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§or p a y l i n e becomes s t e p t w o when most Federal b l u e c o l l a remployees are a t steps four and f i v e .T h i s of course p o i n t so u t t h a t along w i t h average-to-average,t h e s t e p r a t e fea-t u r e s of p a y s c h e d u l e s s h h d b e c o n s i s t e n t w i t h p r i v a t esector p r a c t i c e .GAO and t h e e x e c u t i v e a g e n c i e s h a v e l o n g f e l t t h a t t h ef i x e d s t e p f e a t u r e s h o u l d be corrected, a n d i n 1 9 7 7 , s h o r t l ybefore o u r Korea r e p o r t was i s s u e d , I came across a s t a t e m e n to n t h e m a t t e r made by t h e S e c r e t a r y of D e f e n s e .of h i s s t a t e m e n t was t h e U . S . b l u e - c o l l a rThe c o n t e x ts y s t e m , b u t i t wassuch a f o r c e f u l c r i t i c i s m o f t h e f i x e d s t e p and s o w e l ls t a t e d t h a t I added i t t o t h e r e p o r t t o r e i n f o r c e o u r recommendation.(See s t a t e m e n t , p a g e 9 of report FPCD-77-69.)W e c o n t i n u e t o b e l i e v e t h a t average-to-averges h o u l d beadopted f o r f o r e i g n n a t i o n a l p a y s e t t i n g .A c o n c e r n w a s e x p r e s s e d , a l s o r e l a t i n g t o Korea, "Whati f w e d o know how many y e a r s o f e x p e r i e n c e t h e r e a r e i n o u rsurveyed j o b s , and what i f t h e r e is a s i g n i f i c a n t d i f f e r e n c ei n t e n u r e between t h e U.S.p r i v a t e i n d u s t r y workforce?forces e m p l o y e e s a n d t h e l o c a lWouldn't t h i s j u s t i f y a depar-t u r e from t h e averge-to-averagecomputation?"My a n s w e r w o u l d be a q u a l i f i e d y e s .I f done p r o p e r l yr e c o g n i t i o n o f j o b t e n u r e w o u l d be r e f i n e m e n t o v e r andabove average-to-average.However, I d o n ' t know t h a t i th a s e v e r b e e n recommended a s a n o r m a l p r o c e d u r e o r s e r i -o u s l y considered b e f o r e b e c a u s e of t h e p r a c t i c a l p r o b l e m sc

Brinvolved in documenting job tenure along with all theother matching requirements.If it were to be done GAOwould probably not object, but because the handling ofthis issue tends to have a significant effect on costswe would also want to look closely at the specific methodology used.Any such determination should be based oninformation specific to the surveyed jobs and not a genneral assessment that the U . S , forces workforce has, onthe average, more length of service than the privatesector workforce.Also, to be consistent from country-to-country, DODshould consider all possibilities.The case againstaverage-to-average in Korea stems from the.fact that diversified industry there is relatively new and the workforceis young compared to the U . S . forces workforce with itslonger tenure.Consider the opposite situation--say forexample the Department was establishing a new facility andwas recruiting relatively inexperienced employees in anarea where the private sector workforce was more senior.Logical application of the departure from average-to-averagewould call for a downward adjustment in the payline to likewise account f o r the difference in tenure.0I don't know ifthere is such a situation as I described but I merely pointout the possibility to show that consideration of tenureshould work both ways.

Total compensation comparabilityThe “how to“ of total compensation comparability issomething that people tend to be relatively unfamiliar with7although it has been an issue for several years.Today comparability under Federal pay systems is forthe most part limited to salary or wage comparability without any direct comparison of benefits.The lack of prog-ress in considering benefits is understandable because(1) emphasis was naturally placed on first achieving paycomparability, and (2) there has been a lack of comprehensive information on benefits.Benefit comparisons are alsomore difficult to make than pay comparisons--especially forcontingent type benefits such as pensions and insurance.But, in recent years a s pay comparability has been refined, more attention and research has been given to benefits and total compensation comparability. GAO recommendedin 1975 that a total cornpensation policy be developed andthat legislation be proposed to establish it.The Office.?’ Qf Personnel Management is now testing a methodology, andlegislation has been introduced to adopt it for the domestic Federal pay systems (except postal).As0an objective, we believe total compensatl’on is ap-propriate for foreign national employees and could probablybe argued as required under the Foreign Service Act.a

