[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
                 HOW CAN TECHNICAL ASSISTANCE STIMULATE
                    NEW JERSEY'S MANUFACTURING BASE
=======================================================================




                             FIELD HEARING

                               before the

               SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                     PASSAIC, NJ, FEBRUARY 20, 2002

                               __________

                           Serial No. 107-44

                               __________

         Printed for the use of the Committee on Small Business







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81-520                            WASHINGTON : 2002
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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director
                                 ------                                

               Subcommittee on Tax, Finance, and Exports

                   PAT TOOMEY, Pennsylvania, Chairman
STEVEN J. CHABOT, Ohio               JAMES LANGEVIN, Rhode Island
DARRELL ISSA, California             GRACE F. NAPOLITANO, California
EDWARD SCHROCK, Virginia             ANIBAL ACEVEDO-VILA, Puerto Rico
TODD AKIN, Missouri                  DANNY K. DAVIS, Illinois
FRANK LoBIONDO, New Jersey           ROBERT A. BRADY, Pennsylvania
JIM DeMINT, South Carolina           MIKE ROSS, Arkansas
JOHN THUNE, South Dakota
                     Sean M. McGraw, Staff Director















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 20, 2002................................     1

                               Witnesses

Watson, John, President, Premium Color Graphics Company..........     6
Mitchell, James, N.J. Procurement Assistance Center..............    16
Rashkow, Burt, N.J. Small Business Development Center............    18
Loderstedt, Robert, N.J. Manufacturing Extension Program.........    20

                                Appendix

Prepared statements:
    Watson, John.................................................    28
    Mitchell, James..............................................    32
    Rashkow, Burt................................................    40
    Loderstedt, Robert...........................................    85











    HEARING ON: HOW CAN TECHNICAL ASSISTANCE STIMULATE NEW JERSEY'S 
                          MANUFACTURING BASE?

                              ----------                              


                      WEDNESDAY, FEBRUARY 20, 2002

                  House of Representatives,
         Subcommittee on Tax, Finance, and Exports,
                               Committee on Small Business,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1 p.m., at 
Passaic City Hall, 330 Passaic Street, Passaic, New Jersey, 
Hon. Patrick J. Toomey (chairman of the subcommittee) 
presiding.
    Mr. Barkley. Good afternoon, everyone. I would like to 
thank all of you for coming this afternoon. Mayor Rivera had a 
prior commitment that he couldn't get out of.
    I'm Councilman Barkley, it is my distinct pleasure to 
welcome these members of the United States Small Business 
Community, thank you for coming.
    Today the House of Representatives Small Business 
Subcommittee on Tax, Finance and Exports will hold its official 
Field Hearing to investigate the challenge facing the small and 
medium manufacturers and the performance of three federal 
programs that provide technical and procurement assistance to 
small and medium manufacturers.
    Obviously the success of our manufacturing base is vital to 
our area. As you know most Congress Committee Hearings take 
place in Washington, D.C. So I'm most appreciative that both 
members felt that this topic was important enough to discuss 
right here in the city of Passaic.
    Congressman Toomey, thank you for coming. I would like to 
welcome Pat Toomey, the Representative from the 15th Congress 
District of Pennsylvania. Congressman Toomey has chaired this 
subcommittee since February 2001. And joining him is our local 
Congressman, Congressman Bill Pascrell.
    Congressman Toomey's real-world expertise, his experience 
in areas of international finance, as a small business man, he 
has helped this important panel take the leading role in 
matters that are near and dear to the hearts of many small 
business persons.
    As a ranking Democrat on this subcommittee, Congressman 
Pascrell is constantly on the lookout to ensure that small 
entrepreneurs thrive in the hyper-competitive world 
marketplace.
    It is encouraging to see Chairman Toomey and Congressman 
Pascrell to do everything they can to give small businesses the 
tools they need to succeed, and they are doing this in a 
bipartisan way.
    Now I would like to turn over these proceedings to Chairman 
Toomey. Thank you very much.
    Chairman Toomey. Thank you very much, Councilman Barkley. I 
certainly appreciate your kind words. I also appreciate your 
making this facility available to us so that we can conduct 
this Hearing in this great facility. So thank you very much for 
your hospitality.
    This morning's House Small Business Subcommittee on Tax, 
Finance and Exports comes to Passaic, New Jersey, to examine 
the impact that the Technical Assistance programs have had on 
New Jersey's manufacturing businesses.
    It is certainly my hope that the technical assistance 
programs have provided New Jersey's small businesses valuable 
assistance, as they search for additional procurement 
opportunities, employee training, and strive to improve quality 
of their existing business practices.
    As our nation's small businesses work to compete in a 
global marketplace technical assistance programs have served in 
other places as a valuable resource to help them grow. I want 
to learn more about how well they work here in New Jersey. I 
hope to learn lessons that may apply in my district, in my 
state of Pennsylvania, and across America.
    Today we will receive testimony from the New Jersey 
Manufacturing Extension Program, the New Jersey Defense 
Procurement Technical Assistance Center, and the New Jersey 
Small Business Development Center Network, about their 
contributions to New Jersey's small businesses.
    I would like to say a brief word about each of these 
organizations. The New Jersey Manufacturing Extension Program 
is a not-for-profit organization charged with assisting New 
Jersey's small and medium sized manufacturers to become more 
productive, profitable, and globally competitive.
    The New Jersey MEP has field agents assigned to every 
county in New Jersey, and these field agents have worked their 
entire career in manufacturing, several have owned their own 
businesses.
    Their job is to work with New Jersey-based manufacturers to 
identify opportunities to improve business or to assist in 
implementing solutions to an opportunity that may already have 
been identified.
    New Jersey Small Business Development Center Network is 
composed of the Headquarters located at Rutgers' Graduate 
School of Management and ten, full-service regional centers. 
They provide a variety of educational and business resources to 
counsel and train small business owners to finance, market, and 
manage their companies.
    Their clients are assisted in exploring their business 
ideas, developing and assessing their business plans, making 
cash-flow projections, and accurate financial statements, as 
well as formulating marketing strategies.
    The New Jersey Institute of Technology's Defense 
Procurement Technical Assistance Center provides marketing, 
contractual, and technical assistance to small established New 
Jersey businesses, small disadvantaged businesses, and women-
owned businesses, interested in marketing their products and 
services to federal, state, and local agencies.
    The Center operates under a cost-sharing cooperative 
agreement between the Department of Defense, and the New Jersey 
Institute of Technology under the auspices of New Jersey 
Institute of Technology's office of economic development.
    In addition the subcommittee will hear from three small 
businesses that have worked with these organizations to obtain 
technical assistance. And I want to thank Mr. Mike Patel, 
President and CEO of PPI/Time Zero; Mr. John Watson, President 
of Premium Color Graphics Company; and Mr. Jack Yecies, 
President of Herman W. Yecies, Inc., for relaying their 
experiences with these technical assistance programs.
    I look forward to the testimony of the witnesses before us 
today, but I want particularly to thank the subcommittee's 
ranking member, Congressman Bill Pascrell, for inviting the 
subcommittee and me to examine the resources available for 
small businesses in his congressional district.
    As I said earlier, I think the lessons we learn here will 
apply elsewhere, as well. Mr. Pascrell clearly understands the 
needs of small businesses in his district, and throughout the 
nation, and I appreciate his attention to this matter.
    I would like to also commend Representative Pascrell for 
the dedication and the passion that he has consistently shown 
in defense of the interests of the small businesses that he 
represents.
    At this time I will now yield to my good friend, Bill 
Pascrell, for his opening statement.
    Mr. Pascrell. Thank you, Pat, and welcome to Passaic, New 
Jersey, and the 8th Congressional District. We are honored to 
have you. And I want to thank Council President Barkley for 
your hospitality, which is always there, always.
    Congressman Toomey from the 15th District of Pennsylvania, 
I was there in 2001 for a Hearing, a Subcommittee Hearing into 
agriculture and dairy problems. And I said, what the heck are 
you doing out there in Pennsylvania, you don't have any farms 
in your district, really.
    That is the point. When we talk about education and 
information, we need to understand each other's problems, which 
is part of my job, and part of my responsibility. And I had an 
earful out in Pennsylvania, I enjoyed it. Those people struggle 
just like all folks in this room, and they have hit, many of 
them, hard times.
    Unless we think that that is foreign to us, we are never 
going to accomplish anything in trying to resolve the problems 
of our economy. I know that Chairman Toomey has shown that he 
is committed to small entrepreneurs, time and again, and is a 
true honor to have him here in the district.
    I'm particularly appreciative that this hearing will 
examine something that is of great importance to me, all my 
life, and that is manufacturing. The manufacturing sector of 
our economy, which has been knocked from pillar to post over 
the last 30 years, not only in this state, but in many other 
states throughout the Union.
    Manufacturers face difficult new demands in a turbulent 
world marketplace. The federal government, in my opinion, has 
not provided enough assistance to help them incorporate new 
technologies or become more successful and productive to assist 
them in the federal contracting process.
    Pat and I have worked very hard on that aspect of the 
problem of federal procurement, where small business folks for 
many times have been shut out when large corporations bundle 
contracts so that small companies have no way in.
    Pat has been particularly sensitive to that, and we have 
been working on this for five years, and we hope we've made a 
little progress. And this shouldn't be the case. There are some 
12,000 manufacturers in New Jersey, they employ close to 
450,000 people, that is 11 percent of our workforce.
    Nationally there are 380,000 small manufacturers hiring 
about 12 million people. So it is the largest contributor to 
economic growth, believe it or not, for what you say about the 
service sector of the economy, manufacturing is still a 
critical part of this economy.
    The Bureau of Economic Analysis Study for example, 
manufacturing contributed 29 percent of the nation's economic 
growth between 1992 and 1997. This is larger than any other 
sector, believe it or not.
    And trouble, we have trouble here. The New Jersey 
Department of Labor estimates that our state will lose 34,000 
more manufacturing jobs by 2008. We've already lost 300,000 in 
the past 20 years.
    Of that number Passaic and Essex Counties are projected to 
lose about 9,300 jobs, manufacturing jobs. That is a lot of 
small companies that are involved, a lot. We are trying to stop 
the projections from becoming a reality. And that is what this 
hearing is all about, to listen first-hand.
    The folks that we've invited will explain the dynamics that 
they face, and the very real problems that they encounter on a 
daily basis. And then Chairman Toomey and I will bring these 
ideas back to Washington.
    The federal government must seek ways to assist not only 
the manufacturers of old--imagine brick smokestacks, if you 
will. Budget we must find ways to enhance the productivity, the 
efficiency, the management, the communication of those involved 
in our digital revolution.
    I want to thank the panelists. They have been introduced to 
you by our Chairman. But while we listen to their problems, let 
us not forget some of the exemplary programs that are already 
in existence.
    One problem that I have heard from manufacturers is that 
they are not aware of what currently is out there to help them. 
Hopefully this hearing can change that.
    I want to particularly thank Bob Loderstedt, from the New 
Jersey Manufacturing Extension Program, who I have worked with 
before. Burt Rashkow, who is Manufacturing Mentor of the Small 
Business Development Center, and Jim Mitchell, of the Defense 
Procurement Technical Assistance Center.
    And I know we will get into some good questions about 
federal procurement. The Department of Defense is the largest 
buyer of goods and services at the federal level. In fiscal 
year 2000 the Department had a procurement volume of $126.2 
billion. Small enterprises need to be able to tap into this.
    Again I want to thank the Chairman, I'm anxious to get the 
testimony, and thank you, and welcome to the 8th District.
    Chairman Toomey. Thank you very much, Representative 
Pascrell.
    Before we proceed I omitted from my opening comments 
recognizing Mr. Cliff Lindhom, III, I want to thank you for 
joining us today as well.
    And then let me say a brief word about the way our lighting 
system works. I will ask each witness to limit their comments 
to five minutes. The full text of your message will be 
submitted for the record, and will be available. The lights 
will start in green, when there is one minute left it will go 
to orange, and then when your time is finished it will go to 
red. We will try to honor that as well when we go to our 
questioning stage.
    At this time I'm happy to welcome, and recognize for his 
comments, Mr. Mike Patel.

