   United States Court of Appeals
       for the Federal Circuit
                      ______________________

        NATIONAL FEDERATION OF FEDERAL
             EMPLOYEES, LOCAL 1442,
                    Petitioner

                                    v.

               DEPARTMENT OF THE ARMY,
                        Respondent
                  ______________________

                            2014-3175
                      ______________________

   Petition for review of an arbitrator’s decision in FMCS
Case No. 14-00370-1 by Arbitrator Roger P. Kaplan.
   -------------------------------------------------------------------------

        NATIONAL FEDERATION OF FEDERAL
             EMPLOYEES, LOCAL 2109,
                    Petitioner

                                    v.

                   WATERVLIET ARSENAL,
                         Respondent.
                    ______________________

                            2014-3189
                      ______________________

   Petition for review of an arbitrator’s decision in FMCS
Case No. A14-50680-6 by Arbitrator James A. Gross.
2           NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



                  ______________________

                 Decided: October 20, 2015
                  ______________________

  STEFAN P. SUTICH, National Federation of Federal
Employees, Washington, DC, argued for petitioners.

    HILLARY A. STERN, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, argued for respondents. Also represent-
ed by BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR.,
MARTIN F. HOCKEY, JR.
                ______________________

    Before MOORE, SCHALL, and O’MALLEY, Circuit Judges.
SCHALL, Circuit Judge.
     These related cases are appeals from arbitrators’ deci-
sions denying grievances filed by locals of the National
Federation of Federal Employees (“NFFE” or “Union”). In
the first appeal, Nat’l Fed’n of Fed. Emps., Local 1442 v.
Dep’t of the Army, No. 2014-3175 (“Appeal 3175”), NFFE
Local 1442 filed a group grievance on behalf of 138 NFFE
bargaining unit employees at Letterkenny Army Depot
(“LEAD”) in Chambersburg, Pennsylvania. In the second
appeal, Nat’l Fed’n of Fed. Emps., Local 2109 v. Watervliet
Arsenal, No. 2014-3189 (“Appeal 3189”), NFFE Local 2109
filed two grievances on behalf of all of NFFE’s bargaining
unit employees at Watervliet Arsenal (“WVA”) in
Watervliet, New York. In both the LEAD and WVA
grievances, the Union challenged the furloughing of
bargaining unit employees for six discontinuous days
between July and September in Fiscal Year 2013. The
furloughs were the result of an automatic process of
federal agency spending reductions known as “sequestra-
tion.”
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA     3



    On June 13, 2014, Arbitrator Roger P. Kaplan ruled
that the furloughs of the specified bargaining unit em-
ployees at LEAD were in accordance with law. He there-
fore denied the grievance filed by the Union on their
behalf. Nat’l Fed’n of Fed. Emps., Local 1442 v. Dep’t of
the Army, FMCS Case No. 14-00370-1 (June 13, 2014)
(“LEAD Opinion”). On July 7, 2014, Arbitrator James A.
Gross ruled that the furloughs of bargaining unit security
employees at WVA were not in accordance with law. He
therefore sustained the grievance filed by the Union on
their behalf. Arbitrator Gross also ruled, however, that
the furloughs of non-security bargaining unit employees
at WVA were in accordance with law. He therefore de-
nied the grievance filed by the Union on behalf of those
employees. Nat’l Fed’n of Fed. Emps., Local 2109 v.
Watervliet Arsenal, FMCS Case No. A14-50680-6 (July 7,
2014) (“WVA Opinion”).
    In Appeal 3175, the Union appeals Arbitrator
Kaplan’s decision denying the group grievance it filed on
behalf of 138 bargaining unit employees at LEAD. In
Appeal 3189, the Union appeals Arbitrator Gross’s deci-
sion denying the grievance it filed on behalf of non-
security bargaining unit employees at WVA. In this
opinion, we treat the arguments made in the two appeals
conjointly. For the reasons set forth below, we affirm the
decisions of the arbitrators in both appeals.
                        BACKGROUND
                              I.
    LEAD serves as a maintenance depot, primarily per-
forming maintenance on tactical missiles and ammuni-
tion. LEAD Joint Appendix (“J.A.”) 256. It is subordinate
to the Army’s Aviation and Missile Command Life Cycle
Management Command, which reports to the Army
Materiel Command. LEAD Op. at 5. WVA is subordinate
to the Army’s Tank Automotive Command (“TACOM”)
Life Cycle Management Command, which also reports to
4         NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



