Manufacturing Extension Programs: Manufacturers' Views of Services
(Briefing Report, 08/07/95, GAO/GGD-95-216BR).

Pursuant to a congressional request, GAO obtained U.S. manufacturers
opinions regarding the services they received from manufacturing
extension programs (MEP) in 1993.

GAO found that: (1) 73 percent of manufacturers responding to the
questionnaire believed that MEP assistance positively affected their
overall business performance; (2) MEP assistance improved the
manufacturers' use of technology in the workplace, the quality of their
product, and the productivity of their workers; (3) the companies that
committed their own financial resources to implementing MEP
recommendations reported greater benefits from MEP assistance than other
survey respondents; and (4) other factors affecting the impact of MEP
services included the companies' financial input, the expertise and
experience of MEP staff, and the affordability of MEP assistance.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-95-216BR
     TITLE:  Manufacturing Extension Programs: Manufacturers' Views of 
             Services
      DATE:  08/07/95
   SUBJECT:  Business assistance
             Manufacturing industry
             Federal funds
             Quality control
             Productivity
             Research and development
             Technical assistance
IDENTIFIER:  NIST Manufacturing Extension Partnership
             DOD Technology Reinvestment Project
             EPA Standard Industrial Classification System
             
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Cover
================================================================ COVER


Briefing Report to the Chairwoman
Subcommittee on Technology
Committee on Science
House of Representatives

August 1995

MANUFACTURING EXTENSION PROGRAMS -
MANUFACTURERS' VIEWS OF
SERVICES

GAO/GGD-95-216BR

Manufacturing Extension Programs


Abbreviations
=============================================================== ABBREV

  MEP - Manufacturing Extension Programs
  NIST - National Institute for Standards and Technology
  SBA - Small Business Administration
  SIC - Standard Industrial Classification
  SMSA - Standard Metropolitan Statistical Area
  TRP - Technology Reinvestment Project

Letter
=============================================================== LETTER


B-261875

August 7, 1995

The Honorable Constance A.  Morella
Chairwoman
Subcommittee on Technology
Committee on Science
House of Representatives

Dear Chairwoman Morella: 

This briefing report summarizes U.S.  manufacturers' opinions
regarding the services they received from manufacturing extension
programs (MEP) in 1993.  We obtained the views of manufacturers
served by 57 MEP, which are state/federal partnerships that offer
manufacturers assistance in modernizing or upgrading their
operations. 

As requested, we obtained manufacturers' views regarding the impact
of MEP services on their business performance and the factors
affecting the impact of MEP services.  We did not verify either
positive or negative impacts reported by manufacturers, and we did
not evaluate the operations or management of specific federal or
state programs.  We also obtained the views of other manufacturers
with little or no MEP experience to determine why they made little or
no use of MEP. 

We provided a briefing to Subcommittee staff on July 27, 1995.  This
report summarizes the substance of the briefing.  As agreed, in our
report that is to follow, we will present an in-depth analysis of
manufacturers' views and copies of the questions we asked
manufacturers, along with their aggregate responses. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Most manufacturers responding to our questionnaire--about 73 percent
(or 389)--reported that they believed MEP assistance had positively
affected their overall business performance.  About 15 percent (or
82) of the respondents reported that they believed MEP assistance had
not affected their overall business performance.  Approximately 8
percent
(or 41) said that it was too early to tell the effect, and another 4
percent (or 22) said they had had no basis to estimate the effect. 
(See briefing section II.)

With regard to the impact of MEP assistance on more specific
indicators of manufacturers' business performance, most respondents
reported that the assistance had positively affected their use of
technology in the workplace(approx.  63 percent, or 340), the quality
of their product (approx.  61 percent, or 325), and the productivity
of their workers (approx.  56 percent, or 299).  Between about 44
percent and 63 percent of respondents reported that MEP assistance
had positively affected certain specific indicators of their business
performance, such as their customer satisfaction (300), their profits
(277), and their ability to meet production schedules (265).  Of
those respondents not reporting a positive impact on specific
indicators of their business performance, most said MEP assistance
had not had any impact.  About 2 percent, or fewer, respondents
reported a negative impact on each specific performance indicator. 
One of the manufacturers that reported that MEP assistance had not
affected its business performance commented that it had not followed
MEP suggestions, and another reported that it had not put enough of
its own time into completing MEP assistance.  (See briefing section
II.)

