Issue Briefs

Following are key sections of a recent MSPB report finding that federal agencies have “mostly positive” views of the direct hire procedure–known as the §3304 authority, for the section in Title 5 of the U.S. Code where it is found—which is being used more commonly to fill competitive service vacancies, although noting that the practice raises some issues, including a perception that it is “less fair” than full competition.


Overall, agency representatives were mostly positive about the use of §3304 DHA. In our questionnaire, a majority of CHCO representatives indicated that compared to other competitive procedures, §3304 DHA helped improve the quality of the applicant pool (11 CHCOs), the quality of the new hires (15), and the timeliness of the hiring process (14). The areas most cited by agencies as being helped by §3304 DHA were targeting applicants with the needed skills (18), hiring candidates they actively recruited (18), hiring the most qualified candidates (15), identifying the most qualified candidates (13), and keeping the agency more competitive with other employers (13). These responses also show that agencies are concerned not just with hiring applicants quickly but also with hiring applicants who are best qualified.

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Focus group and interview participants further stated that advantages of §3304 DHA include staying more competitive with other employers by being able to offer more timely tentative job offers after applicant qualifications have been determined, higher rates of satisfaction from managers and new hires, and streamlining the hiring process by not having to apply veterans’ preference. Also, they felt §3304 DHA improves the relationship with hiring officials because there is less conflict about things like certificate of eligible determinations, applicant qualifications, and stringent HR processes.

Challenges

Responses from CHCO representatives did not note many challenges to using §3304 DHA. The two biggest hindrances reported were delays processing security clearances and OPM limits on usage, with eight agencies saying each was at least a slight hindrance. Other hindrances included the need for public notice, the length of the hiring process even with §3304 DHA, documenting the need for §3304 DHA, and understanding the rules, with six CHCOs noting that each of these was at least a slight hindrance.

Regarding public notice, we received comments that the requirement proved challenging because it increases the number of applications (both qualified and unqualified) that need to be processed, reduces flexibility by limiting the receipt of applications to a specific open period, and does not complement targeted recruitment efforts. OPM stated that the public notice requirement ensures objectivity in §3304 DHA selections.

CHCOs were mostly neutral on the issues of whether §3304 DHA affected merit, opportunities to hire veterans, and diversity of the workforce. Some of the agencies specified that they would like more flexibility to use direct hire when they think it is necessary.

Focus group participants were more critical of some aspects of §3304 DHA. Some participants responded that perceptions exist that §3304 DHA is less fair than competitive procedures. For instance, a couple of participants commented that it can be used to “get around” veterans’ preference so hiring officials do not need to consider veterans. We note that the §3304 DHA statute exempts agencies from applying veterans’ preference, but OPM does instruct agencies that “qualified candidates with veterans’ preference should be selected as they are found.”23 Therefore, the authority should not be used to avoid hiring candidates with preference.

Focus group participants also perceived that because the authority focuses so much on external recruitment, hiring officials may not give equal consideration to internal candidates. Participants further expressed that anecdotally they have seen the use of §3304 DHA increase equal employment opportunity complaints and new-hire turnover.

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Competing Views of §3304 DHA

As previously indicated, OPM’s response to our inquiries emphasized that the §3304 DHA authorizes direct hire in only two limited instances: where there is a critical hiring need or when there is a severe shortage of candidates, as defined in the implementing regulations. As the chief human resources agency and personnel policy manager for the Federal Government, OPM is understandably focused on the scope of the authority.

However, some of the responses we received from agency representatives suggest that while agencies are using the authority to address critical hiring needs or applicant shortages, they are also interested in hiring for high-quality candidates, not just those who are proficient enough to get a passing score on the assessment. For instance, agencies use a variety of assessment tools, some of which appear to do more than just assess whether an applicant has the basic qualifications for the job. They use multiple recruitment methods to reach applicants and cited the ability to reach recruited applicants and the increase in applicant quality as advantages to using the authority. Furthermore, their concerns about public notice seem to imply that hiring based on the order of application receipt is not a practice that supports their goals.

Findings

The Government’s experience with the direct-hire authority under §3304 has been largely positive. Appointments made under §3304 DHA are currently only a small percentage of competitive hires and have been used largely for professional and administrative positions that most would agree are occupations in which a critical hiring need or severe shortage of candidates exists. Even though §3304 DHA is the dominant hiring authority for some medical occupations, this usage seems to complement merit-based hiring procedures where needed rather than replacing it overall.