the Army Materiel Command. WVA supports the Life
Cycle Management Command’s responsibility for the
development, acquisition, logistical support, and materiel
readiness of the Army’s tank automotive and armament
systems. WVA Op. at 11; WVA J.A. 456, 462.
    Both LEAD and WVA are Army Working Capital
Fund (“AWCF”) entities. Working capital funds (“WCF”)
were established by Congress under 10 U.S.C. § 2208 to
help control and account for the cost of programs and
work performed within the Department of Defense
(“DOD”). See 10 U.S.C. § 2208(a); WVA J.A. 410. WCFs
are created and controlled by the Office of the Secretary of
Defense. 10 U.S.C. § 2208(a), (b), (e). The AWCF is
shared by two activity groups: Industrial Operations and
Supply Management. WVA J.A. 411. Both LEAD and
WVA are Industrial Operations activities under the
AWCF.
    The primary customers of WCF entities are other
DOD entities that transfer their own congressionally-
appropriated funds to make “purchases” from WCFs. See
id. 409–10. Thus, DOD entities are both the customer
and the service-provider, with appropriated funds from
the ordering entity’s account being transferred to the
WCF’s account. In that way, after receiving initial work-
ing capital through appropriation, WCF entities are self-
supporting and function from the fees charged for the
services they provide.
    Appropriated funds flow from a DOD customer to a
WCF entity as work is performed by the WCF entity. Id.
410. When work is ordered from WCF entities and the
work is funded (i.e., funds have been “obligated” for the
work), but the work is not completed by the end of the
fiscal year, the obligated funds are kept by the WCF
entity as “carryover.” Id. 466–467; DOD Financial Man-
agement Regulation, Vol. 2B, Chapter 9, 090207 (defining
“carryover” as the “dollar value of work that has been
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA       5



ordered and funded (obligated) by customers . . . , but not
yet completed by [Defense Working Capital Fund] activi-
ties . . . at the end of the fiscal year”). Obligated funds
can be de-obligated by a customer, even in the middle of a
WCF entity’s performance of ordered work. E.g., WVA
J.A. 107–08 at 86:15–87:25; LEAD J.A. 74 at 152:2–10.
    Finally, DOD may transfer money in and out of WCF
accounts to meet other needs. See 10 U.S.C. § 2208(r).
Pursuant to § 2208(r)(1), however, a transfer of funds
from a WCF, including a transfer of funds to another
WCF, requires the Secretary of Defense to submit to the
appropriate congressional committees, in advance, notifi-
cation of the proposed transfer.
                              II.
    The sequestration of federal funds in Fiscal Year 2013
forms the backdrop for these appeals. On March 1, 2013,
as a result of the Budget Control Act of 2011 (“Budget
Control Act”), Pub. L. No. 112–25, §§ 101–103, 125 Stat.
240, 241–46 (2011), and the American Taxpayer Relief
Act of 2012 (“Taxpayer Relief Act”), Pub. L. No. 112–240,
§ 901, 126 Stat. 2313, 2370 (2012), DOD’s yearly budget
was cut by $37 billion at a point roughly halfway through
Fiscal Year 2013. 1



   1    The Budget Control Act and the Taxpayer Relief
Act made amendments to the Balanced Budget and
Emergency Deficit Control Act of 1985, Pub. L. No. 99–
177, 99 Stat. 1038, which is codified in pertinent part at 2
U.S.C. § 901 et seq. The amendments established spend-
ing limits for agencies of the federal government and
required automatic “sequestration” under certain statuto-
ry conditions. See generally 2 U.S.C. §§ 901–903. The
Taxpayer Relief Act required the President to issue a
sequestration order on March 1, 2013, in the middle of
Fiscal Year 2013. 126 Stat. at 2370. On that date, Presi-
6         NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



    Operating under the specter of sequestration, on Feb-
ruary 20, 2013, Secretary of Defense Leon Panetta issued
an anticipatory memorandum titled “Preparations for
Potential Sequestration on March 1 and Furlough Notifi-
cations.” WVA J.A. 324–25. The purpose of the memo-
randum was to advise the DOD workforce of the
possibility of furloughs as a result of reductions in spend-
ing and budgetary shortfalls. 2        Following President
Obama’s March 1 order implementing budget reductions,
incoming Secretary of Defense Chuck Hagel issued a
memorandum on May 14, 2013, directing DOD managers
to furlough most of the Department’s civilian employees.
Id. 296–98. The memorandum provided that “[f]urloughs
will be imposed in every military department as well as
almost every agency and in our working capital funds.”
Id. 297 (emphasis added). In a July 2013 statement to
Congress, Robert Hale, Under Secretary of Defense
(Comptroller), officially estimated that “furloughs of all
DOD civilians will save about $2 billion in [Fiscal Year]
2013, including more than $500 million associated with
reduced personnel costs in working capital fund activi-
ties.” Id. 398. Under Secretary Hale stated that “working
capital fund personnel savings provide [DOD] the flexibil-
ity to adjust maintenance funding downward to meet
higher-priority needs.” Id.