Among the factors that manufacturers said had affected the impact of
MEP services was their own companies' input.  Companies that had
committed their own financial resources to implement MEP
recommendations reported greater benefits from MEP assistance
relative to other survey respondents.  Of those 322 respondents who
had made a financial investment, 86 percent (or 269) said that MEP
assistance had positively affected their business performance. 
However, 54 percent (or 119) of those who had not made a financial
investment reported an overall positive impact.  Other factors that
respondents reported influenced the effectiveness of MEP services
were the expertise and experience of MEP staff and the affordability
of the assistance.  (See briefing section II.)

In our related telephone survey of 200 additional manufacturers who
were not extensive users of MEP services, 163 (about 82 percent)
reported that they had not used MEP services because they were
unaware of these programs.  Twenty-one (about 10 percent) said that
although they knew about MEP, they had not used MEP because they
believed the assistance would not be necessary.  Companies we
interviewed said that other sources of modernization assistance
besides MEP were their customers, vendors and/or suppliers, industry
associations, and consultants.  (See briefing section III.)


   BACKGROUND
------------------------------------------------------------ Letter :2

In 1993, the National Research Council reported\1 that small- and
medium-sized manufacturers\2 represented the bulk (more than 98
percent) of U.S.  manufacturing establishments, were integral parts
of the supply chain for commercial and defense products, and provided
approximately 40 percent of manufacturing employment.  However, the
Council said that these manufacturers generally lacked the expertise,
time, money, and information necessary to upgrade in order to
maintain their ability to compete successfully in the modern
marketplace. 

Because of the important role these firms play in providing jobs,
over the last decade states began funding various technology
assistance initiatives.  During fiscal years 1992 through 1994,
states spent a total of $1.01 billion\3 on these initiatives,
including MEP.  In addition to state governments, the federal
government provides funding for grants and other activities related
to MEP, through the Manufacturing Extension Partnership Program
managed by the National Institute of Standards and Technology
(NIST).\4 In fiscal year 1994, the federal government appropriated
$66 million to MEP and related activities, and the states
collectively spent an estimated $57.7 million.\5 Other sources of MEP
support may come from universities, private industry, and users'
fees. 


--------------------
\1 Learning to Change:  Opportunities to Improve the Performance of
Smaller Manufacturers, National Research Council (Washington, D.C.: 
National Academy Press, 1993). 

\2 The Small Business Administration (SBA) generally defines a small
business as having fewer than 500 employees.  Some experts have
further divided small manufacturers into small firms with fewer than
100 employees and medium-sized firms with from 100 to 499 employees. 
This report collectively refers to firms with fewer than 500
employees as small- and medium-sized manufacturers. 

\3 This figure includes programs that are administered or directly
sponsored by state governments that involve a government/industry or
a government/industry/university partnership, and that have as a
primary goal the use of technology to enhance economic growth.  See
Partnerships:  A Compendium of State and Federal Cooperative
Technology Programs, ed.  C.M.  Coburn (Columbus, OH:  Battelle
Memorial Institute, 1995), p.  43. 

\4 The Manufacturing Extension Partnership Program is known as MEP. 
However, this report collectively refers to all state, federal, and
university manufacturing extension programs as MEP. 

\5 Partnerships, p.  55. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To obtain the views of MEP users, we surveyed 766 U.S.  manufacturers
that had completed at least 40 hours of MEP assistance in one or more
of four service categories\6 in 1993.  A total of 551 manufacturers
(72 percent) completed and returned the questionnaire.  We had
obtained the names of these manufacturers from the directors of 57
MEP in 34 states. 

To determine why other manufacturers had made little or no use of
MEP, we conducted telephone interviews with a total of 200
manufacturers located in four Standard Metropolitan Statistical Areas
(SMSA) where MEP are located.  These SMSAs were
Albany/Troy/Schenectady, NY; Atlanta, GA; Kansas City, MO; and Los
Angeles, CA.  Using a commercial database, we selected manufacturers
with little or no MEP experience in each SMSA that were in the same
industries and employed similar numbers of people as did the majority
of our questionnaire respondents.  (For more details about the
methodology we used to meet our reporting objectives, see app.  I.)

We did our work between March 1994 and July 1995 in accordance with
generally accepted government auditing standards. 

Since we did not evaluate the operations or management of specific
federal programs, we did not obtain agency comments on this report. 
However, on July 24, 1995, we discussed the facts presented in this
report with the Director of the NIST Manufacturing Extension
Partnership Program.  He agreed with the technical accuracy of the
report and offered minor clarifications, which we incorporated into
the report. 


--------------------
\6 The four service categories were (1) Quality Improvement, (2)
Equipment Modernization and Plant Layout, (3) Product Design and
Development, and (4) Environmental or Energy. 


