Public Law 95-454). Within specified limits, these projects may be undertaken “notwithstanding any lack of specific authority and notwithstanding any other provision of law relating to personnel” (U.S. House of Representatives, Committee on Post Office and Civil Service, 1978). A demonstration project allows an agency, through its own innovations, to design and implement improvements “to determine whether a specified change in personnel management policies or procedures would result in improved Federal personnel management” (5 U.S.C. 4701[a][4]). Demonstration projects are expected to provide ideas to the Office of Personnel Management (OPM) and to Congress in solving civil service problems, such as those addressed by Civil Service 2000, a Hudson Institute study that OPM forwarded to Congress in June 1988. Civil Service 2000 spoke of “the coming crisis” in the civil service and recommended giving Federal agencies “more flexibility and freedom in personnel matters” and undertaking “extensive additional experiments with delegated personnel authority” (Johnston, 1988). The NIST project differs from other agency projects in two important respects. First, while other demonstration projects were created by approval of OPM, Congress created the NIST project and specified many of its features. Second, while under the Reform Act, OPM conducts demonstration projects (5 U.S.C. 4703[a]), however, the NIST legislation specified that the NIST project “be conducted by the Director of the National Bureau of Standards” (now NIST) after being jointly designed by NIST and OPM (Public Law 99-574). A recent report prepared for NIST's Visiting Committee on Advanced Technology reviews the design and implementation of the demonstration project, how it is intended to improve on the General Schedule system, and how it is working (Cassady, 1991). The report also shows why the project was not made obsolete by the recent pay reform legislation, and why it continues to be useful in informing Congress and OPM on civil service reform. Although

NIST OPTION 82 the Federal Employees Pay Comparability Act of 1990 (Public Law 101-509, 1990) resolved many important pay issues, there are lingering problems in position classification, staffing, performance management, and pay and performance linkage that have been recognized by Civil Service 2000 (Johnston, 1988) and other studies and that are being successfully addressed by the NIST project. Objectives The NIST project covers pay, position classification, recruitment, qualifications examination, retention, performance management, employee development, and employee relations. The objectives are as follows: • Enable NIST to compete more effectively in the labor market through agency-based hiring (using NIST- created candidate registers rather than OPM registers), expanded direct hiring (selection of qualified candidates for hard-to-fill positions without posting vacancies and rating and ranking applicants), greater management involvement in recruiting and hiring, flexible entry salaries, recruiting allowances, and more flexible paid advertising. • Allow NIST to compensate and retain good performers through pay-for-performance, the higher pay potential of pay banding, supervisory differentials, and retention allowances. • Improve personnel administration through pay banding, simplified classification, and automation of personnel processes. • Strengthen managers' roles in personnel management through delegation of authority and accountability to line managers. • Compare compensation with similar private sector positions annually, based on total compensation (basic pay, bonuses, allowances, retirement, health insurance, life insurance, and leave benefits). • Maintain compensation costs within the limits of the former system. Basic Features The key elements of the NIST demonstration program follow: • Restructured pay grade and step system. NIST has devised a simplified pay band system for its employees that gives NIST flexibility to pay its best employees well (see Chapter 7 and Appendix D). • Decentralized hiring authority. Line managers have hiring authority within limits. A line manager may extend an offer to a new graduate almost