dent Obama issued a sequestration order requiring reduc-
tions in spending from most federal budget accounts for
Fiscal Year 2013. Sequestration Order, 78 Fed. Reg.
14,633 (Mar. 1, 2013).
    2   “‘Furlough’ means the placing of an employee in a
temporary status without duties and pay because of lack
of work or funds or other nondisciplinary reasons.” 5
U.S.C. § 7511(a)(5).
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA      7



                              III.
    The facts pertinent to Appeal 3175 are not in dispute.
In accordance with Defense Secretary Hagel’s directives,
LEAD notified its bargaining unit employees that it
proposed to furlough them for not more than eleven days
during July, August, and September 2013. LEAD J.A.
327–29. 3 The affected employees were provided with an
opportunity to respond to the proposed furloughs. After
consideration of their responses, LEAD issued final deci-
sions rejecting requests for exceptions, thereby imple-
menting the furloughs. Id. 66–67.
    In due course, NFFE filed a group grievance on behalf
of 138 bargaining unit employees at LEAD who received
adverse final decisions. Id. 104–07. NFFE argued that,
as a self-supporting WCF entity, LEAD was not faced
with a funding shortfall and that, therefore, the furloughs
did not promote the efficiency of the service by saving any
costs. In support of its position, the Union argued that
there were no reductions in customer orders from LEAD
related to the sequestration. It pointed out that, going
into Fiscal Year 2013, LEAD had carryover funds, with an
estimated $400 million in orders. The Union further
pointed out that LEAD, in fact, ended Fiscal Year 2013
with $778 million in orders—well over projections—
despite the ongoing federal sequestration.
    Pursuant to the Union’s Collective Bargaining
Agreement (“CBA”), the grievance proceeded to a hearing
before Arbitrator Roger P. Kaplan. After the hearing,
Arbitrator Kaplan found that the financial circumstances
of DOD, rather than those specific to LEAD, were the
proper focus for determining the validity of the furloughs.



   3    On August 6, 2013, Defense Secretary Hagel re-
duced the number of furlough days for most DOD civilians
from eleven to six. WVA J.A. 383.
8         NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



In that regard, he concluded that LEAD could not be
viewed as a separate entity from the rest of DOD. LEAD
Op. at 27, 29. Arbitrator Kaplan stated that “NFFE[’s]
position and argument is . . . based largely on the notion
that [LEAD] is self contained,” which he believed failed to
recognize that “[LEAD] is part of [DOD].” Id. at 27.
Arbitrator Kaplan thus “rejected” NFFE’s arguments
regarding LEAD’s budgetary surplus. He instead focused
on DOD’s decision to “save half a billion dollars by fur-
loughing WCF employees,” $5 million of which were saved
by furloughing the LEAD bargaining unit employees. Id.
at 29. Arbitrator Kaplan determined that WCF savings
provided DOD potential “flexibility” to adjust mainte-
nance funding downward to meet higher priority needs.
In his view, the “furloughs were a reasonable solution to
the Sequestration budget problems and therefore were
taken for the efficiency of the service.” Id. at 30. The
Union’s grievance was therefore denied.
                             IV.
    The facts pertinent to Appeal 3189 also are not in dis-
pute. Abiding by Defense Secretary Hagel’s directives,
WVA notified its bargaining unit employees that it pro-
posed to furlough them between July and September
2013. Like the LEAD employees, the WVA employees
were provided with an opportunity to respond to the
proposed furloughs. In due course, the Deputy to the
Commander of the TACOM Life Cycle Management
Command denied all of the employees’ requests for excep-
tions, thereby implementing the furloughs. WVA J.A.
136–39.
    On July 8, 2013, NFFE filed two grievances in connec-
tion with the WVA furloughs. One grievance was filed on
behalf of bargaining unit employees in security positions,
while the other grievance was filed on behalf of all other
bargaining unit employees. Id. 17–18, 246–47. Both
grievances proceeded to a hearing before Arbitrator
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA        9