---------------------------------------------------------- Letter :3.1

As agreed with your office, unless you announce the contents of this
briefing report earlier, we plan no further distribution of this
report until 14 days after the date of this letter.  At that time, we
will send copies of this briefing report to the Director of NIST, the
Secretary of Commerce, and the Members of Congress and congressional
committees that have responsibilities related to these issues. 
Copies also will be made available to others upon request. 

The major contributors to this report are listed in appendix II. 
Please contact me at (202) 512-4812 if you have any questions
concerning this report. 

Sincerely yours,

Allan I.  Mendelowitz, Managing Director
International Trade, Finance, and
  Competitiveness


Briefing Section I BACKGROUND
============================================================== Letter 


   BRIEFING OBJECTIVES
------------------------------------------------------------ Letter :4



   (See figure in printed
   edition.)



      BRIEFING OBJECTIVES
---------------------------------------------------------- Letter :4.1

Our objectives were to present the views of manufacturers that had
used manufacturing extension programs (MEP)\1 services about the
impact of MEP services on their business performance and the factors
affecting the impact of MEP services.  We did not verify either
positive or negative impacts reported by manufacturers. 

In addition, since an estimated 93 percent\2 of all U.S.  small- and
medium-sized manufacturers have not yet been served by MEP funded by
the National Institute of Standards and Technology (NIST), we asked
companies with little or no MEP experience why they had made limited
or no use of MEP services.  We also asked these companies what
resources other than MEP they had used for technical assistance. 


--------------------
\1 The NIST Manufacturing Extension Partnership Program is known as
MEP.  However, this report collectively refers to all state, federal,
and university manufacturing extension programs as MEP. 

\2 Estimate based on data contained in NIST documents. 


   MANUFACTURING EXTENSION
   PROGRAMS:  BACKGROUND
   INFORMATION
------------------------------------------------------------ Letter :5



   (See figure in printed
   edition.)



      MEP PROVIDE TECHNICAL
      RESOURCES FOR MANUFACTURERS
---------------------------------------------------------- Letter :5.1

The primary mission of MEP is to give "hands-on" technical assistance
to small- and medium-sized manufacturers trying to improve their
operations through the use of appropriate technologies. 

MEP engage in a variety of activities to assist manufacturers, often
in partnership with other business assistance providers such as Small
Business Development Centers, community colleges, and federal
laboratories.  MEP offer a wide range of business services, including
helping companies (1) solve individual manufacturing problems, (2)
obtain training for their workers, (3) create marketing plans, (4)
implement Total Quality Management practices and/or an International
Organization for Standardization (ISO) 9000 system,\3 and (5) upgrade
their equipment and computers. 

MEP work with both individual companies and groups of companies. 
NIST estimated that the MEP network it has helped fund since 1988 had
reached a total of 25,000 small- and medium-sized manufacturers as of
March 1995. 



--------------------
\3 ISO 9000 is a minimum set of industrial quality system standards. 
These standards ensure that a company's quality system is documented,
demonstrable, effective, and maintained.  ISO 9000 standards are
established by ISO, comprising delegates from over 90 countries. 


   TOTAL MEP FUNDING THROUGH NIST
   IN 1994 DOLLARS
------------------------------------------------------------ Letter :6



   (See figure in printed
   edition.)

   Note:  Funding amounts include
   NIST and Technology
   Reinvestment Project (TRP)
   funds for MEP and for
   activities related to MEP.

   (See figure in printed
   edition.)

   \ a Funding for fiscal year
   1995 is in 1995 dollars.

   (See figure in printed
   edition.)

   Source:  NIST Budget Office.

   (See figure in printed
   edition.)



      A GROWING STATE/FEDERAL
      PARTNERSHIP
---------------------------------------------------------- Letter :6.1

Direct federal involvement in MEP began when Congress passed the 1988
Omnibus Trade and Competitiveness Act (Public Law 100-418, Aug.  23,
1988) after many states already had taken the lead in establishing
MEP.  NIST is the federal agency primarily responsible for overseeing
federal MEP funding. 

Federal MEP appropriations through NIST\4 have grown (in 1994
dollars) from approximately $6.1 million in fiscal year 1988 to
$138.4 million in fiscal year 1995.  In addition to funding
individual MEP, NIST funds also have been used by states and by NIST
to coordinate MEP and other business assistance activities.  NIST
currently is developing a strategic management plan and an evaluation
system for MEP that belong to its national network. 

State or local agencies are to provide matching funds for NIST grants
to individual MEP.  A 1995 Battelle Memorial Institute report\5
estimated that states collectively spent about $57.7 million
specifically on MEP in fiscal year 1994.  That same fiscal year,
federal MEP spending was $66 million.  Other sources of MEP support
come from universities, private industry, and users' fees. 

