President Donald Trump’s promise to overhaul the federal government hit another obstacle last week when his pick to head the Office of Personnel Management, George Nesterczuk, quietly withdrew from consideration—leaving the administration with no nominee to run a small but crucial agency that oversees policies for all 2 million employees of the federal government and would be integral to any sweeping effort to reform its workforce.

Nesterczuk was a logical Republican pick to head the agency: a former OPM official with decades of experience in personnel issues. But he had become caught up in a contentious fight when public-sector unions sent a letter in late July protesting his nomination, objecting to his position on civil service reform and raising questions—without any specific allegations or evidence—about his work for the Ukrainian government under pro-Russian Prime Minister Viktor Yanukovych, and potential ties to former Trump campaign chairman Paul Manafort.

The White House, which did not answer a request for comment, withdrew his name last Wednesday afternoon. In a letter to Trump last week, Nesterczuk said he was pulling out over the partisan atmosphere and “baseless” allegations against him. “I do not wish to be a distraction for the administration while I defend my integrity,” he wrote. According to multiple sources who were tracking his nomination, the confirmation process was moving slowly, in part because he hadn’t even submitted his paperwork to the relevant committee, despite being nominated in May.

This leaves the White House with a hole in a key spot for its agenda. “His withdrawal is a huge obstacle [to reform] because they don’t have anybody in the White House with any federal government expertise,” said Elaine Kamarck, a senior fellow at the Brookings Institution who worked on Al Gore’s “Reinventing Government” initiative. “They would need somebody like Nesterczuk to walk them through [civil service policies].”

Trump has made big promises about running the government like a business, using evidence to justify policy and personnel decisions. He imposed a hiring freeze—since lifted—on his third full day in office, and, in March, he signed an executive order on a “comprehensive plan for reorganizing the executive branch,” requiring agencies to submit reorganization plans by September, including information on how to “maximize the performance of government workers.” In May, the Trump administration released its 2018 budget, including huge cuts to domestic spending that would require a significant reduction in the federal workforce.

But the federal workforce is bound by a dense web of rules, and any major changes will require the OPM to get involved. The 6,300-person agency acts as the human resources department for the entire federal government, setting policies on health and retirement benefits and how agencies can hire and fire workers.

“This is the type of thing where if you just wade into it without information, it’s really easy to break things,” said Jeffrey Neal, a former chief human capital officer at the Department of Homeland Security, who writes a blog on the government’s HR practices. “For example, you can really screw up pay. You can screw it up and pay people too much and they’ll never leave. You can screw it up and pay too little and be unable to hire. You can break an agency’s workforce.”

OPM has been crucial to reform efforts in the past. The Clinton administration’s “Reinventing Government” plan, run by Gore, used OPM to offer employees across the federal government buyouts of up to $50,000 to leave their jobs. In the end, the administration was able to cut 420,000 jobs, with only 25,000 coming through layoffs.

Asked whether the withdrawal is a setback for the administration's government-reform efforts, an OPM spokesperson said, “OPM is committed to working diligently to support whoever our future nominee will be, but for now we will carry on our daily responsibilities at OPM and continue to move forward with our mission.”

Though many government employees are anxious about Trump’s plans, government personnel policies are also widely seen to be in need of an overhaul: The current U.S. civil service rules date back to 1978, when Congress passed the Civil Service Reform Act. Those rules were built for a world when the iPhone was science fiction, and critics say they hamstring the government from hiring talented workers and removing poor performers. “You tell me what organization that is successful today that last transformed its rules around talent almost 40 years ago,” said Max Stier, CEO of the Partnership for Public Administration, a nonpartisan group that has tracked the nomination process. “It’s crazy.”

Nesterczuk had years of experience with these types of issues working at OPM during the George W. Bush and Reagan administrations. Under Bush, he was a central figure on a controversial reform to the Department of Defense’s civilian personnel policies known as the National Security Personnel System, which moved the DOD’s seniority-based pay system to one based on performance. But the new system, an internal DOD report found, discriminated against women and minorities.

Though Neal, who worked on the program at the Department of Defense, said the problems with discrimination were fixable, the entire program was ultimately torpedoed amid the Bush administration’s attempt to impose new restrictions on collective bargaining for public-sector unions. That triggered a partisan political fight on the overhaul, ultimately dooming the project: Congress, led by Democrats, repealed the NSPS in the fiscal 2010 defense authorization bill.

That gives a sense of the minefield that awaits any president attempting workforce reforms. Unions remember Nesterczuk’s role implementing the system and were adamantly opposed to his nomination. “He has a history of extreme hostility to federal employees and the missions of their agencies,” said Jacque Simon, policy director for the American Federation for Government Employees, one of the groups that sent the letter. The letter writers also wanted lawmakers to seek more information about Nesterczuk’s work for the Ukrainian government and raised the question of potential ties to Manafort, who worked on the Reagan transition when Nesterczuk was tapped to be an OPM official.

Nesterczuk could not be reached for comment for this article. In an interview with the Washington Post last month, he called the allegations “fiction … made up stuff.”

The withdrawal is part of broader woes the administration has had in filling key positions. Trump has still not nominated people to fill 354 of 577 key positions, according to a tracker maintained by the Washington Post and Partnership for Public Service. Just 117 nominees have been confirmed, far fewer than President Barack Obama or Bush had put in place this far into their terms.

In addition to putting a brake on any personnel reforms the administration has in mind, the OPM vacancy also leaves the administration without its top adviser on personnel as agencies submit their reorganization plans, which are due in September. Trump must now find a new candidate for the job, delaying Senate approval until at least the fall. The latest any previous administration installed its first OPM director was July 11 under Bush; most were confirmed in the spring.

“Civil service reform is difficult in a nonpolitical environment. In a highly politicized environment, it’s incredibly difficult,” said Neal. “It’s much harder to pull off if there isn’t somebody sitting there at OPM who is a part of the administration that also has day-to-day exposure to folks at OPM. That’s incredibly important.”

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