James A. Gross in accordance with the Union’s CBA.
Arbitrator Gross sustained the grievance as to the securi-
ty personnel. That decision is not at issue on appeal.
However, he denied NFFE’s grievance on behalf of all
other bargaining unit employees. Arbitrator Gross reject-
ed NFFE’s argument that, because WVA had ample funds
for Fiscal Year 2013 and ultimately suffered no de-
obligation of funds, the furloughs did not promote the
efficiency of the service. WVA Op. at 7–8, 11–13. Arbitra-
tor Gross reasoned that “WVA is not an independent
entity,” but a “part of [DOD].” Id. at 11. In the “extraor-
dinary financial situation” presented by sequestration,
Arbitrator Gross found DOD’s actions to be “reasonable
management solutions.” Id. at 12. He thus found the
furloughs to be in accordance with law.
                              V.
    As noted above, in Appeal 3175, NFFE Local 1442 ap-
peals Arbitrator Kaplan’s decision denying the group
grievance it filed on behalf of 138 bargaining unit employ-
ees at LEAD. In Appeal 3189, NFFE Local 2109 appeals
Arbitrator Gross’s decision denying the grievance it filed
on behalf of non-security bargaining unit employees at
WVA. We have jurisdiction over both appeals pursuant to
5 U.S.C. §§ 7121(f), 7703(b), and 28 U.S.C. § 1295(a)(9).
                         DISCUSSION
                              I.
    When adverse actions which otherwise are appealable
to the Merit Systems Protection Board (“Board”) are
submitted to arbitration under a CBA, we review the
arbitrator’s decision under the standard that we use when
we review a decision of the Board. 5 U.S.C. §§ 7121(f),
7703(b); see also Johnson v. Dep’t of Veterans Affairs, 625
F.3d 1373, 1376 (Fed. Cir. 2010). Our review is thus
limited. We set aside an arbitrator’s decision only if we
find it to be: (1) arbitrary, capricious, an abuse of discre-
10        NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



tion, or otherwise not in accordance with law; (2) obtained
without procedures required by law, rule, or regulation
having been followed; or (3) unsupported by substantial
evidence. 5 U.S.C. § 7703(c); see also McCollum v. Nat’l
Credit Union Admin., 417 F.3d 1332, 1337 (Fed. Cir.
2005).
     Furloughs of thirty days or less constitute an adverse
action by an agency. 5 U.S.C. § 7512; see also Chandler v.
Dep’t of the Treasury, 120 M.S.P.R. 163, 169–70 (2013).
An agency may furlough an employee for lack of work or
funds or other non-disciplinary reasons.          5 U.S.C.
§§ 7511(a)(5), 7512(5). The agency, however, may only
take such action if it “will promote the efficiency of the
service.” Id. § 7513(a). The “efficiency of the service”
standard in a furlough case is satisfied by the agency
demonstrating “that the furlough was a reasonable man-
agement solution to the financial restrictions placed on it
and that the agency applied its determination as to which
employees to furlough in a ‘fair and even manner.’”
Chandler, 120 M.S.P.R. at 171 (quoting Clark v. Office of
Pers. Mgmt., 24 M.S.P.R. 224, 225 (1984)); see also Berlin
v. Dep’t of Labor, 772 F.3d 890, 895 (Fed. Cir. 2014)
(citing Clark and Chandler as establishing the standard
for “non-ALJ furloughs under 5 U.S.C. § 7513”).
                             II.
    On appeal, NFFE does not challenge the arbitrators’
findings that DOD experienced financial restrictions as a
result of sequestration. Neither does the Union contend
that the furloughs were not applied in a fair and even
manner. Instead, the Union contests the arbitrators’
determinations that the relevant financial circumstances
for purposes of assessing the propriety of the furloughs
were those of DOD rather than the local AWCF entities.
   NFFE argues that, pursuant to 5 U.S.C., Chapter 75,
LEAD and WVA, not DOD, were the proper “agencies” for
purposes of assessing the validity of the furloughs. This
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA       11