Briefing Section II

--------------------
\4 NIST has allocated MEP funds from its budget as well as from the
Technology Reinvestment Project (TRP) under the Advanced Research
Projects Agency.  Manufacturing Extension Programs (GAO/GGD-95-124R,
Mar.  24, 1995) lists NIST and TRP MEP funding for fiscal years 1994
and 1995. 

\5 Partnerships p.  55. 


VIEWS OF MEP USERS
============================================================== Letter 


   METHODOLOGY FOR COLLECTING
   VIEWS OF MEP USERS
------------------------------------------------------------ Letter :7



   (See figure in printed
   edition.)



      HOW WE COLLECTED VIEWS OF
      MEP USERS
---------------------------------------------------------- Letter :7.1

In order to determine MEP users' views on (1) the impact of MEP
services on their business performance and (2) the factors affecting
the impact of these services, we mailed questionnaires to
manufacturers that had received at least 40 hours of assistance from
MEP in 1993. 

The manufacturers we surveyed had received services from 57 MEP in 34
states.  These MEP represented a broad range of organizations,
including universities, nonprofit corporations, and state government
agencies.  The majority were established in the 1980s, although they
ranged from 2 years to 49 years old.  Median funding for individual
MEP was about $1 million in fiscal year 1994.  The federal government
provided about 30 percent of the total fiscal year 1994 funding these
MEP received.  MEP also get support from state or local agencies,
universities, private industry, and users' fees. 

Participating MEP gave us the names of manufacturers who had received
at least 40 hours of assistance in 1993 involving help in at least
one of four categories:  (1) Quality Improvement, (2) Product Design
and Development, (3) Equipment Modernization and Plant Layout, and
(4) Environmental or Energy.  Our study focused on these types of
services because they are typically offered by MEP.  Also, MEP
experts told us manufacturers should be able to identify the impact
of these particular services on their business performance. 

MEP gave us the names of 766 manufacturers who met our
qualifications.  We sent these manufacturers questionnaires tailored
to ask about the specific type of MEP project they had completed in
1993.  We received a total of 551 responses, for an overall response
rate of 72 percent.\1



--------------------
\1 The majority of our survey respondents were manufacturers in four
industries:  fabricated metal products; industrial machinery and
computer equipment; rubber and plastic products; and electronic and
electrical equipment, except computers.  About one-half of the
respondents had under 100 employees; about one-third had between 100
and 300 employees.  Respondents were fairly evenly distributed across
three categories of fiscal year 1994 gross sales:  about 29 percent
earned over $1 million to $5 million; about 34 percent earned over $5
million to $25 million; and about 25 percent earned over $25 million. 


   OVERALL IMPACT OF MEP SERVICES
   RECEIVED AS VIEWED BY CLIENTS
------------------------------------------------------------ Letter :8



   (See figure in printed
   edition.)

   Note:  Only one respondent
   (less than 1 percent) reported
   a negative overall impact.

   (See figure in printed
   edition.)

   Source:  GAO analysis of
   questionnaire data.

   (See figure in printed
   edition.)



      MOST COMPANIES REPORTED A
      POSITIVE OVERALL IMPACT ON
      BUSINESS PERFORMANCE
---------------------------------------------------------- Letter :8.1

Almost three-quarters (389) of manufacturers responding to our
questionnaire reported that they believed MEP assistance had
positively affected their overall business performance (i.e., the
facilities' ability to work smarter, faster, and better).  For
example, one respondent reported that MEP assistance with changing
its plant layout had resulted in reduced labor costs, improved
product quality, and improved customer satisfaction.  Another
respondent reported that MEP quality improvement assistance had
improved the work climate for employees, reduced employee turnover,
and helped develop teams.  Only one company reported that MEP
assistance had negatively affected its overall business performance. 
This company commented that MEP advice regarding the timing of its
manufacturing "fell short," which led to dissatisfaction of one of
its customers and the loss of potential sales. 

About 15 percent (or 82) of the respondents reported that they
believed MEP assistance had not affected their overall business
performance.  Just under 8 percent (or 41) of the respondents said
that it was too early to tell the effect of MEP assistance, while
approximately 4 percent (or 22) said they had no basis to estimate
the effect. 



   IMPACT OF MEP ASSISTANCE ON
   SPECIFIC PERFORMANCE INDICATORS
------------------------------------------------------------ Letter :9



   (See figure in printed
   edition.)

   Note:  About 2 percent, or
   fewer, respondents reported a
   negative impact on each
   specific performance indicator.

   (See figure in printed
   edition.)

   Source:  GAO analysis of
   questionnaire data.

   (See figure in printed
   edition.)