  STATEMENT OF MIKE PATEL, PRESIDENT AND CEO OF PPI/TIME ZERO

    Mr. Patel. Thank you, Chairperson Toomey, Congressman 
Pascrell, thank you for taking the time to listen to the Small 
Business Manufacturing Specialty Sector.
    PPI/Time Zero is a company, a manufacturing company, high 
tech business, we manufacture circuit boards that are used in a 
wide variety of different industries. And 30 percent of our 
business is with the defense industries.
    We've been in business for 30 years, and over the years a 
lot of things have changed, and especially in the last 10 years 
or so, things have gotten to the point where it is a hyper 
competitive world. We no longer are just talking about New 
Jersey, or the tri-state area, we are no longer just talking 
about the United States, it is a global marketplace, and we are 
competing with off-shore day in and day out.
    And we have found ways to compete with overseas. As you 
know, electronics is mainly made up in the off-shore 
marketplace. But with the help of some of the programs that are 
available from New Jersey State Department of Business 
Development, and New Jersey State Government trying to 
customize training programs, we've been able to, in 1999 we 
grew the company by 50 percent, in the year 2000 we grew the 
company by one hundred percent.
    And in the year 2001 when our economy was going through the 
tailspin, we were still able to grow the company by another 20 
percent.
    So the programs that are available in New Jersey have 
direct impact on us. For example, the New Jersey Small Business 
Development Center, Mr. Burt Rashkow, Sy Reich, Brenda Hopper, 
these are the folks that work with us to get us to our ISO 9002 
certification, which is probably one of the most influential 
certifications that we have gone through, in order to achieve 
the growth rates that we did achieve.
    The ISO 9002 certification would not have been possible 
without the help of those folks that I've mentioned. And the 
New Jersey Small Business Development Center has again, and 
again, came through for us, for customized training programs, 
for ISO 9002 training program.
    Also when we had an opportunity to do an acquisition, 
Debrah Hoffman, from Passaic County, without her help we could 
not have done acquisition. She introduced us to all different 
kinds of banking people, got the loans packages for us, and 
worked tremendously.
    So the programs are there, I think that we have been able 
to take advantage of some of them, to a great extent. Again, 
going back to the problems that we, as a small manufacturer 
face, I think that for us, in particular in our situation, 
there are two things that we, in the last two years, we have 
definitely, because of our growth rate, we have been very much 
up against a problem, which is human resource.
    I am not aware of any type of human resource assistance 
that is out there for us to be able to attract the right type 
of engineering and technical level personnel, it has been very 
much of an uphill battle.
    When we talk about attracting talent from out of state it 
is very difficult, because the cost of living from say, 
Carolinas to here, or if we stay within the New Jersey 
territory, it has been a very difficult process for us to find 
that. That is just one of the problems that I think that I was 
going to talk to Mr. Burt Rashkow, to see what available 
assistance is out there.
    Besides that, basically an issue in reference to--because 
30 percent of our business is in a hub zone, it is in defense 
area, hub zone would have been perfect for our business, except 
Patterson, which a lot of the areas are in the hub zone, except 
our address just happens to be one street away from hub zone.
    That would have done wonders for us to get Raytheon, Allied 
Signals, these are the people that we do, currently, business 
with to some level. But they all told us that if we can have 
hub zone, that would have been--they would have given us 
tremendous amount of----
    So these are some of the things that are out there that are 
federal government programs, that we would love to take 
advantage of. But, hopefully, there is some stuff that we can 
get assistance in getting. Otherwise all the programs that are 
available are an example of that.
    Chairman Toomey. Thank you very much.
    Mr. Patel. Thank you.
    Chairman Toomey. Now I would like to welcome and invite the 
comments of Mr. John Watson, the President of Premium Color 
Graphics.