is so, the Union urges, because 5 U.S.C. § 7512(a) applies
to a host of adverse actions, in addition to furloughs, that
are taken at the local agency level, and not by the Secre-
tary of Defense. Because adverse actions such as remov-
als are effectuated by local agencies, the Union contends
that furloughs must also be effectuated and analyzed
from the perspective of the local level. The Union thus
takes issue with the arbitrators’ views that LEAD or
WVA could not be considered separately from the rest of
DOD. NFFE argues that the furloughs were not reasona-
ble because LEAD and WVA each had no shortage of
funds and, thus, could pay the salaries of the furloughed
employees for the period of the furloughs. In addition, it
contends that the fact that both LEAD and WVA employ-
ees continued to work during the budget crises in Fiscal
Year 2014, when there was a government shutdown,
proves that the furloughs during Fiscal Year 2013 were
unnecessary.
    Addressing the Union’s contention that the language
of 5 U.S.C., Chapter 75 dictates that LEAD and WVA are
the relevant “agencies” for purposes of analyzing the
furlough decisions, the Army (in Appeal 3175) and WVA
(in Appeal 3189) argue that DOD is the only relevant
“agency” specified by the statute. They argue that 5
U.S.C., Chapter 1, titled “Organization,” divides federal
“agencies” into five different groups. They point out that
DOD is included in the first group of agencies, the Execu-
tive Departments, under 5 U.S.C. § 101, and that neither
LEAD nor WVA are named in any of the five groups or in
any other provision of Title 5. They thus argue that the
statutory text supports the arbitrators’ decisions to look to
the financial circumstances of DOD rather than those of
LEAD or WVA.
    Beyond their statutory argument, the Army and WVA
point out that AWCF entities are paid by DOD customers
that obligate funds to WCF entities based on the cost of
the orders placed. WCF entities, however, do not own the
12        NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



funds until the ordered work is completed. See WVA J.A.
410. The Army and WVA further point out that obligated
funds can be de-obligated by DOD customers at any time
before the ordered work is completed. Thus, if ordered
work is not in fact performed by a WCF entity, and conse-
quently not then charged to obligated funds, DOD has
greater flexibility to de-obligate funds and spend them
elsewhere. In that way, the Army and WVA argue, WCF
entities and DOD are financially interdependent. The
nature of the relationship between WCF entities and
DOD, they contend, provides substantial evidence demon-
strating that a WCF entity cannot be treated separately
from the rest of DOD.
                             III.
    In Appeal 3175 and Appeal 3189, we are faced with
the same two questions: (1) whether the arbitrator erred
in analyzing the efficiency of the service issue by focusing
on DOD as a whole rather than on the local AWCF entity
(LEAD or WVA); and (2) whether the arbitrator erred in
ruling that the employer carried its burden of demonstrat-
ing that the furlough promoted the efficiency of the ser-
vice. We conclude that, in both appeals, the arbitrators
correctly focused on DOD as the relevant agency rather
than on the local WCF entity. We also conclude that, in
both appeals, substantial evidence supports the arbitra-
tors’ findings that the efficiency of the service standard
was met. We consider first the arbitrators’ focus on DOD
rather than on LEAD and WVA.
    Our analysis begins with the language of the statuto-
ry provisions authorizing furloughs of federal employees.
Section 7513(a) states that “an agency may take an action
covered by this subchapter [i.e. those listed in
§ 7512] . . . only for such cause as will promote the effi-
ciency of the service.” 5 U.S.C. § 7513(a) (emphasis
added). Section 7512 provides that the subchapter “ap-
plies to . . . a furlough of 30 days or less.” The term
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA     13



“agency” is not defined in Chapter 75 of Title 5, under
which §§ 7512 and 7513 are organized. Chapter 1 of Title
5, however, divides “Agencies Generally” into five differ-
ent groups: (1) Executive departments (§ 101); (2) Military
departments (§ 102); (3) Government corporations (§ 103);
(4) Independent establishments (§ 104); and (5) Executive
agencies (§ 105). DOD is included in the first group of
agencies, “Executive departments.” Specifically, § 105
provides that, “[f]or purposes of [Title 5], ‘Executive
agency’ means an Executive department.” Section 101, in
turn, explains that “Executive departments” includes,
among others, DOD. In contrast, Title 5 nowhere defines
“agency” as specifically including WCF entities, such as
LEAD and WVA, or any other agency subdivision or local
employing office. Indeed, virtually every time the term
“agency” is defined elsewhere in Title 5, the definition
includes DOD, but never LEAD, WVA, or any other
agency subdivision or local employing office. See, e.g., 5
U.S.C. §§ 3132, 3701, 3581, 4701, 5351, 5381, 5402, 5521,
7103. The statutory language supports the arbitrators’
decisions. 4



   4    In our recent decision in Vassallo v. Department of
Defense, 797 F.3d 1327 (Fed. Cir. 2015), we addressed
whether the word “agency” in 5 U.S.C. § 3304(f)(1), a
provision of the Veterans Employment Opportunities Act
of 1998, Pub. L. No. 105–339, 112 Stat. 3182 (“VEOA”),
means “Executive Agency.” In Vassallo, the government
argued that “agency” in § 3304(f)(1) refers to DOD, and
not a subcomponent or sub-agency of DOD. We found the
statutory scheme of the VEOA ambiguous on the ques-
tion. We resolved the issue by deferring to the Office of
Personnel Management’s definition of “agency” in 5
C.F.R. § 315.611(b) for purposes of § 3304(f)(1). That
regulation defines “agency” to mean “executive agency as
defined in 5 U.S.C. [§] 105.” Vassallo, 797 F.3d at 1331
14        NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



