Manufacturing Extension Partnership Program: An Overview

Prepared for Members and Committees of Congress

A program of regional centers to assist small and medium-sized manufacturing companies use
knowledge and technologies developed under the auspices of the National Institute of Standards
and Technology (NIST) was created by P.L. 100-418. The Hollings Manufacturing Extension
Partnership (MEP) has centers in all 50 states and Puerto Rico that provide technical and
managerial assistance to firms. Federal funding is matched by non-federal sources. Funding
increased until FY1999, when support declined reflecting a decrease in the federal portion of
financing from one-half to one-third as individual centers operated longer than six years. Through
FY2004, funding remained fairly constant despite the Administration’s FY2003 budget that
proposed an 88% reduction in support such that MEP centers “with more than six years’
experience operate without federal contribution.” Financing was cut 63% in FY2004, but restored
in FY2005. The President’s FY2006, FY2007, and FY2008 budgets again proposed funding
reductions; however in FY2006 MEP received $104.6 million, $104.6 million in FY2007, and
$89.6 million in FY2008 (14.4% less than the FY2007 figure). The President’s FY2009 budget
request (as amended) includes $2 million to close out the federally funded portion of the program.
The FY2009 appropriations bill ordered reported from the House Committee on Appropriations
would fund MEP at $122 million, while S. 3182, as reported from the Senate Committee on
Appropriations, would provide $110 million. P.L. 110-69, the America COMPETES Act,
authorizes funding for MEP through 2010 and creates several new manufacturing R&D programs.

Backgr ound ..................................................................................................................................... 1
The Program....................................................................................................................................1
Funding ........................................................................................................................ .................... 2
Evaluations of the Manufacturing Extension Partnership...............................................................3
Issues and Concerns........................................................................................................................4
Author Contact Information............................................................................................................6

The trade debate in the mid-1980s, which ultimately resulted in passage of the Omnibus Trade
and Competitiveness Act, P.L. 100-418, underscored the critical role of technological advance in
the competitiveness of individual firms and in long-term national economic growth and
productivity. Reflecting these and other ideas, legislation established a public-private program to
assist smaller, U.S.-based manufacturing firms in identifying and adopting new technologies. The
focus on small and medium-sized companies derived from their perceived contribution to job
creation, innovation, and manufacturing. Research has shown that businesses of fewer than 500
employees are about 2.5 times as innovative per employee as large firms. The 341,000 firms that
fit this category represent over 99% of the nation’s manufacturing enterprises, employ over 10 1
million people, and account for 70% of total U.S. manufacturing employment.
The improved use of technology by small and medium-sized businesses is seen as important to
the competitiveness of American manufacturing firms. How a product is designed and produced
often determines costs, quality, and reliability. Lack of attention to process technologies and
techniques may be the result of various factors, including finances, absence of information,
equipment shortages, and/or undervaluation of the benefits of technology. The purpose of the
centers program is to address these issues through outreach and the application of expertise,
technologies, and knowledge developed within the manufacturing research activities of the
federal government, particularly the National Institute of Standards and Technology (NIST).

P.L. 100-418 mandated that NIST, a laboratory of the Department of Commerce, create a program
based on regional centers to assist companies in adopting and adapting new technologies and
manufacturing techniques generated by the federal agencies in pursuit of their various missions.
The transfer of public sector expertise and technology suited to individual requirements of firms
is to be accomplished through a “manufacturing extension” system. Federal funding is offered on
a competitive basis to nonprofit, state, or local organizations for development and management of
the centers. Government financing was initially limited to six years, a provision temporarily
suspended by the FY1997 and FY1998 appropriations acts, and eliminated by P.L. 105-309. Non-
federal sources are required to provide 50% or more of each center’s capital and costs through
matched dollars, fees for service collected, and/or industry contributions. After six years, federal
funding may be provided at no more than one-third of these costs if the center has received a
positive, independent evaluation.
Centers were selected in response to open and competitive solicitations and are merit based.
According to NIST, the selection criteria include “knowledge of target firms in the proposed
region; linkages to sources of technology; technology delivery mechanisms; and management and
financial plans.” The sponsor, locally based, is expected to provide expertise reflecting the needs
of the business community and the type of industries in that region. No direct financial support is