      MOST MANUFACTURERS BELIEVED
      MEP SERVICES IMPROVED THEIR
      USE OF TECHNOLOGY AND THEIR
      PRODUCT QUALITY
---------------------------------------------------------- Letter :9.1

Regarding specific business indicators, most respondents reported
that MEP assistance had positively affected their use of technology
in the workplace (about 63 percent), the quality of their product
(about 61 percent), and the productivity of their workers (about 56
percent).  These responses indicate that MEP have had some success in
achieving their primary goal of helping manufacturers improve their
operations through the use of appropriate technologies and through
increases in product quality and worker productivity. 

Others said the assistance had resulted in other positive outcomes,
such as reducing energy consumption or attracting potential investors
to new products under development.  Overall, between about 44 percent
and 63 percent of respondents reported that MEP assistance had
positively affected certain specific indicators of their business
performance, such as their customer satisfaction, their profits, and
their ability to meet production schedules.  Of those respondents not
reporting a positive impact on specific indicators of their business
performance, most said MEP assistance had not had any impact.  About
2 percent, or fewer, respondents reported a negative impact on each
specific performance indicator.  Some of the manufacturers reporting
no effect said they had not followed MEP suggestions, had put little
time into the assistance, or had terminated their relationship with
MEP before completing the assistance. 



   COMPANY INVESTMENT AND IMPACT
   OF MEP SERVICES
----------------------------------------------------------- Letter :10



   (See figure in printed
   edition.)

   Note 1:  No companies making
   financial investments reported
   a negative impact.  Only one
   company (0.5 percent) that made
   no financial investment
   reported a negative impact.

   (See figure in printed
   edition.)

   Note 2:  Impact reported as of
   January 1, 1995.

   (See figure in printed
   edition.)

   \ a Other:  Companies
   responding too early to tell or
   no basis to estimate the
   impact.

   (See figure in printed
   edition.)

   Source:  GAO analysis of
   questionnaire responses.

   (See figure in printed
   edition.)



      COMPANIES THAT HAD MADE
      FINANCIAL INVESTMENTS MORE
      OFTEN REPORTED POSITIVE
      BUSINESS OUTCOMES
--------------------------------------------------------- Letter :10.1

Companies that had made financial investments (e.g., bought or
upgraded equipment or plant facilities) to implement MEP
recommendations reported greater benefits from MEP assistance
relative to other survey respondents.  Overall, 322 respondents (out
of 550 responding to our question) said they had made financial
investments as a result of MEP assistance.\2

Approximately 86 percent of these companies said MEP assistance had
positively affected their overall business performance.  However,
about 54 percent of those who had not made a financial investment
reported an overall positive impact. 

Significantly, approximately 97 percent of the respondents who had
made financial investments as a result of MEP assistance said that
they believed that this investment had been worthwhile. 



--------------------
\2 Not all MEP assistance includes recommendations for financial
investments. 


   ATTRIBUTES THAT MANUFACTURERS
   DESIRED IN MEP
----------------------------------------------------------- Letter :11



   (See figure in printed
   edition.)



      MANUFACTURERS DESIRED MEP
      WITH STAFF EXPERTISE AND
      AFFORDABLE COSTS
--------------------------------------------------------- Letter :11.1

About 93 percent of our survey respondents told us that they wanted
MEP with expertise and experience to help them solve their problems. 
In personal interviews, manufacturers told us MEP assistance was
successful because MEP staff had applied practical manufacturing
experience to resolve their companies' problems. 

The ability to afford both the costs of obtaining MEP assistance and
implementing MEP recommendations was another important consideration
for our survey respondents.  About 91 percent of respondents said it
was important that MEP fees, if charged, be "fair and reasonable" and
that MEP project proposals be within their companies' financial
means.  Companies' financial capacity may be an important determinant
of their ability to benefit from MEP assistance:  some survey
respondents (15 percent) cited budget constraints as one of the main
reasons why they did not implement one or more MEP recommendations. 


Briefing Section III VIEWS OF MEP
NONUSERS
============================================================== Letter 


   METHODOLOGY FOR SURVEY OF FIRMS
   MAKING LITTLE OR NO USE OF MEP
----------------------------------------------------------- Letter :12



   (See figure in printed
   edition.)



      HOW WE ASSESSED WHY
      MANUFACTURERS MADE LITTLE OR
      NO USE OF MEP
--------------------------------------------------------- Letter :12.1

In addition to sending a written questionnaire to MEP users, we
conducted a telephone survey of 200 manufacturers who had made little
or no use of these programs.  Defining the universe of nonusers was
difficult, because an estimated 93 percent of the 370,000 U.S. 
small- and medium-sized manufacturers had not used MEP. 