    We are not persuaded by NFFE’s argument that the
word “agency” in 5 U.S.C. § 7513(a) refers to the “local
agency level” because the adverse actions listed in Chap-
ter 75 include removals and suspensions, as well as
furloughs, and those adverse actions (removals and sus-
pensions) regularly are taken at the local level or duty
station. Even assuming NFFE’s proposition to be true, we
see no basis for concluding that, because some adverse
actions are implemented at the local level or at an affect-
ed employee’s duty station, it necessarily follows that the
determination of the validity of furloughs at a particular
location arising from an agency-wide sequestration must
be assessed from the standpoint of the local level or local
duty station. In our view, such an approach ignores the
fact that entirely different considerations are involved
when assessing an adverse action, such as a removal or a
suspension, as opposed to a furlough. In the former, the
pertinent facts—the conduct of the employee and the
resulting actions of his or her supervisors—are purely
“local” in that they typically arise at the particular em-
ployee’s duty station. In the case of the furloughs here,
however, the actions at issue (the furloughs at the local
level) were the result of financial restraints imposed on
the entire agency, not just on particular subcomponents of
the agency.
    We find instructive the Board’s decision in Yee v. De-
parement of the Navy, 121 M.S.P.R. 686 (2014). The issue
in Yee was whether the furloughing of a Navy attorney in
response to the sequester and resulting DOD directives
promoted the efficiency of the service, where the Navy
had sufficient funding to avoid the furlough. In Yee, the
Board reasoned that, “[a]lthough the Navy may ordinarily



(quoting 5 U.S.C. § 315.611(b)). We have no interpreta-
tion of “agency” in § 7513(a) to defer to here. Our decision
is nonetheless consistent with the result in Vassallo.
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA        15



show that an action promotes the efficiency of the service
by establishing a connection or nexus that relates solely
to the operations of the Navy, . . . section 7513(a) is not so
limiting under the facts of this case.” Id. at 692. The
Board found that the requirements of § 7513(a) “can be
met by showing a connection or nexus between the action
in question and the efficiency of the civil service more
generally.” Id. (emphasis added). In Yee, the Board noted
that, “although the Navy is separately organized under
the Secretary of the Navy, it operates under the authori-
ty, direction, and control of the Secretary of Defense.” Id.
at 693. The Board pointed out that “the Secretary of the
Navy is responsible to the Secretary of Defense for, among
other things, ‘the effective and timely implementation of
policy, program, and budget decisions and instructions of
the President or the Secretary of Defense relating to the
functions’ of the Navy.”          Id. (quoting 10 U.S.C.
§ 5013(c)(3)). The Board concluded: “[W]e agree with the
administrative judge that, although the appellants as-
serted that the Navy had adequate funding to avoid the
furloughs, it was reasonable for DOD to consider its
budget situation holistically, rather than isolating each
individual military department’s situation.” 5 Id.



    5   In resolving cases involving employees furloughed
during sequestration, the Board has issued a series of
precedential and non-precedential opinions following the
same rationale as in Yee. See, e.g., Einboden v. Dep’t of
the Navy, 122 M.S.P.R. 302 (2015), aff’d, No. 2015-3117,
2015 WL 5730370 (Fed. Cir. Oct. 1, 2015); Furtek v. Dep’t
of the Navy, No. SF-0752-13-2167-I-1, 2015 WL 3830294
(M.S.P.B. June 22, 2015) (unpublished); AR Fort Leaven-
worth, KS v. Dep’t of Army, No. DE-0752-13-1962-I-1,
2015 WL 3794440 (M.S.P.B. June 18, 2015) (un-
published); Office of the Sec’y v. Dep’t of Def., No. DC-
0752-14-0624-I-1, 2015 WL 1655544 (M.S.P.B. Apr. 14,
16        NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