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In comparison to other competitive procedures, §3304 DHA resulted in comparable or greater racial and ethnic diversity, as well as more female hires. Otherwise, there were few demographic differences achieved through §3304 DHA versus other competitive procedures when compared by occupation. Furthermore, HR representatives reported a number of advantages to using §3304 DHA, including the ability to target recruitment efforts, hire faster, make more timely tentative job offers to keep the agency more competitive with other employers, and improve satisfaction rates of managers and new hires.

On the other hand, some focus group participants expressed concerns about the fairness of the §3304 DHA process for internal candidates and veterans, and the data do suggest that veterans were hired at lower rates for some occupational categories.

Looking Forward

Given the Government’s pressing talent needs and repeated efforts to improve Federal hiring, it is good news that at least one hiring initiative seems to be having some positive effects. However, that success also raises broader questions about the purpose of §3304 DHA and other direct-hire authorities in general. Looking forward, the Federal Government needs to consider what outcomes can reasonably be expected from DHAs and how they can best be used in conjunction with competitive hiring procedures.

The §3304 DHA was created to address critical hiring needs and severe shortages of candidates that could not be resolved adequately through competitive examining. The authority was not intended to result in a better-qualified workforce The first merit system principle states that “selection and advancement should be determined solely on the basis of relative ability, knowledge, and skills.” However, §3304 DHA enables agencies to hire, after public notice, any qualified applicant. In fact, OPM’s cited guidance specifically states that agencies should determine which candidates meet the level of proficiency needed to perform the work and make selections in an order that approximates the receipt of applications, rather than trying to determine the relative degree of qualifications applicants have.

OPM officials pointed out that the statute allows agencies to use §3304 DHA only “when there exists a severe shortage of candidates (or, with respect to the Department of Veterans Affairs, that there exists a severe shortage of highly qualified candidates) or that there is a critical hiring need.” The guidance to make selections in the order that applications are received helps meet this requirement while also ensuring objectivity in selections and fair treatment of veterans in the absence of formal competitive procedures and the application of veterans’ preference.

Yet, as discussed in the brief, there are indications that agencies may be going beyond that intent by expanding recruitment, implementing additional assessments, and doing more to draw distinctions among applicants. Consequently, agency and managerial satisfaction with §3304 DHA appears to be at least somewhat derived from the ability to hire better-qualified candidates, more than the ability to hire a merely qualified applicant more quickly. Although such actions may not be in keeping with hiring qualified applicants in the order of receipt, they do seem consistent with the spirit of the first merit system principle.

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This suggests that OPM and hiring officials may have a different understanding of the role direct hire should play in hiring decisions. In the context of §3304 DHA, these different views have not seemed to create undue friction, likely because the authority is limited to a small set of occupations that do not have a large number of applicants or that need to be staffed quickly.

However, there are indications that Federal leaders and stakeholders would like to expand the current §3304 DHA to include the quality of the candidate as a factor in selection decisions. As mentioned previously, VA sought and obtained congressional approval to use §3304 DHA for positions with a severe shortage of “highly qualified candidates” rather than “qualified candidates.” Two good Government groups—the Partnership for Public Service and the Volcker Alliance—have advocated jointly for changing the §3304 DHA standard from “qualified” to “highly qualified” for all users. Further, they recommended that agencies be permitted to use the authority without OPM approval, arguing that agencies know their workforce needs best—a recommendation also suggested by the National Academy of Public Administration.

In the context of direct hire beyond that covered under §3304, these different visions raise the question about the rationale for direct hire in general: should DHAs be used only for reasons of urgency or scarcity, or should quality also be a factor? Certainly, the first merit system principle affirms through its focus on “relative ability” that quality matters.

That is an important question facing Government policymakers. As indicated earlier, there is a broader collection of DHAs not granted through OPM that are showing a rapid increase in usage, reaching 27 percent of all competitive hires in FY 2018. This rapid growth is a clear indicator of frustration with the results of current competitive service hiring procedures. It also suggests that these DHAs may no longer be just an avenue to supplement competitive hiring for occupations in which critical hiring needs or severe shortages of candidates exist.

The time is right for thoughtful, well-planned hiring reform that balances the principles of fairness, openness, quality, and efficiency. In our 2006 report Reforming Federal Hiring: Beyond Faster and Cheaper, MSPB recommended that OPM work with Congress and other stakeholders to develop a policy framework for hiring reform. That recommendation remains relevant today and should include discussions of what outcomes can reasonably be expected from DHAs and how DHA can best be used in conjunction with competitive hiring procedures. Otherwise, the Federal Government risks letting DHAs proliferate and replace merit-based hiring processes, such as competitive examining, with little forethought or planning.

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