NIST OPTION 83 immediately, rather than undergoing the months-long process the civil service practices entail. • Restructured position descriptions under local control. Position descriptions are very specific, reducing the requirement to search other government agencies for potential transfers before hiring new employees (and limiting bumping by personnel who have lost their jobs during reductions in force). • Management assignment pay differential. This additional salary is given to line managers only during their tenure as managers. • Rank order evaluation procedures. Professional employees are ranked from best to worst, as well as rated by the normal federal system. • Extra tenure credit for high rank. Extra years of employment are credited each year to those employees who are highly ranked relative to their peers. This serves to protect them during reductions in force. • Large taper in raise distributions. The rating and ranking system supports management's discretion in the allocation and variation of pay raises. Highly rated personnel may receive higher pay raises than those with lower ratings. The personnel system at NIST is in its second five-year demonstration period. It has had one major revision after its initial implementation. Presumably at the end of the current demonstration, NIST will apply for and receive approval for permanent status. Evaluations of the NIST Personnel Demonstration Project OPM conducts an annual evaluation of the project through a contractor, as required by the project legislation. The University Research Corporation conducted annual evaluations in the first two years of the project (University Research Corporation, 1989; University Research Corporation, 1990). Although the General Accounting Office report (General Accounting Office, 1991) faulted the University Research Corporation evaluation, OPM stands behind the evaluation and this report cites evaluation findings discussed below. For the evaluation of the third year of the project, OPM contracted with the Human Resources Research Organization (Human Resources Research Organization, 1992). According to the University Research Corporation reports, the Personnel Demonstration Project brought faster classification and hiring; the ability to make hires that could not be made under the former system; greater pay flexibility, particularly at the entry level; and higher rewards for, and more effective retention of, good performers. Managers, supervisors, and employees

NIST OPTION 84 reported that the demonstration project was a success, but needed improvement in some areas. In response, the performance appraisal and pay-for-performance systems were extensively revised, and the automated classification system was expanded and made more user-friendly (National Institute of Standards and Technology, 1990; Office of Personnel Management, 1990). The 1989 University Research Corporation report said: Overall, NIST staff and management believe the Demonstration Project addresses previous problems in staffing and hiring and has the potential to make NIST a better place to work. Many of the staff feel that positive results have already been attained. In particular, they feel that decentralization and streamlining of the hiring procedures has enabled NIST to attract individuals who might have been lost under the old cumbersome processing procedures. The most useful interventions are the agency-based hiring, the delegation of classification and hiring to the line managers, and the flexibility in entry salary offered by pay bands and delegated authority. Employees were surveyed in the summer of 1989 (University Research Corporation, 1990). Most responses were positive. Supervisors were much more satisfied with the new personnel system than with its predecessor. The most negative responses to the demonstration project personnel system have been in performance appraisal and, by extension, pay for performance. Both supervisory and nonsupervisory employees provided ideas for improving the system, through focus groups and other forums. NIST responded to this feedback by developing a revised performance appraisal and payout system, which was approved by the OPM and implemented for the 1991 performance cycle (Office of Personnel Management, 1990). NIST also uses a post-doctoral program, administered in part by the NRC, for recruiting and evaluating new Ph.D. recipients. About 50 two-year appointments are made each year. About half of the program participants stay on to become regular NIST employees. (ARL also participates in this NRC program, and has about 24 NRC post- doctoral fellows.) This mechanism gives the organization a chance to evaluate new candidates in the workplace without making permanent commitments. External Review and Oversight for ARL The NIST option includes a two-tiered system of external advisory boards modeled on those of NIST. An ARL analog of NIST's Visiting

NIST OPTION 85 Committee on Advanced Technology, made up of senior executives from defense-related U.S. industry and RDECs (the ARL customer base), would review and recommend ARL's policy structure and budget. Another board, comparable to NIST's Board of Assessment, would provide separate scientific and technical reviews of each of ARL's directorates (subsidiary laboratories), its technology sources, and the overall ARL. This board's membership would include nationally recognized technology experts. COMPARATIVE ASSESSMENT The committee assessed the NIST option with respect to six key criteria, which together encompass the Army's requirements for its technology base laboratories. On the basis of these criteria, the option presents both advantages and disadvantages when compared with the other options considered. Linkage to Army Strategies and Objectives This option would not substantially improve ARL's sensitivity or responsiveness to the needs of the Army, compared with the ARL Enhanced baseline. Secondary improvements would be expected, however, as a result of the improved performance and reputation of the laboratory, owing to the more flexible personnel policies. Because ARL would remain a government organization, staffed and managed by government personnel, this option would provide simpler links to the Army's policy makers than either of the contracted options (ARL Multicenter and GOCO ARL). Communications would be clear and direct, without the need to build in protections against conflict of interest. The relationship between the Army and ARL could be one of partnership, rather than oversight. (To obtain the full benefit of this change, the Army would have to guard against applying overbearing management and program controls.) World-Class Land Warfare Research The ability of ARL to conduct world-class research in support of Army requirements would be enhanced by the improvement in scientific and technical staff that the flexible personnel practices and the new external oversight bodies would produce. It would take some time for these improvements to take full effect (see Implementation Issues below).