    As noted above in Part I of the Background section,
LEAD and WVA are WCF subcomponents of the Army
Materiel Command. The Department of the Army “is
separately organized under the Secretary of the Army.”
10 U.S.C. § 3011. “It operates,” however, “under the
authority, direction, and control of the Secretary of De-
fense.” Id. The Secretary of the Army is therefore “re-
sponsible to the Secretary of Defense for . . . the effective
and timely implementation of policy, program, and budget
decisions and instructions of the President or the Secre-
tary of Defense relating to the functions of the Depart-
ment of the Army.” Id. § 3013(c)(3). Under these
circumstances, and in view of the fact that WCF entities
are created and controlled by the Office of the Secretary of
Defense, we think logic and common sense compel the
conclusion that, when faced with sequestration, “it was
reasonable for DOD to consider its budget situation
holistically, rather than isolating [LEAD’s and WVA’s]
situation.” Yee, 121 M.S.P.R. at 693. The arbitrators did
not err in focusing their analyses on the financial circum-
stances of DOD rather than on those of LEAD and WVA.
                             IV.
    We turn now to the question of whether substantial
evidence supports the arbitrators’ decisions that the Army
and WVA carried their burdens of demonstrating that the
2013 furloughs promoted the efficiency of the service. In
both Appeal 3175 and Appeal 3189, we hold that the
arbitrators’ decisions are supported by substantial evi-
dence.




2015) (unpublished); Will v. Dep’t of the Navy, No. DC-
0752-13-4673-I-1, 2015 WL 1284270 (M.S.P.B. Mar. 20,
2015) (unpublished); Moser v. Dep’t of the Navy, No. DC-
0752-13-2643-I-1, 2015 WL 892796 (M.S.P.B. Mar. 3,
2015) (unpublished).
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA      17



    As noted, the DOD components that are LEAD’s and
WVA’s usual customers are funded by congressionally-
appropriated funds. Those funds are used to pay for the
work performed by LEAD and WVA. When work is
performed by LEAD or WVA, appropriated funds flow
from the DOD customer to LEAD or WVA. See WVA J.A.
410. However, funds obligated to AWCF entities can and
have been de-obligated by customers for a number of
reasons—even in the middle of the performance of work.
LEAD J.A. 74 at 152:2–10 (Colonel Victor Hagan, LEAD
Deputy Commander, testifying that “[f]unds that are
obligated can be deobligated anytime”); id. 70 at 133:14–
19 (Scott Molony, Director of Resource Management at
LEAD, testifying that over $37.5 million in funds were de-
obligated in Fiscal Year 2013 at LEAD); WVA J.A. 107–08
at 86:15–87:25 (John Genuit, Deputy Chief of Staff of
Resource Management for TACOM, stating that WCF
customers could “at any point” either cancel an order that
had been placed or reduce its scope). In the wake of
sequestration, in addition to the desire to reduce payroll
expenses, it was the potential diversion or de-obligation of
funds by DOD customers—which would result in a re-
duced scope in work orders or the transfer of funds away
from WCFs—that formed the basis for DOD’s decision to
furlough employees at LEAD and WVA. See WVA J.A.
389–95 (Declaration of Under Secretary of Defense Robert
Hale); id. 397–98 (Letter of Under Secretary of Defense
Hale to Congressman Derek Kilmer).
    The evidence in the record supports the arbitrators’
decisions to credit DOD’s rationale. The sequester placed
extraordinary financial constraints on DOD during ongo-
ing wartime conditions. At the same time, there is evi-
dence indicating that DOD notified Congress of its
intention to transfer money from WCFs, if such action
became necessary. WVA J.A. 393–95 (Declaration of
Under Secretary Hale). In addition, LEAD’s Deputy
Commander, Colonel Victor Hagan, stated that, during
18        NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



the period after 2004, $6.9 billion was transferred out of
the AWCF “to cover other Army higher priorities.” LEAD
J.A. 74–75 at 152:18–153:10; see also WVA J.A. 420–21
(setting forth yearly charts showing that “[s]ince FY 2004
approximately $6.9 billion [was] transferred from the
AWCF”). Colonel Hagan also testified that delaying work
to be performed by AWCF entities gave the Army spend-
ing flexibility because it meant that fewer dollars would
be spent from congressionally-obligated funds. LEAD J.A.
77 at 161:20–163:2. Similar testimony regarding the
“flexibility” that the furloughs provided was presented in
the arbitration hearing relating to the WVA furloughs.
WVA J.A. 106, 108. Further, in a September 16, 2013,
declaration, Under Secretary of Defense Hale explained
that, during Fiscal Year 2013, DOD had sought permis-
sion from Congress to reprogram funds, and that it had
exercised its own authority as well to reallocate funds to
support priority activities. Id. 393–95.
    We, like the arbitrators, must base our review of the
agency’s decision on the circumstances it faced when the
furlough decisions were made, and not on events that did
or did not occur at a later date. E.g., Clerman v. Inter-
state Commerce Comm’n, 35 M.S.P.R. 190, 194 (1987) (an
agency’s decision to release employees by reduction in
force is judged based on the agency’s ceilings when the
actions were taken). From that perspective, in the period
immediately after March 1, 2013, it was reasonable for
DOD to determine that savings from furloughing WCF
employees would be part of an overall effort to reduce
expenditures in the face of decreased funding resulting
from budget reductions. We therefore conclude that
Arbitrators Kaplan and Gross had substantial evidence
before them demonstrating that the furlough decisions
were reasonable management solutions to the financial
restrictions placed on DOD by the sequester, thus promot-
ing the efficiency of the service.
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA       19