  STATEMENT OF JOHN WATSON, PRESIDENT, PREMIUM COLOR GRAPHICS

    Mr. Watson. Premium Color Graphics is a commercial printer 
and prepress provider located in Clifton, New Jersey. We have 
been in business for roughly 10 years. We currently employ 
about 30 people, and we have annual sales of approximately $5 
million.
    Over the past three years we've actually transitioned from 
a prepress provider, which is all the work that is done upfront 
prior to getting the press, into a printer, where we actually 
put ink on paper.
    And most of that was because of the technology that changed 
all that, where other printers were putting in what we 
prepress, we set the specialty business, which is now pretty 
much gone, which is why we were forced to get into the printing 
market, and the whole visual revolution.
    But we managed to do very well because we saw it coming 
three years ago, and we were able to get into printing, we 
bought some of our own presses, we are looking to buy new 
presses, and hire more people.
    Because of the rapid growth of our business we needed 
outside assistance from a place like NJMEP. And I have a 
partner, and even with that partner it is hard to run a 
business and keep an eye on dealing with the strategic half of 
where your company is going.
    And that is where NJMEP has been able to help us. They've 
come in, they've assessed our company and the way that we run 
it, and made suggestions. They've offered solutions. We have 
choices to either move forward with it, or reject it, based on 
the amount of money that it is going to cost us.
    But the fact of the matter is that you always have somebody 
that you can bounce ideas off of, and give you really good 
information on where to find the resource to do what you want 
to do, and to keep moving your business forward.
    Some of the things that NJMEP has done for us is, like I 
mentioned, they did a business strategy assessment, where they 
came in and they assessed, you know, how we are running our 
business, suggestions.
    One of the big things that we needed, as we were moving 
into this new printing phase of our business was more of a 
marketing plan. So they came in and they did a full marketing 
audit, and came up with ideas on how we could attack that.
    One of the things was to create a customer satisfaction 
survey of our current customer base. And that was tremendously 
helpful, and it is something that we probably would not have 
done without the help of NJMEP.
    That allowed us to really understand how we were perceived 
in the marketplace, and I would have to say that it probably 
increased our business because we found out a lot of things 
that we didn't realize, like leaving business on the table 
because of various reasons.
    So we were able to address that immediately and get new 
business out of our existing customers, as well as take that 
message to customers. So it was definitely a great thing to do.
    Right now one of the things we are working on is the sales 
management reporting system. We have four sales people, but as 
we continue to grow our business we need to grow our sales 
force. So it is getting to the point where you can't sit down 
and talk to two sales people and figure out who is calling on 
who, you need a system in place, and they have been able to 
help us with that.
    Another huge thing that we are about to do, in 2002, is 
human resource program development and implementation. One day 
I called Tony, I said, you know we are this size now where 
there is no real structure or management, because we grew from 
a five person shop to 30 people.
    And although we all have our own responsibilities we know 
what it is, it is not organized enough. So they were able to 
come in and analyze that, and come up with a human resource 
type place, that is going to come in and help divide up the 
lines, even on the executive management level we cross over too 
much.
    And being able to break that apart and really focus on 
certain things, it makes you a more efficient company. And what 
they are also doing is they are going through and helping us 
put together assessment tools for our employees.
    Because right now reviews, basically, wind up being 
something that happens once a year, and you sit down and you 
talk, and that is about it. And now they are going to give us 
the tools to put in place to really measure and quantify what 
people are doing, and pay them accordingly.
    And just in closing, as mentioned, we engage NJMEP in 2000, 
in 2001 our sales revenue increased to about 45 percent, due in 
large part to help we received from them. I don't think we 
would have hired an outside consultant to help us due to the 
costs of those services and the trust factor of those 
relationships.
    They bring a real comfort knowing that they are not making 
a living, so to speak, off of us like a consultant would. We 
probably would have managed to grow five or ten percent, but 
with the systems that I mentioned that we put in place, we were 
able to post a 45 percent increase.
    That is pretty much it.
    [Mr. Watson's statement may be found in the appendix.]
    Chairman Toomey. Thank you very much.
    At this time I would like to welcome and invite the 
comments of Mr. Jack Yecies. Welcome, thank you for being here.

  STATEMENT OF JACK YECIES, PRESIDENT, HERMAN W. YECIES, INC.

    Mr. Yecies. Representative Toomey, Representative Pascrell, 
I'm an industrial distributor supplying one of these gentlemen, 
anyhow, at one time.
    We have been in business for about 75 years, and New Jersey 
Engineering has been in business for over 100 years. We have 
watched, and I've watched in my 50 years in the industry, 
industry leave, first change, then leave, and as I said in my 
letter, I think it is inevitable and inexorable, it is like 
this glacier coming down from New England, going through 
Connecticut, eastern New York, eastern Pennsylvania, and so 
forth.
    So the smokestack and chip-making industries we know is 
really no more to speak of. The thing that concerns me is we 
have lost so many of our major industries, and most of the 
small machine shops and manufacturers in support of the major 
industries.
    And I really feel that looking at what are the industry 
that we service has changed so drastically, that I think that 
our whole focus should be on the human resources side, of 
training people to make our state more attractive to the kind 
of industry we want to attract.
    Heavy industry, as I said, was legislated, and taxed, and 
badgered out of the state by zoning laws, planning boards, and 
so forth. And I think if we look at the miles, the 
pharmaceutical plants, which is one of our strengths, we look 
at all of the telecommunications and electronics plants, and 
high tech, we need trained people, whether it be from a sales 
point of view, or from a tech, you know, manufacturing point of 
view, to make other people want to move into the state.
    Because centralized labor pools, whether it be insurance 
companies in Newark, which at one point was one of the 
insurance capitals of the country, or Hartford in Connecticut, 
if we look in Pennsylvania, when I was out in Pittsburgh, 
Carnegie Mellon decided to emphasize information technology and 
they built that huge basis there.
    You look at all those hospitals up at the top of the hill, 
they decided that medical service would be their strong point 
to attract people in, when they lost all the mills and 
manufacturing.
    And I really feel that our strengths lie, one in logistics, 
and transportation. I heard one guy from the New York 
Authority, New Jersey Authority many years ago say, we are one 
of the only places in the world that has a major deep water 
port, major railheads, major international airport, major east/
west, north/south highways right together.
    He also said you can't swing a big truck around because 
none of the corners are cut back, you can't get under the 
railroads except at one street, or you go around them. But when 
you look at the warehousing that is going on down at the 
turnpike, and moving away from our area, unfortunately, this is 
obviously one of the strong points, transportation being 
another, in spite of EPA.
    And also, of course, the training of people to fill these 
industries. And in reality that is about what I have to say. I 
watch our industry move, I don't think we can stop it. We can 
try to attract different industry, because we are not going to 
make heavy manufacturing come back, I don't believe.
    I don't think we are going to make machine shops, or 
machinery manufacturers, the mills are never coming back, 
legislatively. They won't do it, and competition is such, that 
they also won't do it.
    So that is, really, I don't say it is hopeless, but I say 
that we have to--the whole thing is changing so drastically, 
that we have to change our whole point of view as to what 
constitutes manufacturing.
    And by attracting them, through training, legislation, 
whatever you will, I think this is what is really going to 
create the new jobs in this state, and hold the ones we have.
    I thank you for your time.
    Chairman Toomey. Thank you for your testimony.
    At this time I would like to welcome, and invite the 
comments of Mr. Cliff Lindholm III.