We selected manufacturers to survey in four SMSAs that had
established MEP (Atlanta, GA; Albany/Troy/Schenectady, NY; Kansas
City, MO; and Los Angeles, CA).  Using a commercial database, we
identified manufacturers who were in the same industries and employed
similar numbers of people as did the majority of manufacturers who
had responded to our questionnaire.  We then conducted structured
telephone interviews with 50 firms in each area.  We asked them if
they had used MEP and what other sources they had used for technical
assistance. 



   MANUFACTURERS' REASONS FOR
   LITTLE OR NO USE OF MEP
----------------------------------------------------------- Letter :13



   (See figure in printed
   edition.)



      MOST FIRMS INTERVIEWED
      UNAWARE OF MEP
--------------------------------------------------------- Letter :13.1

Most of the manufacturers we interviewed by telephone (163 out of
200, or 82 percent) said they were unaware of MEP and so had not used
them.  MEP officials attributed this lack of awareness to two
reasons.  First, the companies may have received mailings and other
information from MEP, but they either did not read the information
carefully or did not perceive its relevance to their own operations. 
Second, MEP officials told us that many state programs limit their
marketing efforts in order to avoid creating a demand they cannot
meet with their service resources.  For example, the MEP in the State
of New York had 17 field engineers to serve an estimated population
of 28,000 potential manufacturing clients at the beginning of 1995
and thus had to limit its outreach efforts. 

However, 29 of the 37 manufacturers who said they were aware of MEP
told us they did not use MEP for a variety of reasons.  Of these 29
manufacturers, 21 said they had not used MEP services because they
believed the assistance would not be necessary.  For example, 12 of
these firms said they could largely solve their own problems or that
they turned to other sources for help.  In addition, three others
said they believed the programs could not provide the relevant
expertise they needed.  Finally, two manufacturers told us that they
believed that government resources should not be used to provide
assistance to businesses. 



   OTHER SOURCES OF TECHNICAL
   ASSISTANCE USED BY FIRMS
----------------------------------------------------------- Letter :14



   (See figure in printed
   edition.)

   \ a Other includes customers,
   other corporate units, and
   other manufacturers.

   (See figure in printed
   edition.)

   Source:  GAO analysis of
   telephone interview data.

   (See figure in printed
   edition.)



      MANUFACTURERS USED VENDORS,
      SUPPLIERS, CONSULTANTS, AND
      TRADE ASSOCIATIONS
--------------------------------------------------------- Letter :14.1

Manufacturers we interviewed identified several sources of technical
help they had used other than MEP and said they often had employed
more than one of them.  The most commonly used source of technical
assistance was the firm's own vendors and/or suppliers.  For example,
a manufacturer that puts the final coating on a variety of products
told us that whenever it has a problem with a coating not adhering to
the surface of the product it is treating, it contacts either its
equipment vendors or its raw material suppliers for help in solving
the problem.  Other sources of technical assistance included
consultants, manufacturing associations, customers, and even other
manufacturers. 


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

At the request of Chairwoman Constance A.  Morella of the
Subcommittee on Technology, House Committee on Science, we obtained
manufacturers' views regarding the impact of MEP services on their
business performance and the factors that affected the impact of MEP
services.  We did not verify either positive or negative impacts
reported by manufacturers.  In addition, we obtained the views of
other manufacturers with little or no MEP experience regarding the
reasons why they had made limited or no use of MEP services. 

To identify manufacturers that had used MEP services to survey
regarding the services' impact on their business performance and the
factors that had affected the services' impact, we (1) developed
criteria for the type of MEP our study would include, (2) located all
MEP that fit our criteria, and (3) asked these MEP for their
cooperation in supplying names of clients that met our survey
criteria (described in the following paragraphs). 

Since the term "MEP" could include a variety of programs and
organizations, we consulted MEP literature and MEP experts to develop
a set of criteria to use in identifying programs to include in our
study.  For the purpose of our study, we considered programs to be
relevant if their primary function was to provide direct technical
assistance to individual manufacturers, using program staff or
supervised consultants.  We defined technical assistance as one or
more of the following activities: 

  providing access to and encouraging use of innovative and/or off
     the shelf manufacturing technologies and processes;

  disseminating scientific, engineering, technical, and management
     information about manufacturing;

  providing access to industry-related expertise and capability in
     university research departments; and

  transferring advanced manufacturing (i.e., cutting edge)
     technologies and techniques to companies. 

Our definition excluded business assistance programs such as the
SBA's Small Business Development Centers; business incubators;\1

financial assistance, funding, and grant programs; joint research
ventures with universities and/or federal laboratories; on-line
technical database services; and industry networks. 