NIST OPTION 86 However, the quality of the R&D work might be somewhat lower than it would with either of the contracted options, owing to the various personnel incentives, recruitment flexibility, and other advantages of those options. The relevance of the work, on the other hand, may be higher, because of the more direct channels of communication to users in the Army. The work would still be hampered by government administrative regulations. (The measures assumed for this option would bring substantial improvements, but would offer less management flexibility in personnel and procurement practices than the contracted options.) Diversity and Quality of Research Sources Adopting this option would not directly affect the diversity and quality of research sources as compared with the baseline, the ARL Enhanced option. To the extent that the new external oversight bodies (modeled on NIST's Visiting Committee on Advanced Technology and the Board of Assessment) provide useful critiques of research sources, this aspect of ARL's operations would improve, however. This option—even if ARL could contract out its maximum of 30 percent of its program—would be inferior in this respect to either the ARL Multicenter option (70 percent contracted) or the GOCO ARL option (100 percent contracted). Technology Transfer to the Army This option would not be substantially different from the baseline, the ARL Enhanced option, in its ability to transfer technology to users. It could be argued that the higher-quality staff that would result from the personnel reforms and the advice of the Visiting Committee and the Board of Assessment would be more effective in their relations with outside organizations. This effect, however, would likely be marginal. The relations with the RDECs, ARL's main channel of technology transfer, would be relatively simple. (These simple relationships in themselves would not negate the current conflicts that exist between ARL and the RDECs.) The personal contacts on which successful technology transfer depends would not be hampered by conflicts between government and contractor priorities, or by procedures designed to curb conflict of interest. The difference in organizational culture between ARL and RDECs would be minimal.

NIST OPTION 87 Ability to Leverage Funds and Programs This option would neither substantially improve nor substantially diminish ARL's ability to leverage funds and programs of outside organizations, compared with the ARL Enhanced baseline. The assumed personnel reforms and the new oversight bodies, however, might improve somewhat the staff's willingness and ability to make the necessary contacts with the best commercial and academic R&D organizations to enhance the flow of dual-use technologies between ARL and commercial or academic laboratories. This option, on the other hand, would be significantly weaker in this respect than the more outward-oriented options, ARL Multicenter and GOCO ARL. Those options, with their rich links to the private sector, and their ability to easily exchange personnel with contractors, would find it far easier to maintain the shifting research and development partnerships that are needed to take advantage of dual-use opportunities. Recurring Costs and Productivity The NIST option would be a substantial improvement over the ARL Enhanced baseline in enabling ARL to improve its productivity and quality. The personnel demonstration would give management and personnel the accountability and flexibility that continuous quality improvement programs require. Increased productivity would be required of this option, because it entails increases in recurring costs, owing to its higher pay scales. The average scientist's or engineer's salary would rise to an estimated $61,200, compared with $52,700 for the ARL Enhanced option. (These estimates are based on cost surveys of ARL and NIST commissioned by the committee; see Chapter 7 and Appendix D.) The committee assumes, in comparing options, that the overall budget would remain the same ($323 million 1993 dollars in fiscal year 1997); as a result, the number of scientists and engineers, including contractors, would be 1,779, compared with 2,021 in the ARL Enhanced option. IMPLEMENTATION ISSUES The NIST option, with one major exception, is a matter of continuous improvement rather than sudden transition. New procurement practices could be in place within a year. The new demonstration personnel system, which would need immediate approval, would take two years to design and