   STATEMENT OF CLIFF LINDHOLM III, VICE-PRESIDENT, FALSTROM 
                            COMPANY

    Mr. Lindholm. Thank you very much, Chairman Toomey, and 
Congressman Pascrell for holding the Subcommittee Field Hearing 
here in Passaic. It is also nice to see Councilman Barkley, who 
I know from our time on the Passaic Enterprise Zone Development 
Corporation.
    I'm honored to have the opportunity to share my views this 
afternoon, about the state of manufacturing here in New Jersey, 
and some of the programs that have helped to keep manufacturing 
competitive.
    I think having a field hearing here in Passaic is fitting, 
as Passaic, like Patterson and some of the cities in 
Pennsylvania, such as Allentown, have a great manufacturing 
tradition.
    The programs that we are talking about here today help to 
continue that heritage and I believe are beneficial to the 
wider community.
    A little bit about Falstrom Company. Falstrom Company is my 
family's business. We are located in Passaic, and have been in 
Passaic since 1870. I represent the fourth generation of 
ownership and management of Falstrom Company.
    As Mr. Patel's business, PPI/Time Zero, Falstrom Company is 
a contract manufacturer serving a wide variety of aerospace and 
defense companies. Our niche is fabricating custom steel and 
aluminum enclosures that support a wide variety of military 
programs.
    The enclosures are mechanical and electro-mechanical 
assemblies. While our customer base is nation-wide, I can tell 
you that primarily our supplier base is right here in New 
Jersey. We do deal with a lot of smaller businesses here in New 
Jersey, and so I do have the opportunity to experience, first-
hand, on a day to day basis, how manufacturing is thriving here 
in New Jersey, and where competitive pressures emerge.
    Falstrom Company, did have the opportunity, a couple of 
years ago, to take advantage of the technical assistance from 
the New Jersey Manufacturing Extension Partnership. We had a 
consultant come in and take a look at our painting operations.
    In our business painting is a very important aspect. 
Through the use of the NJMEP we were able to reduce, rework in 
our painting operations, as well as increase through-put in the 
paint shop. These are two very important aspects to maintaining 
competitive manufacturing processes.
    I will tell you that having an individual from the outside 
come in as a consultant lended a lot of credibility to the 
changes that we made, and helped to make those changes be long 
term and lasting.
    When I think about the challenges facing Falstrom Company, 
there are a number of different areas I could touch on today. 
And seeing that this is the subcommittee that sometimes deals 
with tax issues, I won't talk about tax issues today.
    But I would like to echo what I heard from some of my other 
colleagues about the Human Resources side of business. In 
today's business environment, we find ourselves facing a 
plethora of regulations that we must conform to, and make good 
faith efforts to comply with.
    Personnel law is becoming increasingly complex. And no 
matter the size of your business, you must find ways to comply 
with these human resources laws. Specifically in the 
manufacturing area, there are other regulations, such as OSHA 
and environmental regulations that sometimes come under the 
umbrella of human resources.
    Anything that this committee could do to increase and 
expand, perhaps, legal help and assistance in compliance with 
human resources issues, I think, would be beneficial to all 
manufacturers, not only here in New Jersey but elsewhere in the 
country.
    The second to last thing I would like to mention, as I 
begin to sum up, is that Falstrom Company derives its' business 
from the defense industry. There is a multiplier effect to any 
defense spending that occurs.
    Every time that we are successful in securing a contract to 
support the defense industry, there is a multiplier effect that 
occurs here in New Jersey, five to ten other businesses also 
benefit.
    If we can tie in continued support of the defense industry, 
along with some of the programs we are talking about here 
today, I believe that manufacturers within this state, and 
nationwide, will benefit.
    Once again, thank you for the opportunity to speak this 
afternoon. I hope that the comments I have been able to offer 
will allow you to improve and expand the programs that we are 
talking about.
    Chairman Toomey. Thank you very much. Well, I will begin 
with some brief questions.
    I would like to start with Mr. Patel, if we could.
    Your story of your company is one that seems remarkably 
successful, spectacular growth in recent years. Is your company 
profitable?
    Mr. Patel. Yes, we are.
    Chairman Toomey. Great. About 30 percent of your business 
is sales to the defense industry?
    Mr. Patel. Last year we peaked at about 38 percent.
    Chairman Toomey. About 38 percent. One of my concerns would 
be that a company growing at the rate yours is growing may not 
be a small business for much longer, if it even is any more.
    But do you feel that you have any sort of structural 
disadvantages that you face vis a vis larger competitors, in 
selling products to the American defense industry?
    Mr. Patel. Yes, we absolutely do. We are about 165 
employees at this point. So from a definition of 500 or less, 
we are a small business.
    Our competitors come in all sizes, but there are some 
giant, big billion plus contract manufacturers out there that 
are all over the country, in fact they have plants overseas, 
and what not.
    So we do face competition from those entities as well. That 
is why I mentioned that issue about the hub zone, because when 
we go head to head against a company that, for example SCI, 
which is based out of California, their sales last year, same 
business as us, but they were a $2 billion corporation.
    Their buying power is enormously a lot larger than ours. 
When we go compete against that kind of company for defense 
contracts, if our company was in a hub zone we get 10 percent 
differential against a larger company of that nature.
    So that is why I mentioned that if we were in a hub zone 
type of situation that would give us a lot of leg up. I mean, 
usually we are about five percent on material side higher than 
our competition.
    Chairman Toomey. And that is just because you don't have 
the same economy of scale as a larger competitor has. But is 
there any bias that is actually intentionally designed to your 
disadvantage?
    I mean, it is understandable that a buyer would look to the 
lowest possible price. Is there any reason for which you feel 
that your company gets any additional disadvantage, other than 
your difficulty in matching price?
    Mr. Patel. Again the size and the location. We, at this 
point, have two locations versus our competition, they have 
multiple location. So geographically if we are talking about a 
Raytheon plant that is in Florida, there is a distance thing 
that we are competing versus this giant company that would have 
a plant right there in Texas or Florida.
    Chairman Toomey. And you mentioned, if I have it correctly, 
that the Small Business Development Center helped you with a 
certain certification process, and I was not familiar with 
that. What is that certification process, and what does that do 
for your business?
    Mr. Patel. Yes. About four or five years ago it was 
becoming very evident that whenever we go to Allied Signal, 
Honeywell, or Raytheon, the bigger boys, what they generally do 
is in order for us to present our subcontract to them, they 
usually first give out a 30 page questionnaire to fill out, 
give a history about the company.
    The very first question, usually, in that 30 is are you ISO 
9002 certified? And, again and again we were coming to an 
opportunity where if the answer to the question was if you are 
not, continue filling in the rest of 30 pages, if you are, stop 
right there, you don't need to fill out any form.
    So it was very crucial for us, being in a high tech 
business, to be ISO 9002 certified. So we approached Mr. Burt 
Rashkow and his department to say that if it is a tremendously 
costly affair for a small business to go through ISO 9002 
certification on their own.
    And they provided us with the help that we needed, from an 
outside consultant standpoint, and a grant, and they basically 
took our hands and got us through the ISO 9002. And because of 
that we have added so many different new, bigger customers that 
wouldn't have, ordinarily without a certification would not 
have done business with us.
    And in the last two years we have been fortunate to get all 
these boys, to play in that league.
    Chairman Toomey. Thank you. If you would indulge me, as 
I've exceeded my own time limit on the clock, I have a question 
I would like to ask Mr. Watson.
    And the question is, I'm familiar with the manufacturing 
extension programs in other areas, and I have heard many great 
stories about the services they provide.
    Very candidly I think one of the important questions that 
we have to ask ourselves is, when a quasi-governmental type 
entity, or an entity that gets government assistance provides 
valuable services, which there is no doubt it does, what is the 
appropriate balance in terms of who pays for it?
    The client that receives the benefits versus the taxpayers, 
how do you strike that balance, what is the appropriate 
combination. And just some questions for you. You spoke very 
highly of the service, and many people do, without doubt.
    Is your company profitable?
    Mr. Watson. Yes, it is.