1 Manufacturing Extension Partnership, Making A Difference For America’s Manufacturers, available online at

available for companies; the program offers only technical and managerial assistance that is
generally reimbursable on a sliding scale.
The original regional centers program expanded in 1994, creating the Manufacturing Extension
Partnership (MEP). There are now centers in all 50 states and Puerto Rico. Since the program was
established 1989, awards have resulted in the creation of approximately 350 offices. NIST also
took over support of the 36 extension centers originally funded by the Department of Defense
through the Technology Reinvestment Project, which was terminated in FY1994.
Centers offer expertise, needs evaluation, application demonstrations for new production
technologies, training, and information dissemination. Larger, regional organizations use federal,
university, and private sector technologies, knowledge, and skills in providing improved
manufacturing techniques designed to increase efficiency and quality and to decrease costs. They
also can furnish individual project engineering, help in selecting and employing software and
equipment, factory assessments, and provide on-site assistance with new technologies.
Managerial, financial, and marketing services are accessible. No new R&D is conducted by the
centers, which only use technologies available elsewhere in the network. One center may have
several field offices to provide support to a broader population. Generally these programs are
associated with operating technical or training institutions such as community or technical
colleges, vocational institutions, university manufacturing programs, or state technical assistance
efforts. They are located in areas of the country where there is less industrial concentration and
serve companies out of range of the larger programs.
The Partnership leverages existing resources—whether from government, business, or academia.
It does not attempt to supplant the private sector. The program endeavors to build on existing
state and local activities and industrial extension efforts. According to NIST, cooperative efforts
involve other federal agencies, the National Association of State Development Agencies, the State
Science and Technology Institute, the National Association of Manufacturers, and various
universities and community colleges.
The America COMPETES Act, P.L. 110-69, creates and authorizes funding for several new
manufacturing programs including collaborative manufacturing research pilot grants, a
manufacturing fellowship program, and a manufacturing research database. The report to
accompany S. 3182, the FY2009 appropriations bill, calls for the establishment of a new Strategic
Measurement Partnerships program “... to facilitate cost-shared collaborative research
partnerships and alliances with institutions of higher education that are focused on developing
next generation measurements and standards.”

Initial appropriations for NIST manufacturing extension programs totaled $12.5 million for
FY1989 and FY1990. Further funding included $11.9 million in FY1991, $15.1 million in
FY1992, and $16.9 million in FY1993. In FY1994, the State Technology Extension Program was
combined with the centers’ activity to create the Manufacturing Extension Partnership.
Appropriations for the larger effort totaled $30.3 million. Funding for FY1995 was $90.6 million
and included a new program, LINKS, to network federal, state, and local agencies, the private
sector, and the manufacturing outreach institutions through communications and data systems.
However, $16.3 million of this amount was rescinded. MEP was provided with $80 million for
FY1996 and P.L. 104-208 provided $95 million for FY1997 while temporarily removing the six-

year time limit for federal support of the individual centers. For FY1998, $113.5 million was
appropriated while the following year MEP was funded at $106.8 million, which reflected a
decrease in the federal share of support as the centers matured. P.L. 105-309 ended the six-year
restriction on federal funding if a positive evaluation through an independent review is received at
least every two years. Federal financing is limited to no more than one-third of the annual
operating and maintenance costs of the center. For FY2000, the Partnership was financed at
$104.2 million (after a mandated rescission) and $105.1 million was appropriated for FY2001. In
FY2002, MEP received $106.5 million in funding.
The Administration’s FY2003 request of $12.9 million for the Partnership reflected the
recommendation that centers in operation for more than six years no longer receive federal
support. However, $105.9 million was appropriated that year (after mandated rescissions). The
following year, the President’s FY2004 budget again included a significant reduction in support
for the extension program and only $38.7 million was appropriated (after mandated rescissions).
Funding increased to $107.5 million in FY2005 (after mandated rescissions). While the
Administration’s FY2006 and FY2007 budgets included substantial decreases in financing for
MEP, Congress appropriated $104.6 million (after mandated rescissions) in FY2006 and $104.6
million in FY2007.
The President’s FY2008 budget proposal included $46.3 million for MEP, 56% below the
FY2007 figure. The initial FY2008 appropriations bill that passed the House, H.R. 3093, would
have increased funding 3.9% to $108.8 million. The version of H.R. 3093 passed by the Senate
would have provided $110 million, a 5.1% increase over FY2007. The final FY2008
appropriations legislation, P.L. 110-161, funds the Partnership at $89.6 million, 14.4% below the
previous fiscal year.
The Administration’s amended FY2009 budget request provides $2 million to close out the
federally funded portion of the Manufacturing Extension Partnership program. The FY2009
appropriations bill ordered reported from the House Committee on Appropriations would finance
MEP at $122 million, 36.2% above the current fiscal year, while S. 3182, as reported from the
Senate Committee on Appropriations, increases support 22.8% to $110 million.