t.Of course, the items we are talking about that have tobe compared (in addition to pay as is now done) are pensions,,severance, leave, holidays, insurance, bonuses, and the numerous other emoluments found in various countries.The possible techniques for implementing total compensation comparability vary widely in their complexity.Undoubt-edly the most sophisticated approach is being planned by OPMfor the General Schedule and blue-collar Federal Wage System.This is being done in anticipation of the authorizing legisPation being passed.In making their case for total compen-sation, OPM discusses two basic methods that could be usedto compare Federal and non-Federal benefits.These are:cost-of-benefits, and level-of-benefits.The cost-of-benefits method involves, for each particu-lar benefit, determining the respective cost to the organizations being compared (Federal and non-Federal).If bothorganizations paid the same cost, generally expressed as adollar outlay per employee or a percent of pay, t h a t is anequal benefit and no adjustment to total compensation isnecessary.This approach is the easier of the two to understand andrequires relatively little information to implement.0Mow-ever, it doesn't provide for the possibility that althoughcosts may be the same between organizations, benefits accorded their respective employees may not be.Conversely,

'benefits may be the same but costs may vary.An example ispensions whose costs and benefits depend on factors such asthe characteristics of the workforce and how the plans arefunded.OPM also claims that benefit cost in the privatesector is sensitive information that is often hard to obtainfrom firms.So, f o r their purposes in designing total com-pensation comparability OPM opts for a second method it callslevel-of-benefits.Under level-of-benefits the cost to a private firm toprovide a benefit is of no consequence and is not needed forthe comparison.What OPM plans to do is determine the de-tailed benefits available at each surveyed firm and thencalculate what it would cost the Government to provide thosesame benefits to the Federal workforce.That cost is com-pared to the actual cost of the Federal benefits, and thedifference when combined with,the customary pay adjustmentbecomes the total compensation adjustment.Since the level-of-benefits method deals with the details of benefit plans,large amounts of data have to be gathered.Furthermore,applying this information hypothetically to the Governmentworkforce requires that models of the Federal workforce beconstructed showing the demographic characteristics of the4employees and their propensity to use a particular benefit.Asyou might imagine the models are very complicated--up to

Lseveral hundred pages of data and formulas requiring extensive economic and actuarial research and analysis.The pri-vate benefit plans will be fed through the respective models\and what comes out will be-'a statement of benefit cost as apercent of pay or dollar amount per employee.Although the level-of-benefits method is immensely morecomplicated than cost-of-benefits, I don't believe OPM had arealistic alternative to using it if they are to successfullysell the pay reform plan to Congress.OPM's total compensa-tion plan would affect 2 million employees whose combinedpay and benefits was about 4 3 billion dollars in.fiscal year1978*Obviously or a program this large sophiscated tech-niques are justified.It seems also obvious that applying OPPI's level of bene-fits methodology to foreign national compensation would notbe practical.The size of the foreign national workforce ismuch smaller than those in the U . S . and there is a uniquecharacter and environment in each country.The effort re-quired to gather benefit details and contruct models in eachcountry for the relatively few employees involved would, Iam certain, be too costly.In addition, one of OPM's biggestconcerns is measuring the difference between the-Federal andBnon-Federal sector f o r the major contingent benefits such asretirement and insurance.The level-of-benefits approach is