    Chairman Toomey. And did you pay anything at all for those 
services, or are all those done at no direct cost to you?
    Mr. Watson. We paid for the services.
    Chairman Toomey. You did? Okay.
    Mr. Watson. Yes, because there is some stuff, advice they 
are giving me on a--not on a daily basis, but when we sit down 
and meet, I mean, I'm not being charged per hour to have 
somebody come in and consult with me.
    But there are projects that they put out on the table and 
they bring in a third party vendor, and we pay for that.
    Chairman Toomey. So you pay when a third party vendor comes 
in and provides a service. Do you pay anything for the direct 
services provided by the NJMEP, or----
    Mr. Watson. Yes, we do.
    Chairman Toomey. In addition to paying for the third party?
    Mr. Watson. Yes.
    Chairman Toomey. And so in your judgment, obviously, you 
think there is benefit value?
    Mr. Watson. Yes, it is extremely good value. I think that 
whatever tax dollars are being given to that organization, I 
believe it is money well spent, because they are helping 
businesses within the state grow their business. And by growing 
their business there is more jobs.
    So I guess there is a burden for the taxpayer also, but it 
means more jobs. Overall, I think, it is a benefit.
    Chairman Toomey. Thank you very much.
    Mr. Pascrell. Thank you, Mr. Chairman. I would like to put 
out some questions, and perhaps whoever wants to respond to it, 
make your responses brief so we get as many people, and I will 
try to make sure I keep my questions brief.
    What do you say Mr. Lindholm to Mr. Yecies, who said that 
these factories we see in towns all over, you mentioned some, 
the market will never come back again; do you agree with that, 
or what are your thoughts?
    Mr. Lindholm. My thoughts are that being a manufacturer 
that has its history in the smokestack era, we are a sheet 
metal fabricator doing business here in the east coast is 
extremely competitive.
    Some states to the south and to the west offer to fly me 
and my wife out there, so that we can look at them in hope of 
relocating our businesses out there. Some states try to entice 
us to move our business.
    I believe that the business can thrive in this area. 
However, it becomes increasingly difficult when we face more 
regulation, increased environmental pressures that some of our 
states to the west and to the south don't have, and the 
increased tax burden, that we enjoy here in New Jersey, that 
some other states don't enjoy.
    There is competitive pressure, but you can survive if you 
are tough.
    Mr. Pascrell. You mentioned taxes, and that is part of our 
Committee's responsibility, business taxes, that is us. What 
are you suggesting we do in terms of taxes, what is the most 
onerous, what is the most--needs the most change, which would 
help you immediately in your businesses?
    Does anybody want to take a shot at that?
    Mr. Yecies. All right, I will take a shot. First of all, to 
attract capable people, the cost of--I tried to hire a fellow 
who lived in Pennsylvania, outside of Philadelphia, in a lovely 
home. This is some years ago.
    And he agreed that the salary and the compensation I 
offered him was very generous. But when he came to look for a 
home to move he couldn't afford to move. I mean, my daughter 
lives outside of Philadelphia, and I look at her taxes, and her 
cost of living there, as compared to here, where you are really 
just a few miles, and it is unbelievably different.
    If I might, there is one thing that I wanted to say, which 
I forgot about, or got carried away in my thought. We have 
done, in order to replace a lot of the business that we lost by 
the industry moving, we are doing a great deal of business with 
the GSA and the Department of Defense, and DOA.
    And Jim Mitchell, and Dule Chapman, from MJIT center, down 
in the procurement technical center, have been immensely 
helpful in getting us into that area. And also the ECRC, which 
had a place in Scranton, I don't know if they still do, and we 
went up to see them at Picattiny, were very, very helpful in 
getting us there.
    And quite honestly, as far as I can see, this is why we are 
still in business, is because what originally was supposed to 
be additional business has now replaced a great deal of 
business we've lost through movement south a defense contractor 
was enticed to West Virginia, a naval installation in West 
Virginia. There is a lot of water down in West Virginia, and 
things like that.
    But, anyhow, I really think the cost of doing business 
here, because of the high real estate taxes, among others, and 
we have a tax for everything, we have sales taxes, we have the 
gambling revenue.
    But no matter what we do everything seems to go up.
    Mr. Pascrell. The major factors that contribute whether we 
stay in business or not, you mentioned all of them, all of you 
have.
    The state of the art of technology, because we would all 
agree, for instance in the textile business, you need to keep 
up with the state of the art, besides the imports that came 
into this country, but the industry did not keep up with the 
state of the art.
    And you have to apply that to your own industries. The 
human resource problems, two or three of you did mention, in 
training personnel, how do we get those personnel, how do we 
attract them here.
    And then capital investment, you need money to invest, and 
low interest loans, if you are going to grow your business to 
compete. Would you add anything or subtract anything from what 
I just said, any of you?
    Mr. Yecies. Only one thing. As far as personnel we don't 
have to bring them in, we have the personnel here, we just have 
to train them in the right areas. We have a lot of very bright 
people in this state.
    Mr. Pascrell. That is true.
    Mr. Lindholm. If I might add? In my business, we attract a 
lot of first generation immigrants, primarily from South 
America and Eastern Europe. I can tell you that they come with 
a very good skill set that is difficult to find here in the 
United States.
    I would imagine in some of your dealings you have heard 
that the training for high school, and just out of high school 
aged youth is not focused on going into a manufacturing career.
    It is becoming increasingly difficult to find individuals 
who have that training, that were born and raised here in the 
United States. This paradox speaks to the diversity of the 
United States, but it also points out something that I think we 
are all aware of.
    Mr. Pascrell. One more quick question, if I may, Mr. 
Chairman?
    What is, very briefly, because we are running out of time, 
what is the impact from competition of off-shore manufacturing 
on your own business, and what do you see happening in that 
regard?
    Mr. Watson. In the printing business we don't get much 
offshore competition, other than in packaging, where a lot of--
I have one customer that just shut down in Neptune, New Jersey, 
their whole printing operation. They will still do the design, 
and the publishing here, but all the printing and everything is 
getting done in China because of costs, obviously.
    Mr. Pascrell. Anyone else?
    Mr. Lindholm. If I could quickly add, some of the products 
we make are exported to other countries, and so occasionally we 
do run up against issues where export licenses are slow and 
coming, and that is a competitive pressure that we face.
    Mr. Pascrell. It is not reciprocal?
    Mr. Lindholm. No.
    Mr. Patel. Well, offshore competition is here to stay, I 
mean, that is the norm, you just have to be a little more 
creative, and find the niche markets that are here to stay, for 
example medical, or defense, or short run prototype stuff that 
is never going to go offshore.
    And you have to be that much smarter, and let go of the 
motherboard type of business that is done offshore. But plenty 
of business out there, it just takes some skills, and some 
support from local government.
    For example, the training that we talked about, there are 
boot camps for electronics. I agree with everybody that sits 
here, there are plenty bright people, especially immigrants. 
But if I take somebody off the street and have them try to run 
a million dollar pick and pace line, which is one of the 
robotic lines that help us compete, there are boot camps that 
we can send that high school graduate, they cost $5,000.
    If there was some kind of program assistance that would 
take maybe 10 of these people and train them, they are going to 
be golden. So those are the kinds of things that we----
    Chairman Toomey. Well, I would like to thank all of the 
witnesses for your testimony, it is very helpful to me, and I'm 
sure to Mr. Pascrell as well. So I would like to thank you for 
being with us today, and at this point I would welcome the 
members of the second panel to the stand.
    We will be taking a very brief recess and return in just a 
moment.
    [Whereupon, the above-entitled matter went off the record 
at 1:57 p.m. and went back on the record at 2:00 p.m.]
    Chairman Toomey. Before we get started with the second 
panel, I would ask the second panel to please keep in mind what 
was said to the first panel. We are looking to you, gentlemen, 
for resolution. And if you could keep that in mind I think it 
would really be a productive afternoon.
    I want to introduce the Mayor of the City of Passaic, New 
Jersey, who has been a Mayor for a very short time, who has had 
a very positive impact on this city, quality of life issues, he 
has impacted, and I want to commend him for that.
    Mayor, thank you for joining us.