NIST OPTION 88 implement (and would require an act of Congress). Its effect on the quality of the professional staff would become significant over five years. The improved oversight arrangements could be instituted more rapidly. Terms of reference could be drawn up and approved within six months, and the Visiting Committee and Board of Assessors could be conducting their first reviews within a year of the initial decision. The one-time cost of conversion for the option would be about $17 million (see Chapter 7 and Appendix D). This cost is mainly due to severance pay for employees replaced in the recommended narrowing of ARL's program. The implementation of the new personnel system would entail a minor cost (less than $2 million). OVERALL EVALUATION The NIST option offers the Army a substantial improvement in both external oversight and internal management, at a relatively small cost in either dollars or organizational disruption. The revised personnel system would result in a superior cadre of scientific and engineering talent, although the full effect would take years to achieve. The new Visiting Committee, modeled on NIST's Visiting Committee on Advanced Technology, would provide continuity through changes in Presidential administrations. It would function as the source of policy advice to the Army. The external Board of Assessment would serve a similar function for the Director of ARL, with periodic performance reviews that would gradually improve the quality and relevance of ARL's research and development. Together, these changes would bring ARL a gradually improving reputation, making it possible to attract and retain better quality scientific managers at all levels of ARL.

NIST OPTION 89 REFERENCES Cassady, A. 1991. NIST Personnel Management Demonstration Project—Design, Implementation, and Accomplishments. NISTIR 4640. Gaithersburg, Maryland: National Institute of Standards and Technology. General Accounting Office. 1991. Review of Evaluation of Personnel Demonstration Project at Commerce. GAO/GGD-91-93. Washington, D.C. May. Human Resources Research Organization. 1992. National Institute of Standards and Technology Personnel Management Demonstration Project, Fourth Annual Evaluation Report. Vol. 1. Washington, D.C.December. Johnston, W.B. 1988. Civil Service 2000. Report prepared by the Hudson Institute for the Office of Personnel Management. Washington, D.C.: U.S. Office of Personnel Management. June. Kammer, R. 1993. Briefing by Raymond Kammer, Deputy Director, National Institute of Standards and Technology to the Committee on Alternative Futures for the Army Research Laboratory, Washington, D.C., May 24—26, 1993. Kramer, S. 1993. An overview of NIST. Briefing by S. Kramer, Associate Director, National Institute of Standards and Technology, at the National Institute of Standards and Technology, Gaithersburg, Maryland, May 13, 1993. National Institute of Standards and Technology. 1987. Federal register. October 2. Amended May 17, 1989, and May 10, 1990. National Institute of Standards and Technology. 1990. Position classification manual. Gaithersburg, Maryland: National Institute of Standards and Technology. December. National Institute of Standards and Technology. 1992. Research, services, facilities. Gaithersburg, Maryland: National Institute of Standards and Technology.

NIST OPTION 90 Office of Personnel Management. 1990. Personnel Management Demonstration Project; Alternative personnel management system at the National Institute of Standards and Technology: Notice of proposed amendment. Federal Register, May 10. pp. 19688–19692. University Research Corporation. 1989. Implementation Report: National Institute of Standards and Technology Personnel Management Demonstration Project. Washington D.C.: U.S. Office of Personnel Management. August. University Research Corporation. 1990. Second Annual Evaluation Report: National Institute of Standards and Technology. Appendice D and Appendice E. Washington, D.C.: U.S. Office of Personnel Management. U.S. House of Representatives, Committee on Post Office and Civil Service. 1978. H.R. 11280 to Reform the Civil Service Laws. Report. Washington, D.C.: U.S. Government Printing Office. May 31.

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