amore helpful in dealing with these items, but since the Department of Defense overseas has the general policy ofadopting the major host country benefit plans you as over,seas compensation specialidts should not be faced with OPM'ssituation in the United States where Federal and non-Federalplans are basically different.Accordingly the level-of-benefits approach is of less importance for foreign nationalcompensation setting.That is why in our report we were interested in simplermethodology such as the State Department's.Although it issimple, it is very comprehensive in that it touches uponvirtually every type of benefit, (many of which OPM does notaddress) and, all in all, I believe can be effectively usedby limited staffs .to measure prevailing total compensation.Valuable information can be learned from both the theoryand practical application of the OPM and State Departmentmethods, from which overseas commands should be able toadopt total compensaton procedures that best fit their ownneeds.And, the systems devised don't have to be purelycost-of-benefits or level-of-benefits.We have seen compo-sites of each used at the same location depending on whateverseems appropriate considering the type of benefit and the in4formation available. Whichever techniques are used, the keythought is to bring benefits into the picture.t

we believe that i n s t a l l a t i o n s arealready a long way toward adopting t o t a l comparability i nt

crwants t o l e a v e t h e door open f o r p o s s i b l e later changes t obenefits (except retirement).T h i s p a r t of t h e i r pay re-form i s b e i n g m e t w i t h s i g n i f i c a n t c r i t i c i s m , s o w e a l l app r e c i a t e t h e v a l u e of t h e : ? x p e c t a t i o n t h a t e m p l o y e e s placeo n a s t a b i l i z e d b e n e f i t package.Public interest clauseW e were a l s o a s k e d o u r v i e w s o n w h e t h e r c o m p e n s a t i o nf e a t u r e s t h a t a r e n o t s u p p o r t e d by p r e v a i l i n g p r a c t i c e c a nbe j u s t i f i e d under t h e p u b l i c i n t e r e s t c l a u s e i f t h e f e a t u r e sa r e d u e t o forces o u t s i d e t h e c o n t r o l o f t h e D e p a r t m e n t - - f o ri n s t a n c e , i n t e r n a t i o n a l agreements.As I a l l u d e d . t o b e f o r e ,t h e l e g i s l a t i o n for f o r e i g n n a t i o n a l compensation states:I' ec o m p e n s a t i o n p l a n s s h a l l b e b a s e d upon prev a i l i n g wage r a t e s a n d c o m p e n s a t i o n p r a c t i c e sf o r c o r r e s p o n d i n g t y p e s of p o s i t i o n s i n t h elocality, t o ' t h e e x t e n t c o n s i s t e n t with t h epublic interest."When i s i t i n t h e p u b l i c i n t e r e s t t o n o t f o l l o w p r e v a i l i n g practice?S i n c e t h i s is a legal q u e s t i o n GAO's GeneralC o u n s e l r e s e a r c h e d t h e l e g i s l a t i v e h i s t o r y of t h e p u b l i c i n -t e r e s t p r o v i s i o n a s well a s Comptroller G e n e r a l d e c i s i o n s o nt h e matter.What t h e y c o n c l u d e d was t h a t t h e r e i s n o s a t i s -factor definition of public interest i n t h i s context thatc o u l d be u s e d a s a g e n e r a l r u l e of thumb.More i m p o r t a n t l y ,t h e y also concluded t h a t t h e d e t e r m i n a t i o n o f a practice asbeing within t h e public i n t e r e s t is w i t h i n t h e d i s c r e t i o nof t h e a g e n c y h e a d t o make, p r o v i d e d t h a t t h e d e c i s i o n s i s