         STATEMENT OF SAMUEL RIVERA, MAYOR, PASSAIC, NJ

    Mr. Rivera. It is a pleasure to be here, and I was unable 
to be here before. There were some personal matters I had to 
take care of.
    But whenever I'm not around, Mr. Barkley is around, and he 
does a great job for us here in the district, and I'm sure that 
he does a very outstanding job.
    So thank you very much for being here, and this is city 
hall, and this is your home, if at any time you need this, we 
are very grateful for what you do for us, and welcome here.
    Chairman Toomey. Thank you Mayor.
    Mr. Pascrell. Thank you, Mr. Mayor, and thank you for 
making this facility available to us.
    Chairman Toomey. At this time we will resume and take the 
testimony from our second panel. I would like to thank the 
witness for enjoining us this afternoon, and to begin the 
testimony I would like to welcome and invite Mr. James 
Mitchell, from the New Jersey Procurement Assistance Center to 
begin with his testimony.

STATEMENT OF JAMES MITCHELL, NEW JERSEY PROCUREMENT ASSSISTANCE 
                             CENTER

    Mr. Mitchell. Thank you, sir. Chairman Toomey and 
Congressman Pascrell, it is a pleasure to have us come and 
share what we do.
    I'm James Mitchell, and I'm a marketing specialist for NJIT 
Defense Procurement Center. Our center provides free technical 
assistance in marketing and bidding government contracts to all 
small firms in the state of New Jersey.
    The Department of Defense and New Jersey Institute of 
Technology, jointly fund the program. The federal government 
provides less than $300,000 per year. We have more than 1,000 
clients, and we maintain four locations. Newark, the main 
location, Trenton, Mount Holly, and Atlantic City.
    Our clients have won more than $550 million in contract 
since the creation of the center in 1986. As set forth in the 
attachment, and there is a copy of the attachment on the table.
    We help businesses to obtain contracts with all of the 
federal agencies, both state and local governments, and also 
large businesses. Doing business with the government can be a 
challenging task, even for the most enthusiastic business 
owner.
    We evaluate our clients' capabilities, and we direct the 
center's resources to respond effectively. A major tool the 
center employs is our bid matching services. We electronically 
bid match what the Government, state or federal agency, wants 
to buy, with what a company is selling. And this is done on a 
daily basis.
    We send an email to the clients, at night, so that when 
they wake up the next morning, the bids are there. Keeping in 
mind that the DOD purchased more than 220 billion in goods and 
services, annually. We specialize in that agency's procurement 
process.
    When selling to DOD manufacturers have targeted 
marketplaces. For example, the Defense Supply Center, 
Philadelphia, Pennsylvania, buys clothing and textiles, general 
and industrial supplies, medical supplies, including 
subsistence for all of the services.
    Companies such as Lola Fashions, Jackie Evans, and Jacob's 
Textiles, have received marketing assistance in the bid 
preparation from the Center. And we have successfully assisted 
them in submitting bids, whether the solicitation was paper, or 
an electronic bid.
    We direct electrical and machine parts, and computer 
manufacturers to places like the Defense Supply Center in 
Columbus, the ship parts out in Mechanicsburg, Pennsylvania, 
and Defense Supply Center in Richmond.
    Again, companies are experiencing competition with offshore 
manufacturers, especially orders less than 2,500. And our 
witness, Mr. Yecies has discussed his concerns there. But in 
this area the Center has assisted companies to obtain 
contracts, such as Empire Electric, Sun Dial and Panel 
Corporation, and Swiss Technology.
    We've made available copies of the websites of the 
logistical sites, on the table, for the small businesses that 
are present today. A particular challenge to the Center's 
clients is the loss of business experienced by the offshore 
exodus of manufacturing facilities.
    To help overcome this negative impact to their bottom line, 
we encourage companies to leverage the competitive preferences 
made available by Congress in the area of certification.
    If a firm can obtain a certification, such as a hub zone, 
8A, or SDB, or team with a company who is certified, it would 
give the company a competitive edge, and possibly level the 
playing field.
    We recommend another important marketing avenue to reach 
all federal agencies with buying opportunities. It is to obtain 
a General Services Administration, a GSA contract. We have 
assisted companies to do this, such as Phacil, Insap, Four 
Technologies, to bid these type of contracts.
    These contracts are particularly helpful to both the small 
business and to the Government buyer. The company has a place 
to advertise their prices, the contract terms are already 
negotiated, so the buyer can simply write the order.
    As I mentioned in my summary information, we strongly urge 
small business to market to large businesses. Ninety nine 
percent of all large businesses are government contractors. As 
such they are required to do business with small businesses.
    We develop a strong professional relationship with large 
business buyers, so to assist them in expanding their small 
business basis, and meeting their small business goals. We 
frequently broadcast to our clients those large business 
requirements by running a daily advertisement of their needs.
    And an example of this has been Stone & Webster with the 
Army Corps of Engineers. Thank you, respectfully submitted, 
James Mitchell.
    [Mr. Mitchell's statement may be found in the appendix.]
    Chairman Toomey. Thank you very much for your testimony.
    At this time I would like to welcome the testimony of Mr. 
Burt Rashkow, from the New Jersey Small Business Development 
Center.

     STATEMENT OF BERT RASHKOW, NEW JERSEY SMALL BUSINESS 
                       DEVELOPMENT CENTER

    Mr. Rashkow. Chairman Toomey, and Representative Pascrell, 
thank you very much, as well as the people in the audience who 
are here with us today.
    I really find it a pleasure to be able to speak to all of 
you about the Small Business Development Center. You should 
know that the New Jersey Small Business Development Center 
means small business, because that is our name, Small Business 
Development Center.
    The Small Business Development Center was brought into 
being as a result of a congressional public law in 1977. Since 
that time it has grown into a total of about 11 regional 
offices here in the state of New Jersey, along with--by the 
way, other small business development centers throughout the 
nation, were also part of an initial pilot group.
    We have 11 regional offices throughout the state, and 18 
satellite offices. In addition we have a number of private 
consultants that we use. Our funding is a matched funding from 
the Small Business Administration. The Small Business 
Administration matches funds that are received either for in-
kind, or direct contribution by other entities.
    The initial seeding contribution came from the New Jersey 
Commerce and Economic Growth Commission. That has been in 
effect since 1986.
    The Small Business Development Center, as its core 
services, include free counseling and training. Certain 
training may be charged for, on a minimal basis, for any small 
business in this state.
    Small business means small business, anywhere from a 
thought or a dream in somebody's mind, or a going established 
business. Some of our going businesses are growing in size, as 
you may have heard from Mr. Patel, who was here just a few 
moments ago.
    We are measured by our economic impact. Economic impact is 
jobs. We understand very little else besides jobs. Of course 
that translates into a need for revenues. And revenues is where 
the planning and the effort takes place.
    The services that we offer, or the counseling services that 
we offer, which are all free, could be in business planning, 
marketing, government trade, government procurement rather, 
women-owned businesses, or minority owned businesses for 
certification, loan packaging, international trade, 
manufacturing alliances; add to that, technology 
commercialization.
    Our diversity is our strength. And with respect to that 
geographic diversity, hands-on experience in service and 
manufacturing industries. Ethnic diversity and personnel and 
consultants from most backgrounds.
    Within the SBDC, the Small Business Development Center, 
there are specialty centers. The manufacturing mentor protege 
program, which is comprised by my colleague Sy Reich and 
myself, was formed, or at least tried out in 1993, Brenda 
Hopper, who is our director, state-wide director, felt that the 
drain in manufacturing jobs was excessive compared to any other 
industry.
    She felt that it would be reasonable to make alliances 
between small businesses and large businesses. To have the 
larger business, the larger manufacturer, assist the small 
business in getting jobs in the state of New Jersey.
    Would it not be reasonable that if the benefit accrues to 
both parties, an effort like that should take place? The larger 
manufacturer finds that he can get his products and materials 
right here in the state, versus getting it overseas.
    The Mentor's question is, get the supply at a reasonable 
price, and at the quality necessary? In this mentor/protege 
program a large manufacturer assists the smaller manufacturer 
to achieve these goals. Both of them have something to gain.
    As we progress from company to company, we found that the 
majority problem was training of the manufacture personnel. 
This happened in 1994, that we learned all this.
    Since that time, the Small Business Development Center's 
Manufacturing Mentor/Protege Program has been able to deliver 
$6 million worth of training manufacturing workers here in the 
state of New Jersey. Customized training is tailored to the 
company's own defined needs. No canned training. It is what the 
companies wanted.
    In that time we had 192,000 hours of training to more than 
5,000 trainees, in about 107 facilitated here in the state of 
New Jersey, all manufacturers in appropriate manufacturing 
skills.
    What we find, in general, is that the manufacturers need 
managerial assistance. They need to know how to do things, they 
need to know more about such things statistical process 
control. They need to know things that will help their business 
run.
    In general manufacturers know what technology they need. 
What they need to do is training and connections.
    I can tell you that we have had success in our operation, 
and we look forward to being able to do it in the future. Thank 
you.
    [Mr. Rashkow's statement may be found in the appendix.]
    Chairman Toomey. Thank you very much for your testimony.
    At this time I would like to welcome and introduce the 
testimony of Mr. Robert Loderstedt, from the New Jersey 
Manufacturing Extension Program. Welcome.