    We find unpersuasive NFFE’s argument that the fact
that no LEAD or WVA employees were furloughed during
the government shutdown that occurred in October 2013,
Fiscal Year 2014, demonstrates that the furloughs in
Fiscal Year 2013 were unreasonable and unnecessary.
The Union argues that, if, as the Army and WVA urge,
LEAD and WVA are properly viewed as under the um-
brella of DOD rather than as independent entities, then
they necessarily should have been adversely impacted and
required to lay off employees when Congress did not enact
DOD’s annual appropriations bill for Fiscal Year 2014.
NFFE reasons that, if appropriated money really could
have been saved through furloughs in Fiscal Year 2013,
then layoffs during the shutdown in Fiscal Year 2014
necessarily should have taken place also.
     The fact that no LEAD or WVA employees were laid
off in October 2013 does not undermine the arbitrators’
findings that the furloughs at LEAD and WVA, in Fiscal
Year 2013, promoted the efficiency of the service. NFFE’s
argument ignores that it was reasonable for DOD to base
its furlough decisions at LEAD and WVA on the situation
that existed on May 14, 2013, when, in the face of Presi-
dent Obama’s sequestration order, Defense Secretary
Hagel ordered the furloughs that are at issue. See Cross
v. Dep’t of Transp., 127 F.3d 1443, 1447–48 (Fed. Cir.
1997) (finding that “[c]onducting a [reduction in force
(“RIF”)] because of an anticipated shortage of funds does
not require that the shortage exist at the time of the RIF”
and that whether an agency “reasonably anticipated a
budgetary shortfall” is a question of fact based on credibil-
ity determinations). NFFE’s argument also ignores the
fact that LEAD and WVA were able to continue operating
during the shutdown in Fiscal Year 2014 because they
had sufficient funds due to the fact that, as explained
above, they were authorized to carry over funds from
Fiscal Year 2013. See WVA J.A. 466–67. NFFE’s argu-
ment thus fails.
20        NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA



    Finally, our holding today is consistent with this
court’s recent decision in Einboden v. Department of the
Navy, No. 2015-3117, 2015 WL 5730370 (Fed. Cir. Oct. 1,
2015). Einboden involved an appeal by a civilian employ-
ee of the Navy from a decision of the Board affirming the
action of the Navy furloughing him for six days in July
and August 2013 pursuant to the sequester. Mr. Ein-
boden, who worked at a Navy WCF entity, argued that
the government could not show that his furlough promot-
ed the efficiency of the service because the WCF at which
he worked never suffered a budgetary shortfall. In af-
firming the Board’s decision, we left undisturbed the
Board’s finding that, “although [the WCF entity at which
Mr. Einboden worked] may have had adequate funding to
avoid a furlough . . . , it was reasonable for DOD to con-
sider its budget situation holistically, rather than isolat-
ing the situation of each individual Navy organization or
component.” Einboden, 122 M.S.P.R. at 309. In addition,
we rejected the proposition that the Navy was “required
to show actual re-programming of the funds saved by [the]
furlough” in order to meet the efficiency of the service
standard. Einboden, 2015 WL 5730370, at *3. We also
rejected the notion that “subsequent,” “ameliorat[ing]”
events could undermine the reasonableness of a manage-
rial decision based on a prospective budgetary shortfall.
Id.
                       CONCLUSION
     For the foregoing reasons, we hold that Arbitrator
Kaplan, in Appeal 3175, and Arbitrator Gross, in Appeal
3189, did not err in finding that the furloughs of bargain-
ing unit employees at LEAD and WVA in Fiscal Year
2013 due to sequestration promoted the efficiency of the
service and were in accordance with law. We therefore
affirm the arbitrator’s decision in Appeal 3175 and the
arbitrator’s decision in Appeal 3189.
                       AFFIRMED
NFFE, LOCAL 1442   v. ARMY; NFFE, LOCAL 2109 v. WVA   21



                            COSTS
   Each party shall bear its own costs.
