sized manufacturers as they upgrade their equipment, improve their production processes and strengthen their business performance. The NIST MEP program awards limited Federal funds on a competitive basis to non-profit manufacturing extension centers that serve firms in State and local areas. The centers employ experienced field engineers to help smaller manufacturers identify and carry out high priority improvement projects in areas such as quality assurance, electronic commerce, business information systems, plant layout, market development, computer-aided design and manufacture, waste reduction, work force development, and rapid prototyping. NIST cooperates with State Governments to select and set up centers. In many cases, centers build upon and expand established State manufacturing extension programs to enhance the service offerings and outreach program to serve more manufacturers in their region. Centers are typically private, non-profit, market-driven organizations. The centers are not part of a Federal or State Govern ment. The MEP leverages Federal, State and local funds. The Federal funds are matched by State and local Government funds which together are used to support the outreach activities. The companies themselves pay for the cost of implementing modernization projects. Thus Government funds serve to subsidize the education of small manufacturers so they know what they need to do to become more globally competitive. However, the companies must pay for actual change. There are currently 44 manufacturing extension centers in 32 States located appropriately to serve the manufacturing sector. The centers have 250 affiliates and over 500 public and private-linked organizations supporting manufacturing extension. Why is the Manufacturing Extension Partnership necessary? Small and medium-sized manufacturing enterprises are the foundation of American manufacturing muscle. Small firms from all regions of the country produce parts, components, systems, and tooling for large manufacturers who sell their products worldwide. They form the broad supplier base of our great metropolitan manufacturing centers and anchor jobs in small cities and towns across the United States. The 381,000 small and medium-sized manufacturing establishments employ a total of 11.8 million people which represents 65 percent of the Nation's manufacturing jobs. Their combined annual payroll of $322 billion represents 58 percent of the manufacturing payroll in America. These manufacturing companies are responsible for the sector's only job growth in recent decades, adding 1.71 million jobs since 1967. Today, America's smaller manufacturers are challenged as never before. To perform in the emerging global marketplace, they must master modern technologies, management techniques, and methods of work organization. Our economy will be stronger if thousands of small to mid-size firms accelerate modernization of their design, production, and marketing capabilities, and the management methods that focus them. But too few small companies are modernizing. The productivity growth of smaller manufacturers lags behind larger firms. Larger manufacturers improved their productivity at an annual average rate of 2.9 percent from 1967 to 1987. Small and medium-sized manufacturers, on the other hand, productivity grew at an average of only 1.3 percent during the same years. This represents one-half of the growth of the large firms. Small manufacturers are only 69 percent as productive as large ones, according to the most recent data, down from 79 percent in 1967. Market forces alone cannot reverse this dangerous three-decade trend. A national network of centers with some public support can overcome the cost of sales barrier to serving large numbers of small and medium-sized manufacturers, thus modifying the market forces in order to drive modernization of the industrial base. Is the Manufacturing Extension Partnership working? A justpublished study based on a 1994 Dun & Bradstreet survey found that small and medium-sized manufacturers served by MEPs are up to six times more likely to undertake specific improvement actions than those of similar size, type of operation, and unit volumes not assisted by a center. When MEP customers carry out a project, they pay for it, they want results. During the program year ending in June of 1994, the seven centers established between 1989 and 1992 delivered services to over 10,000 small and medium-sized manufacturers, completing over 2,800 technical assistance projects and formal assessments. The average project resulted in $191,000 in increased sales, $17,000 in reduced inventory, $23,000 in savings from labor and material costs, and five jobs retained or created. This is for every project worked by the system. Recent evaluation data shows that manufacturing firms are reporting total economic impact returns of eight dollars for every Federal dollar invested in the centers. This return on Federal investment is so high because of the additional dollars leveraged from the States and from fee-for-service paying customers, as well as the actual high impact of the projects. What should Congress do to help build up the Manufacturing Extension Partnership? The MEP program has been bipartisan since its inception under President Reagan, its establishment under President Bush, and its expansion under President