   STATEMENT OF ROBERT LODERSTEDT, NEW JERSEY MANUFACTURING 
                       EXTENSION PROGRAM

    Mr. Loderstedt. Thank you Chairman Toomey, and Ranking 
Member Bill Pascrell of the House Small Business Subcommittee 
on Tax, Finance, and Exports, for holding today's field 
hearing.
    I would also like to thank you for allowing me to speak 
before you about the impact the New Jersey Manufacturing 
Extension Program is having on New Jersey small and medium 
sized manufacturers, and to further comment on ways to 
stimulate New Jersey's manufacturing base.
    By conducting this hearing it is clear you have an 
understanding of the importance of manufacturing to our 
country, and you are looking to understand what more can be 
done to strengthen this national asset.
    Our manufacturing sector has always played a key role, if 
not the lead role, in leading this nation out of times of 
economic downturn, and threats to our national security.
    It is also good to see our colleagues from the New Jersey 
Institute of Technology's Defense Procurement Technical 
Assistance Center, and the SBA Small Business Development 
Center.
    We work together on issues involving New Jersey's 
manufacturers. As you know, the mission of the New Jersey 
Manufacturing Extension Program is to work with New Jersey's 
small and medium sized manufacturers to help them become more 
profitable, productive, and globally competitive. We focus 
exclusively on manufacturing.
    Having spent my entire career in the private sector, 26 
years, prior to joining the New Jersey Manufacturing Extension 
Program, I tell people we are implementing a public sector 
manufacturing mission with a private sector mindset.
    We are a 501C3 not-for-profit. I tend to choke on that, I 
like to tell people we are a not-for-loss organization. And I 
always think in terms of return on investment. Whenever I have 
an opportunity to speak with our investors, of which you are 
one, I like to let you know what the return on your investment 
has been.
    During the five years the New Jersey Manufacturing 
Extension Program has been in existence, for every dollar 
invested by you, we returned $55. The State of New Jersey has 
realized a return of $155 on each dollar they've invested, and 
the combined federal and state investment has been $40 return 
for every dollar invested.
    That gets over most hurdles. That return is calculated by 
using the State of New Jersey economic input/output model, and 
the quantified responses provided by clients who are surveyed 
one year after completion of a project conducted by New Jersey 
Manufacturing Extension Program, by an independent third party.
    The quantified results are in areas such as new sales 
dollars, retained sales, and new jobs created. In actual 
dollars the economic impact in our five years of existence has 
totaled $511 million.
    The New Jersey Manufacturing Extension Program has worked 
with over 760 companies, and we have delivered over 1,300 
projects. Every manufacturer has been contacted at least 10 
times through our telemarketing and newsletter.
    Manufacturing plays a key role in our nation, and in New 
Jersey. As you said, Congressman Pascrell, nearly 11 percent of 
the state's jobs are in the manufacturing sector. That is 
445,000 people.
    They are also some of the best jobs we have. Wages of 
manufacturing workers in New Jersey are 26 percent higher than 
the state-wide average, and 67 percent higher than wages in the 
service sector.
    Manufacturing accounts for 12 percent of our gross state 
product, and a comparable share of all state revenues. As New 
Jersey Manufacturing becomes more efficient, through the 
deployment of advanced technologies and modern management 
methods, the total number of manufacturing jobs has declined in 
our state.
    However, productivity and output has increased 
significantly. The state of New Jersey ranks 14th in the nation 
in the number of manufacturers.
    What can you do to assist New Jersey manufacturing, and 
manufacturing in the nation? I would like to tell you a story, 
before I offer you a simple suggestion. When I was first 
offered the job of president of the New Jersey Manufacturing 
Extension Program, and told I was the first employee, and that 
I needed to create a vision, and get it up and running, I 
agreed with one proviso, that I be allowed to work on a 1099, 
because I wasn't sure this thing could fly.
    Having spent 26 years in the private sector, and having 
just left the company I had started and owned, I wasn't really 
sure this concept could work. I always thought the private 
sector made things go, and government got in the way.
    Well, I stayed on that 1099 for 18 months, and five and a 
half years later I can tell you this does work, and it is not 
something that the private sector can do, or we would be doing 
it. I would be getting venture capital and making it happen if 
I thought it could fly.
    This program, in my opinion, is the best use of my tax 
dollar. It produces quantified results, forces collaboration 
between the private and public sector, and draws the best from 
around a nation-wide system of 75 manufacturing extension 
programs, making us more efficient and better.
    For example, Congressman Toomey, we work closely with Edie 
Ritter, and the Northeast Pennsylvania MEP on best practices, 
and assessment tools, management information systems, and sales 
processes, making each center better and more efficient.
    The end result, we have a stronger, more competitive, and 
more profitable small manufacturing base which is the backbone 
of this country's manufacturing.
    In summary, you create wealth in an economy by making 
things, mining things, and growing things. We need to continue 
creating wealth by making things. The New Jersey Manufacturing 
Extension Program received $1.66 million of investment from you 
last year; the state of New Jersey invested $750,000, and we 
generated $1.6 million in client fees. Nothing is free.
    Our future, and our growth, will come from increasing our 
client fees. But for us to do that, and for you to help to 
continue to create wealth in our economy, we need the state of 
New Jersey to invest at the rate you are investing, and for you 
to continue to invest at your current level, your current 
level, not more money.
    Your investment allows us to put experienced and 
knowledgeable field agents out working with small 
manufacturers, we'll grow the business, grow the assistance to 
small manufacturers, and help in creating wealth by growing 
client fees each year.
    You need to reinstate the federal investment of the 
national manufacturing extension program. Thank you, sorry for 
running on.
    [Mr. Loderstedt's statement may be found in the appendix.]
    Chairman Toomey. Thank you.
    My first question is for Mr. Mitchell.
    Do any of your clients find themselves in competition, 
essentially, with the prison industries?
    Mr. Mitchell. Yes, sir, especially many of the small 
manufacturers----
    Chairman Toomey. If you could take the mike and explain a 
little bit about the nature of that. And if you could touch on 
the inherent advantages that the prison industry has, versus 
your clients.
    Mr. Mitchell. The prison industry, their wage level is far 
lower, therefore they are able to manufacture and make items at 
a much lower cost. So it has impacted a number of our 
manufacturers, two or three, that have mentioned it.
    Chairman Toomey. And are there government buying entities 
that are essentially required to buy from the prison industry?
    Mr. Mitchell. That I don't know, sir.
    Chairman Toomey. It is my understanding that that does 
happen, and that there are industries where if the prison 
industry provides products, the Government is required to buy 
those products, and they are not even allowed to contemplate a 
competing bid.
    Mr. Mitchell. We don't see the prison industry bids, only 
the ones that are full and open.
    Chairman Toomey. Okay. You mentioned that your budget is 
less than 300,000 a year comes from the federal government. 
Where does the rest of the budget come from?
    Mr. Mitchell. Matching funds from NJIT.
    Chairman Toomey. Okay. Mr. Rashkow, your services are not 
limited to manufacturing, they are any kind of small business, 
is that correct?
    Mr. Rashkow. The New Jersey Small Business Development 
Centers cover a range of small business. The specialty program 
is called the New Jersey manufacturing mentor protege program, 
where we match smaller and larger manufacturers for the 
improvement of skills in the state of New Jersey.
    We are a component of the New Jersey Small Business 
Development Center.
    Chairman Toomey. And as such you provide consulting and 
training services to small businesses?
    Mr. Rashkow. That is correct, we do supply that. Some of 
those training services do carry a small fee with it.
    Chairman Toomey. With respect to the small business that 
happens to be in manufacturing, how would your mission and your 
services differ from the Manufacturing Extension Program 
Services?
    Mr. Rashkow. We do not attend to technology. We concentrate 
on managerial requirements, managing the company, the marketing 
plan, packaging loans for small businesses. Getting them the 
opportunity to do a better marketing plan, getting them the 
consultants, and finally the match with the larger 
manufacturers.
    Chairman Toomey. Okay. Mr. Loderstedt, some of those 
services, it seems, are also services that you provide. How do 
we avoid duplicative services for the same sector of the 
economy?
    Mr. Loderstedt. I would respond to you this way. In five 
and a half years we have not arrived at the same company 
together in overlapping of services. Typically if we find 
companies that are in a start-up mode, and looking for the 
kinds of help that would be given by the SBDC, those are 
referred to the SBDC.
    Many times a company doesn't understand how to create a 
marketing plan, or a business plan, because they are looking to 
start out in business. Since they cannot afford to pay us for 
those services, they are referred over to the SBDC.
    So the types of work that we do, in fact, do not overlap, 
because we are working for the most part with going concerns 
that have an ability to pay. The SBDC will typically work with 
smaller companies, or companies perhaps that are looking for 
some help in packaging financing, or training type needs that 
we don't typically become involved with.
    Chairman Toomey. So the SBDC would be dealing with startups 
that don't have the ability to pay any fees, and you are 
dealing with companies that are more established?
    Mr. Loderstedt. That is a general rule, yes. I mean, they 
will work with larger companies, they will do things in the 
area of training that we might not necessarily work with. And 
as I mentioned to you earlier, there is a referral of leads 
where we feel the other organization can better serve that 
needs.
    Chairman Toomey. Mr. Rashkow.
    Mr. Rashkow. Whenever a technology issue arises we 
generally refer them over to the MEP. We don't deal with 
technology issues, we deal primarily with the managerial 
issues, and the training needs within the company. We 
facilitate training.
    Furthermore the service of matching a mentor and a protege 
is something that is done on an consultative basis between the 
two companies. We are facilitators.
