2004 Finalist
Winners:
U.S. Department of Commerce
2004
Publication:
Innovations in American Government Award
Sponsored By:
Innovations in American Government Awards
Jurisdiction:
Federal
When asked to describe the nation's manufacturing sector, many Americans tend to think of goliaths like U.S. Steel or the Detroit auto industry, not realizing that the majority of factory jobs in this country are in small firms. Ninety-eight percent of the nation's manufacturers have fewer than 500 employees, accounting for around two-thirds of U.S. manufacturing employment.
 
While this strength of small business is an asset closely linked to the American entrepreneurial instinct, it comes with its own disadvantages; small manufacturers are 60% less productive on average than larger companies.
 
The reasons for this gap are numerous. Large firms have sophisticated internal mechanisms for evaluating new processes and technologies, and the resources to both hire external consulting help when needed and act on their recommendations. Small companies have none of these resources, all of which are essential to maintain a competitive edge over foreign trade rivals in an increasingly global economy.
 
Recognizing the need for coordinated information and advice across the manufacturing sector, in 1988 the U.S. Department of Commerce created the Manufacturing Extension Partnership (MEP). While the program was started in large part to upgrade the technological apparatus of defense contractors and other large concerns, MEP officials soon realized that the average small factory was working in isolation with few resources, and needed their help to become "state of the industry," let alone "state of the art."
 
To improve this situation, the program links federal, state, and local resources to put 2,000 manufacturing and business specialists on the floor of small manufacturing plants. These specialists travel to plants and work one-on-one with firm management to tackle challenges of productivity, competition, and efficiency.
 
The group has established a broad network of 59 manufacturing extension centers throughout the U.S. and Puerto Rico, independent non-profit organizations that receive federal and state funding. Originally, MEP centers focused on transferring technology from federal labs to relevant industries; now they also offer technical and consulting expertise to businesses for a below-market rate.
 
Each year, each center's performance is measured and adjusted, through parameters like savings to the companies involved, jobs created, and increased sales. Since 1995, over 90,000 companies have used the service, and over three-quarters of them have reported that their consultation through a MEP center noticeably improved their productivity.
 
The program has not been without controversy. Conservative think tanks like the Cato Institute have called the program "corporate welfare," claiming it distorts private-sector consulting activity. Nevertheless, governmental groups from the National Governors Association to the Senate Task Force on Manufacturing have endorsed the program repeatedly. One of the most appealing aspects of the program across jurisdictional boundaries is the way in which it applies private-sector innovations in information-sharing networks to industry through a public partnership.
 
Unlike other programs in which the federal government acts as the director of state policies, the MEP centers are geared towards horizontal diffusion of information, rather than vertical command. Similar approaches had been applied for agricultural research in the past, but never for small manufacturing-a vital, yet often neglected, sector of the American economy in the 21st century.