Clinton. It has received growing support from Congress since 1989. Currently, $90 million is appropriated for fiscal year 1995. The President has requested $147 million for the MEP appropriation in fiscal year 1996. While the Federal investment in the MEP has grown rapidly in percentage terms in recent years, the sums are very modest when compared to other technology programs or the $70 billion Federal R&D budget. Unlike many technology grants that provide funds to individual companies, I would remind you that these funds support the outreach and infrastructure of the centers and is not given to any particular company. Every smaller manufacturer in America with the resolve to modernize and compete in today's global environment must have access to reliable, effective, objective, and affordable services of the manufacturing extension center. To meet this goal in the 1990's, Federal investment in the MEP must grow along the lines of the Administration's request. Currently, Federal funding for 37 of the 44 centers comes from the ARPA Technology Reinvestment Project. This support will end in 1996 and 1997. Those MEP centers that have performed well can continue as part of the national network only if they can compete for MEP appropriated funds. Also, new centers serving regions not yet reached by the MEP network cannot be established unless the MEP appropriation is increased. Investing in the capacity to reach many more firms with this program is good policy, and should have bipartisan support. The tax incentives for manufacturing modernization that the Congress may approve will have much more impact if thousands of smaller manufacturers can get good advice from extension centers as they choose and implement new technology. A successful MEP will help reduce the deficit through economic growth. Prospering small and medium-sized manufacturers will increase taxable incomes and reduce social safety net outlays. Increasing small and medium-sized manufacturers' productivity growth by only a modest amount will generate substantial Federal revenue. Successful and proven technology programs like the NIST MEP should be continued and receive appropriate funding to carry out their mission. I urge you to invest the resources necessary to support continuous modernization of America's manufacturing industrial base. The need is there. Thank you for letting me testify and I would be willing to answer any questions you might have. Chairman ROTH. Let me ask you, as you know, one of the things we are trying to do is downsize Government, reduce expenditures. Why cannot this kind of service be privatized? Why can it not be done in the private sector? Mr. KWIATKOWSKI. In the past 6 years that the MEP program has been functioning I think it has proven that the small to medium-sized manufacturers, those manufacturers under 500 employees generally get ignored by the large firms that generally get involved in consulting. So the small companies, the cost of sales of doing business with a small company I think is prohibitive of letting the natural forces take care of helping these small companies make decisions to implement technology that will help them grow and to be globally competitive. So I believe that you have to have an organization like an MEP that will help the small companies through investments by the Federal Government and by the State Governments in partnership to help them reach these companies. Chairman ROTH. That was going to be my next question. If it cannot be done in the private sector, why can it not be done at the State level? I gather that in some States, Virginia for example, the program has not succeeded. They have closed it down. Why is it not something that should be done at the State level depending on how important manufacturing is to that State? Mr. KWIATKOWSKI. I think it is a case of the States looking for partnerships to help reach these companies. The States, like the Federal Government are looking at scarce resources, financial resources within their own States. They have large agendas to help meet the needs of the State. I think the manufacturing sector, the States look for a partnership between Government and private industry to help finance that cost of sales that you need to to reach the small to medium-sized manufacturers. Chairman ROTH. The hour is late. I appreciate your coming in at this time. Mr. KWIATKOWSKI. Sorry about the mix-up in time. Chairman ROTH. It is unfortunate there was that mix-up. We are glad you were able to come. We appreciate your taking the time to state your case. Thank you very much. [Whereupon, at 2:06 p.m., the Committee was adjourned.] އ APPENDIX 104TH CONGRESS 1ST SESSION S. 929 To abolish the Department of Commerce. II IN THE SENATE OF THE UNITED STATES JUNE 15 (legislative day, JUNE 5), 1995 Mr. ABRAHAM (for himself, Mr. DOLE, Mr. FAIRCLOTH, Mr. NICKLES, Mr. GRAMM, and Mr. BROWN) introduced the following bill; which was read twice and referred to the Committee on Governmental Affairs A BILL To abolish the Department of Commerce. 1 Be it enacted by the Senate and House of Representa 2 tives of the United States of America in Congress assembled, 3 SECTION 1. SHORT TITLE. 4 This Act may be cited as the "Department of Com Sec. 101. Reestablishment of Department as Commerce Programs Resolution Agency. Sec. 102. Functions. Sec. 103. Deputy Administrator. (199) |