k(1) c a r e f u l l y weighed a g a i n s t t h e s t a t e d i n t e n t i o n of Congress t h a t local p r a c t i c e s b e f o l l o w e d , a n d ( 2 ) t h a t i tis n o t made a r b i t r a r i l y o r u n r e a s o n a b l y .Some items t h a t t h e 1'82search t u r n e d u p a r e of some i n .terest although t h e y are n o t e n t i r e l y conclusive:--In1 9 6 1 t h e Comptroller G e n e r a l ' d e t e r m i n e d t h a tD e f e n s e could p r o v i d e a m e d i c a l a n d h o s p i t a l i z a t i o np l a n i n Bermuda because i t was p r e v a i l i n g p r a c t i c e ,b u t n o t a l i f e i n s u r a n c e program b e c a u s e t h a t was.n o t t h e p r e v a i l i n g p r a c t i c e by l o c a l e m p l o y e r s .However i n t h a t case t h e r e i s n o record o f w h e t h e rD e f e n s e f e l t i t would b e i n t h e p u b l i c i n t e r e s t t oprovide l i f e insurance.--Before1 9 6 0 t h e law read " e q u a l p a y f o r e q u a l r e s p o n T h a t was replaced w i t h " p r e v a i l i n g p r a c -sibility."ticee. c o n s i s t e n t w'ith t h e p u b l i ci n t e r e s t , " ando n e of t h e r e a s o n s g i v e n i n t h e S e n a t e report w a st h a t o v e r s e a s m i s s i o n s were o f f e n d i n g some l o c a lGovernments by p a y i n g women t h e same a s men f o r t h esame work.Although n o t e x p l i c i t l y stated, t h i ss u g g e s t s t h a t C o n g r e s s was a s i n t e r e s t e d i n s a t i s f y i n g l o c a l Government c o n c e r n s a s i t was i n p a y i n g i nt h e most d e s i r a b l e way.--During h e a r i n g s o n t h e same amendment, a S t a t e D e p a r t ment w i t n e s s was a s k e d what t h e p u b l i c i n t e r e s t c l a u s e

meant a n d h e r e s p o n d e d w i t h a h y p o t h e t i c a l examplet h a t t h e y might choose n o t t o f o l l o w a pay p r a c t i c ei f i t s cost g r e a t l y exceeded t h e b e n e f i t .In summary, t h e d e c i s I : o n o f w h e t h e r p u b l i c i n t e r e s t i sb e i n g s e r v e d (by a d e p a r t u r e from p r e v a i l i n g p r a c t i c e ) l i e sp r i m a r i l y w i t h t h e S e c r e t a r y o f Defense.A t t h e same timeI t h i n k G A O ' s p r o p e r r o l e would b e t o k e e p a d d r e s s i n g t h e s ei s s u e s p e r i o d i c a l l y and c o n t i n u e t o ask t h e q u e s t i o n , " I st h i s p r a c t i c e s t i l l i n t h e public interest or h a s it servedi t s purpose?--isi t t h e k i n d o f i t e m whose c o s t s h o u l d b eb o r n e by t h e h o s t government?"Those k i n d s o f q u e s t i o n sare n e c e s s a r y , I b e l i e v e , s o t h a t o n c e a n i t e m i s d e s i g n a t e d a s j u s t i f i e d under t h e p u b l i c i n t e r e s t p r o v i s i o n itis n o t l o c k e d i n p e r m a n e n t l y .As a r e l a t e d p o i n t , w e a l s o f e e l t h a t U.S.f o r c e s payp r o c e d u r e s t h a t d e p a r t f r o m p r e v a i l i n g p r a c t i c e s h o u l d rec e i v e more f o r m a l r e c o g n i t i o n a n d v i s i b i l i t y a t a h i g h e rl e v e l t h a n w e found d u r i n g o u r work.D e p a r t u r e s from pre-v a i l i n g practice might b e w i d e l y understood and approvedo f at h i g h e r command l e v e l s o r m i g h t be o b s c u r e f e a t u r e sknown o n l y a t t h e l o c a l l e v e l .One p o s s i b l e way t o maket h e s e items a m a t t e r o f record would b e t o l i s t them to*g e t h e r w i t h t h e reasons f o r h a v i n g t h e m i n t h e s u r v e y rep o r t s g o i n g u p t o t h e P a c i f i c a n d European c o o r d i n a t i n gcommittees.?T h i s w o u l d n ' t mean t h a t t h e d e v i a t i o n s a r e

' unjustified,b u t would s i m p i y be a means of d o c u m e n t i n gthem s o t h a t t h e y a r e subject t o p e r i o d i c h i g h e r l e v e lreview.I.'tc

clause of the Foreign Service Act provision on foreign na- tional pay setting, and the implications of deviations from prevailing practice. The overall philosophy, or legislated policy guidance, for compensating foreign national employees is in essence the same as for most other Federal employees--that is, com-