We located 80 MEP that met our criteria for inclusion and had been
established before 1994.\2 We used reports from the National
Governor's Association, the Northeast-Midwest Institute, and the
Battelle Memorial Institute that contained references to existing MEP
as the basis for identifying programs that would possibly fit our
criteria.  We confirmed and updated information in these reports by
conducting structured telephone interviews with all programs that we
believed matched our criteria.  We interviewed officials of a total
of 114 programs in 40 states.  Eighty of them met our criteria for
inclusion and had been established before January 1994. 

Fifty-seven\3 of the 80 MEP that qualified for our study supplied us
with the names of clients that met our survey criteria.  In an effort
to determine if the qualified programs that provided client
information differed from the qualified programs that did not, we
compared the two sets of programs on the basis of age, total funding,
federal funding, and type of administration.  The results of the
comparisons indicated that there were no significant differences
between MEP that did and did not provide client data. 

We asked the 57 participating MEP to select from their records all
manufacturers that met specific criteria that we developed in
consultation with MEP officials and MEP evaluation experts.  The
client had to meet the following criteria: 

  It had to be a manufacturing facility, which means that its
     products had to belong to one or more of the manufacturing
     categories in the Standard Industrial Classification (SIC)
     codes.\4 Our survey excluded nonmanufacturing facilities, such
     as service providers or farmers. 

  It had to have received at least 40 hours of MEP assistance\5 in
     1993.  Thus, when the facility received our survey in early
     1995, at least 1 year would have elapsed since the MEP
     assistance ended.  MEP evaluation experts have told us that 1
     year would have been sufficient time for facilities to be able
     to gauge the value of the assistance and its impact on their
     business performance.  Experts also have told us that 40 hours
     would have been enough assistance to have had a potential effect
     on a manufacturer's business performance. 

  It had to have completed assistance in one or more of the four
     categories defined below.  In cases in which a manufacturer
     completed more than one type of assistance, we asked the MEP
     official to choose the primary assistance provided to the
     manufacturer (i.e., the assistance requiring the most MEP time
     and/or resources). 

We did not verify the client information MEP provided against the
programs' records. 

The assistance categories we included in our survey were

Quality Improvement.  Technical assistance in planning, developing,
and implementing a quality system to help a manufacturer attain
higher quality standards. 

Equipment Modernization and Plant Layout.  The evaluation and
analysis of plant layout and equipment to determine the most
efficient means of manufacturing or assembly through reorganization
of the process flow through the facility, and/or upgrading,
reconfiguring, or replacing manufacturing equipment. 

Product Design and Development.  Services to support the creation,
enhancement, or marketing of a manufacturer's product. 

Environmental or Energy.  Assessment of hazardous materials,
discharge, waste products, energy use, and other environmental
effects within a manufacturing operation. 

We chose these four assistance categories because they share
important characteristics.  They are types of assistance that MEP
typically offer clients, so our survey potentially could include
clients from most MEP.  Also, the four types of assistance are
defined in a similar way by most MEP, according to MEP officials. 
Other MEP services (such as worker training and strategic business
planning) may vary considerably from one program to another. 
Finally, we selected types of assistance that are directed at
clients' manufacturing operations.  MEP clients receiving
operations-related assistance were able to tell us (1) their
expectations of how the assistance would affect their operations
and/or performance and (2) whether or not these expectations were
met.  Other types of MEP assistance--examples are material
engineering, electronic data exchange, and computer upgrading--have
effects on manufacturers' operations that are less visible and less
easily measured.  As a result, manufacturers may have difficulty
determining the expected and actual impact of these types of services
on their business operations and performance. 

We designed four questionnaires, each focusing on one assistance
category.  In designing our survey questions, we obtained input from
NIST and MEP officials, MEP evaluation experts, and managers at
manufacturing facilities.  We also reviewed client surveys that MEP
used. 

Each questionnaire contained identical questions to obtain background
information about the respondent and to obtain respondents' views on
the impact of MEP services on their business performance and the
factors affecting the impact of MEP services.  However, the four
surveys also had unique questions asking about the expected and
actual outcomes of the assistance, because each type of assistance
focuses on a different aspect of a manufacturer's operations.  We
tailored these questions to ask about the kind of impacts that
reasonably could be expected to result from the particular kind of
assistance received. 

As part of our survey development, we tested all four surveys with
manufacturers in Texas, Iowa, New York, and Kansas who had received
MEP assistance.  We also interviewed manufacturers who had received
MEP services in Maryland, Georgia, North Carolina, and South
Carolina.  MEP directors in those states had agreed to arrange for us
to meet selected clients.  We asked the manufacturers about their
experiences with MEP services and the impact of those services on
their business performance. 

