OPM Limits Top Federal Performance Ratings to 40% of GS Employees

The Office of Personnel Management (OPM) directed agencies in September to limit the share of General Schedule (GS) employees receiving ratings of 4 (“exceeds fully successful”) or 5 (“outstanding”) to no more than 40% during the FY2026 performance review cycle. The cap is shaping agencies’ appraisal processes as managers finalize ratings, but implementation is not uniform. The reported timing and rollout vary by agency, including an account that the U.S. Department of the Interior (DOI) circulated implementation guidance after business hours on a Friday. That variation makes agency-specific guidance and workforce rules important for contractors assessing the operating environment around their government customers.

At the Internal Revenue Service (IRS), managers are applying the cap as ratings are finalized, and employees have been told that a rating of 3, or “fully successful,” may be the default for many. Government Executive reported that an IRS division involved in reassigning staff to address shortages and backlogs urged employees not to let the prospect of a lower rating lead them to “deliberately choos[e] mediocrity.” In an employee email, IRS Chief of Internal Consulting Joseph Ziegler and deputy Elizabeth Vonhof acknowledged that process changes had generated “concern, frustration, and, for some employees, disappointment.” The IRS message underscores a potential management challenge: maintaining performance and engagement while rating distributions are constrained, particularly in functions already addressing service backlogs.

One commenter described a calibration process in which supervisors submitted ratings, managers reviewed the overall distribution, and the agency then raised the “commendable/FS cutoff” for the overall rating by about 25 points to reach the desired distribution. This is an individual account, not verified agency-wide procedure. Reports and commentary also discuss PCAS, union exemptions, and possible consequences for future reduction-in-force decisions; these claims vary and should not be treated as confirmed government-wide rules. Agencies and contractors should distinguish published, applicable appraisal and personnel requirements from employee commentary before drawing conclusions about staffing or retention.

For contractors, the immediate significance is operational rather than a new buying signal. Changes in government staffing, employee reassignment, morale, or retention could affect the availability of program counterparts, the pace of reviews and approvals, contract oversight, and delivery schedules. The IRS is separately reassigning staff to address taxpayer-service backlogs, so contractors supporting related services should anticipate possible shifts in government coordination capacity without assuming a particular contract change. A separate report mentions reduced funding, dismissal of a 30-person vendor team, and work moving in-house, but does not identify the vendor, agency, contract, or procurement. It therefore indicates a possible workforce and service-continuity concern—not an announced recompete, solicitation, or defined opportunity.

• OPM capped FY2026 ratings of 4 or 5 at 40% of GS employees; contractors should track how this affects agency customer capacity and oversight.
• The IRS is applying the limit while managers finalize ratings, with “fully successful” (3) described as the default for many employees.
• IRS leaders urged employees to maintain high work standards despite rating concerns, amid staffing reassignments aimed at shortages and backlogs.
• A commenter reported a roughly 25-point increase to a “commendable/FS cutoff” during calibration; treat this as an individual account, not confirmed government-wide practice.
• Reports about PCAS, union exemptions, and possible reduction-in-force effects are not confirmed agency-wide rules; verify applicable official guidance.
• DOI implementation timing reportedly differed from other agencies, reinforcing the need to confirm local procedures and schedules.
• The reported elimination of a 30-person vendor team and shift of work in-house is unspecified; it is not evidence of a named contract action or recompete.
• Program and procurement teams should assess potential effects on government staffing, service continuity, review timelines, and contractor coordination without assuming a solicitation or award.