Factors for Evaluating the Cost Share of Manufacturing Extension Partnership Program to Assist Small and Medium-Sized Manufacturers

In Process

Of the 60 current MEP centers, 57 are required to meet a 2:1 (nonfederal: federal) cost share; the others are required to meet a 1:1 cost share because they are in their first 3 years of operation since their contracts were awarded to new operators. From fiscal years 2006 through 2010, NIST received over $530 million in appropriations for the MEP program. In fiscal year 2010, NIST received $124.7 million in appropriations for the MEP program, allocating $87.4 million to the MEP centers. NIST used the remainder to administer and support the program and, in 2010, for competitive grants it awarded to MEP centers. MEP centers meet their nonfederal cost share using various resources, including cash and in-kind contributions--goods or services provided in lieu of cash. These resources are provided by a range of entities, including state and local governments, associations, and user fees provided by manufacturers who use the MEP centers' services. In response to our request for information, MEP centers identified both positive and negative effects of the current cost share structure on individual centers and the overall program. Among the positive effects, some MEP centers reported that it encourages them to leverage resources and improve partnerships with other organizations, to find clients willing to pay fees and take a stake in the program, to emphasize services that are relevant to manufacturers, and to avoid duplication. Among the negative effects, some MEP centers reported that they are spending more time and effort seeking funds, seeking projects outside their mission, shifting their focus to larger clients who can pay higher fees, focusing more on multiple projects with repeat clients, and focusing less on rural clients. To date, most centers have been able to meet their portion of the cost share, but some noted that they are concerned about their continued ability to meet the cost share requirement and remain eligible to receive federal funding in the future because the economic downturn is hurting them, state funding may become more limited, and manufacturers are becoming less willing to pay client fees. We were unable to provide recommendations on how best to structure the cost share requirement to provide for the long-term sustainability of the program because we could not identify criteria or a basis for determining the optimal cost share structure for this program. Instead, we have identified a number of factors that could be taken into account in considering modifications to the current cost share structure. Among other things, past GAO work has found that cost share structures should promote equity by assigning costs to those who both use and benefit from the services. As it applies to the MEP program, manufacturers, state and local governments, and the nation may all benefit from the program to varying degrees, requiring an evaluation of the relative benefits and aligning cost shares to reflect who receives the benefits. NIST also commissioned a study of the MEP program and its cost share mechanism that recommended that the cost share requirements should be consistent with those of other economic development programs--which it noted, in Commerce, had 1:1 or lower cost shares--and should provide flexibility to alter the cost share requirement in response to economic conditions. Finally, OMB, CBO, and others have examined the MEP program and have raised questions about the need for any federal funding. Among other things, in 2009 and 2011, CBO identified the MEP program for potential elimination from discretionary spending, stating that the program's enhancement of U.S. productivity is questionable.