Our final surveys initially were mailed to a total of 843
manufacturers during the months of February 1995 through March 1995. 
Follow-up mailings were made through May 1995.  Each manufacturer was
sent one survey, based on MEP information on the primary type of
service the manufacturer had received. 

The primary reason manufacturers did not respond to our survey was
their inability to recall MEP assistance they had received.  We wrote
letters asking the nonrespondents why they did not return our survey. 
We received responses from 60 companies out of 274 nonrespondents. 
About one-third told us that no one at their facility could recall
the assistance received in 1993 and/or that we had addressed the
survey to a person who no longer worked at the facility.  On the
basis of this information, in addition to other information provided
by our nonrespondents, we reduced our survey population from 843 to
766. 

We obtained an overall response rate of 72 percent across all four
surveys.  Response rates varied from a low of 63 percent for the
environmental/energy survey to a high of 76 percent for the quality
improvement survey. 

Our analysis of the companies that did and did not respond to our
survey found nothing to indicate that our results would have been
different if the nonrespondents had completed our questionnaire.  The
respondents and nonrespondents were similarly distributed across
different geographic locations and different MEP. 

To understand why other manufacturers had made limited or no use of
MEP services, we conducted telephone interviews with 200
manufacturers with little or no experience with MEP services.  Most
(an estimated 93 percent) of U.S.  small- and medium-sized
manufacturers have not received assistance from NIST-funded MEP,
according to available NIST data.  We used a commercial database to
identify manufacturers who

  had had little or no previous experience with MEP services;

  were in an area containing an MEP--they were selected from one of
     four SMSAs that contained MEP; and

  were in the same employment size range (20-300) and same four
     industries\6 as the majority of manufacturers that had responded
     to our questionnaire about MEP services. 

We telephoned manufacturers until we completed interviews with 50 in
each of the four SMSAs--Albany/Troy/Schenectady, NY; Atlanta, GA;
Kansas City, MO; and Los Angeles, CA.  In our interviews, we asked
these manufacturers why they had made little or no use of program
services and what resources besides MEP they used for modernization
assistance.  The results of these interviews were not generalizable
to all small- and medium-sized manufacturers. 

We performed our review in Washington, D.C.; Los Angeles; San
Francisco; and New York between March 1994 and July 1995 in
accordance with generally accepted government auditing standards. 

Since we did not evaluate the operations or management of specific
federal programs, we did not obtain agency comments on this report. 
However, on July 24, 1995, we discussed the facts presented in this
report with the Director of the NIST Manufacturing Extension
Partnership Program.  He agreed with the technical accuracy of the
report and offered minor clarifications which we incorporated into
this report. 


--------------------
\1 Incubator facilities provide office and lab space for start-up
companies at below-market rates.  Shared support services such as
clerical, reception, and data processing often are made available. 

\2 Since our survey focused on manufacturers receiving MEP services
in 1993 (for reasons explained in the text) we limited our study to
MEP that were operating before 1994. 

\3 Of the remaining 23 MEP, 7 were willing to provide client
information but did not have any clients meeting all of our survey
criteria.  Ten declined our request because of concerns over client
confidentiality, three never responded to our request, and three
others did not participate for other reasons. 

\4 The Standard Industrial Classification is the statistical
classification standard underlying all establishment-based federal
economic statistics classified by industry.  The classification
covers the entire field of economic activities and defines industries
in accordance with the composition and structure of the economy. 

\5 The 40 hours need not have been consecutive.  Assistance may have
been provided by MEP staff or by consultants affiliated with MEP.  In
cases involving consultants, MEP should have performed a case
management role. 

\6 These four industries were (1) fabricated metal products; (2)
industrial machinery and computer equipment; (3) rubber and plastic
products; and (4) electronic equipment and electrical equipment,
except computers. 


MAJOR CONTRIBUTORS TO THIS
BRIEFING REPORT
========================================================== Appendix II


   GENERAL GOVERNMENT DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:1

John R.  Schultz, Assistant Director
Susan Westin, Assistant Director
Stuart Kaufman, Senior Social Science Analyst
Barbara Keller, Senior Evaluator
Keith Steck, Evaluator


   LOS ANGELES FIELD OFFICE
-------------------------------------------------------- Appendix II:2

Amy Finkelstein, Evaluator-in-Charge


   SAN FRANCISCO FIELD OFFICE
-------------------------------------------------------- Appendix II:3

Raymond Hendren, Evaluator


   NEW YORK FIELD OFFICE
-------------------------------------------------------- Appendix II:4

Preeti Jain, Senior Evaluator