    Chairman Toomey. Mr. Loderstedt, how do you determine what 
fees your clients--well, let me back up one second and just 
say, as an overall picture, what percentage of your budget 
comes from federal funds versus funds paid by clients in the 
form of fees?
    Mr. Loderstedt. Our total budget is about 40 percent right 
now from the Federal Government. We are basically matching the 
federal contribution. As you may know the ideal model is a 
third federal, a third fees, and a third state.
    We are pretty much together at the federal level in terms 
of fees. Unfortunately the state is not going to come up to 
match, your contribution and ours at a percentage in the state.
    Chairman Toomey. And how do you determine what is the 
appropriate fee to charge a client?
    Mr. Loderstedt. It is based on value added, and the type of 
project. We break projects into three types of projects, a 
tactical project, an intermediate type project, or a strategic 
project.
    A tactical project typically takes anywhere from two days 
to a week. It typically would be priced somewhere less than 
$3,000. In that particular situation we recover our direct 
costs, and a markup to provide that service.
    There is a very defined scope of work, client needing help 
for developing job descriptions. We have our third party 
resources, we have a defined scope of work, we have the markup 
to be put on that. And then we sell cost justified, and macro 
project manage that project for the client.
    Chairman Toomey. But is it with no regard of the 
profitability of the client?
    Mr. Loderstedt. Well, we always cost justify it. I mean, in 
26 years, 30 years now counting my time here, I've never had a 
client give us money unless we've been able to cost justify a 
proposal.
    So we do have the advantage in the sense that the way the 
federal and state money is used, it allows us to deploy the 
types of experienced resources that we have, working with 
clients to establish the relationship, spend the time at the 
facility, get to understand the business, unlike most 
consulting companies where the clock starts right away.
    So that is really what the investment allows us to do.
    Chairman Toomey. And I understand that, and I understand 
that, from hearing from many of my own constituents, that the 
program is very popular, and well-regarded. I'm raising the 
question which is, really, should we provide equally subsidized 
services to companies that are struggling, as well as those 
that are extremely profitable?
    Mr. Loderstedt. The answer is, in the case where a company 
is extremely profitable, we typically will make more markup on 
those. It is their ability to pay. On a struggling company we 
give that individual, and that company, an opportunity to pay 
less, simply because they cannot afford the service at a full 
markup.
    They need that service, but the longer term strategy with 
the account is basically we are investing with them on those 
early projects, knowing that if we can help them become more 
profitable we can now start to gain additional----
    Chairman Toomey. So there is a means test?
    Mr. Loderstedt. Yes, sir.
    Chairman Toomey. Thank you.
    Mr. Loderstedt. You are welcome.
    Chairman Toomey. I yield to Mr. Pascrell.
    Mr. Pascrell. Yes, I think Mr. Chairman, that both panels 
have been extremely helpful today, and I hope the folks have 
been listening, because we are geared, mentally, to think about 
General Electric. And yet 90 to 95 percent of the folks work 
for the companies you do. Strange? Not so strange.
    Let me ask you this question. Would it be esoteric to ask 
that each state and the federal government come up with a 
manufacturing policy which we don't have right now? Would that 
be a waste of time if we had a manufacturing policy?
    Mr. Loderstedt. As I said in my remarks, I think if you 
look at any economic downturn we've had, if you look at any 
wars we've had, it has been manufacturing that has led us out 
of that economic downturn, it has led us to any victory in wars 
that we've had.
    It is the backbone of this country. You make things, you 
mine things, you grow things, that is how you create wealth. 
And in my opinion, Bob Loderstedt's opinion, I do not see a 
national manufacturing strategy on what is probably the most 
important sector in this country. I do not see one in the state 
of New Jersey.
    And I believe if nothing else comes out of this hearing, 
somebody needs to stand up and say manufacturing is important. 
Somebody needs to say to these manufacturers, you know, you are 
important to the state of New Jersey, you put a lot of money in 
the state of New Jersey, and we care about you. And there are 
programs available which do not overlap that can help you to 
become more profitable and grow in the state. Somebody's got to 
do it.
    Mr. Pascrell. Let me ask you this. You said that--you 
mentioned that, when you talked about manufacturing jobs, you 
said something about competitive service jobs which I found the 
figures you used very difficult to believe. Not that you are 
difficult to believe.
    But could you just crystallize that idea? 67 percent higher 
in terms of what we get out of every dollar we invest?
    Mr. Loderstedt. Well, it is the economics. The more money 
that people are able to make, the more people can make in terms 
of earning a wage----
    Mr. Pascrell. But you said manufacturing jobs was producing 
higher income than service jobs?
    Mr. Loderstedt. Yes, sir.
    Mr. Pascrell. I think I heard you say that?
    Mr. Loderstedt. That is correct.
    Mr. Pascrell. And you are pretty sure about that?
    Mr. Loderstedt. Yes, sir.
    Mr. Pascrell. Could you just repeat that?
    Mr. Loderstedt. Yes. Manufacturing wages in New Jersey are 
26 percent higher than the state-wide average, and 67 percent 
higher than wages in the service sector.
    Mr. Pascrell. Why, in God's name, do we as a government, 
and a society, think that service jobs are the direction the 
nation should be going?
    Mr. Loderstedt. Well, you need a balanced economy. I guess 
my opinion is that there is a tremendous need for skilled 
workers, and workers going into the manufacturing arena. There 
is a lot of high paying jobs from the factory floor up through 
different levels of management, and it is not my place to talk 
about the education system, but I coached high school hockey.
    And I have to tell you, those rides in school buses where 
kids would come up to me and say, hey coach, my parents want me 
to go to college, I'm not sure I want to go to college. I mean, 
there are other jobs I think I would like to do.
    And that is a whole other discussion. Maybe not for this 
Committee, but we have this thing about everybody has to go to 
college, and I'm not so sure that is the answer. There is a ton 
of opportunity in manufacturing, there is a ton of 
opportunities to be plumbers.
    My company repaired and reconditioned forklift trucks. At 
the top union scale I was paying $28 an hour. I couldn't get 
kids to come into the business, because there was this thing 
about working in manufacturing, or not having a college 
education.
    And I don't mean to lecture.
    Chairman Toomey. And I want to get into the subject, trade, 
that is part of our many responsibilities. But we were sold a 
bill of goods that for every manufacturing job that we lost to 
Beijing, or Honduras, that we would create two service-related 
jobs of higher pay.
    Where, I mean, this cuts to the chase here. Do you agree 
with that, and have we been misled, or maybe I determined that 
they did, concurrently----
    Mr. Rashkow. I personally think, Congressman, that the 
general public has not been misled so much as been less 
informed than they should be. The most important thing is that 
every manufacturing job has behind it at least one, if not more 
than one supply job, as a trickle down effect.
    When you lose a customer, as many of the people in this 
room have, from the state of New Jersey, they've not only lost 
the job there, but they've lost the customer, and they've lost 
business.
    For every $50,000 of business that they lose they lost 
another job. And that has happened to every manufacturing 
company. I will wager that every manufacturing company in this 
room who is in the manufacturing business has lost customers 
and jobs in the state of New Jersey.
    Mr. Pascrell. I want to thank you.
    Chairman Toomey. Let me just say that this has been 
extremely helpful, the previous panel, as well as this panel. 
And if any of the current panelists have any point they would 
like to make in conclusion, I would like you to do so now.
    Mr. Pascrell. I have one other question.
    Chairman Toomey. I yield to Mr. Pascrell.
    Mr. Pascrell. I meant to ask this question, one of you 
touched on it, and I forget who it was, vocational technical 
entrepreneurship, there is a piece of legislation and it went 
to us, and was passed in the House, H.R. 2666 was passed in 
October of last year. The Senate hasn't acted on it.
    It would establish a grant program for the development and 
implementation of curriculum designed to promote vocational and 
technical entrepreneurship, God forbid. And that was a primary 
sponsor by Congressman Brady, of the State of Pennsylvania.
    What do you think of that idea?
    Mr. Loderstedt. You guys want to comment on that?
    Mr. Pascrell. And then grants would be offered to the 
SBDCs, or post-secondary vocational and technical schools.
    Ms. Hopper. We would really like that Congressman, if it is 
given to the SBDCS. There is a need for additional training, 
customized training, and we have the infrastructure where we 
need to continue to do the things that we do.
    Mr. Pascrell. Burt.
    Mr. Rashkow. Yes. The idea of providing some assistance has 
enormous potential. Some of our experience with the customized 
training, 190 and some odd thousand of training hours that we 
brought into the state, through the customized training grants 
provided by the New Jersey Department of Labor, has shown the 
results on the factory floor to be enormous.
    For example, just to give you a rough idea as to how well 
it was received, some people actually came in from vacation, in 
violation of the Fair Labor Standards Act, to hear some of the 
consultants who were delivering the training.
    They, themselves, have become the greatest carrier for the 
message about its being a great place to work. Believe it or 
not, such simple things as training in English as a second 
language, has been able to create a communications medium for 
management and personnel, has improved the morale.
    The ultimate benefit is that it improved thru-put, cycle 
time, getting things done in a given period of time. And it 
gave the people on the production line the feeling that 
management cares, management cares.
    So the overall morale increased, and it was a great thing 
that they hadn't anticipated. They had taken jobs, for the most 
part, because that was the only one that they could get. But in 
reality it turned out to be a carrier for some wonderful 
things.
    Mr. Pascrell. Can you, gentlemen, hang around after the 
meeting, so if people have questions of you, which I'm sure 
we'll have, it has been a great help.
    Chairman Toomey. Absolutely, they very much, and the 
hearing is adjourned.
    [Whereupon, at 2:28 p.m., the above-entitled matter was 
adjourned.]



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