In an August 1995 briefing paper, the General Accounting Office (GAO)explored how small and
medium-sized firms were served by various manufacturing extension efforts, including the MEP
program (Manufacturing Extension Programs, Manufacturers’ Views of Services). Of the 551
responses (to 766 questionnaires distributed), approximately 73% found that their relationships
with an extension activity had a positive effect on the company’s business performance. Fifteen
percent indicated that there was no effect at all. Among the impacts identified were improved use
of technology (63%), better product quality (61%), and expanded productivity (56%). According
to GAO, this suggested that manufacturing extension activities “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.” The
study also found that companies which used internal funding to implement recommendations
offered by extension programs were the most likely to find an overall positive impact.
“Significantly, approximately 97 percent of [these respondents] ... said that they believed that this

investment had been worthwhile.” Those who utilized these organizations noted that practical
experience in the field contributed to the success of staff activities, as did the affordability of the
assistance. Companies that did not utilize the resources provided by the MEP tended to be those
that were unaware of the program and the opportunities associated with it.
Further refining this information in a March 1996 report, Manufacturing Extension Programs,
Manufacturers’ Views about Delivery and Impact of Services, GAO also noted that company size
and age were significant factors in business perceptions the extension program. Smaller (under $1
million gross sales) and newer (established after 1985) firms “were most likely to report that their
overall business performance was boosted by MEP assistance.” While there were no real
differences in perception between extension services offered by NIST and those funded by other
institutions, there was a difference in assessments of effectiveness based on whether or not
payment was required. According to GAO, those firms that paid fees “were half as likely as those
that paid no fees to credit the assistance for having an extremely positive impact, as opposed to a
generally positive impact, on their business performance.”
According to NIST, MEP centers have responded to more than 310,000 requests for assistance 2
since the program’s inception. Regular reporting is required of the centers, covering the number
and type of projects undertaken. Centers also are mandated to collect information that may
provide indicators of longer-term results, including changes in sales, financial investments,
inventory reduction, savings in labor and materials, and jobs created or saved. The latest survey
of clients using the centers during FY2005 found that the 4,726 companies responding indicated
that 53,000 jobs were retained or created, $6.3 billion in sales were increased or retained, and 3
$2.2 billion in new private sector investment was placed in plant modernization and training.
The National Academy of Public Administration also studied the MEP program and found that
while “on balance ... the MEP Program performs capably and effectively and that the core
premise ... remains viable as it is fulfilling its mission by leveraging both public and private
resources to assist the nation’s small manufacturers,” there should be consideration of a
“fundamental change in the mix of the types of services it provides as well as the structures for 4
delivering them.... ” As such, a Next Generation Strategic Plan has been developed by the
Partnership to concentrate on not just the shop floor but on “the entire enterprise and its position
in the marketplace.” In addition to individual manufacturing firms, MEP “must focus on 5
industry/supply chain requirements as well as overall economic development trends.”

The Manufacturing Extension Partnership has, at times, been included in the discussion
surrounding termination of government programs that provide direct federal support for industry. th
Beginning in the 104 Congress, questions have been raised as to the appropriateness of

2 Making a Difference for America’s Manufacturers.
3 Manufacturing Extension Partnership, Delivering Measurable Returns to Its Clients, Fiscal Year 2005 Results,
available at
4 National Academy of Public Administration, The Manufacturing Extension Partnership Program, Report 2,
Alternative Business Models, May 2004, available at
5 Manufacturing Extension Partnership, Next Generation Strategic Plan, available at

government funding for this program when the technologies are available in the marketplace.
Instead of the government picking “winners and losers,” opponents argue, the marketplace should
make decisions regarding firms worthy of investment. However, proponents of the program stress
that no direct funding is available to companies through MEP and that assistance is technical,
scientific, and/or managerial. The Centers facilitate the adoption of new technologies that foster
competition and promote innovation.
Congress continues to explore the issue of manufacturing extension within the context of federal
support for research and development. Until FY2004, despite some opposition to the
Manufacturing Extension Partnership, there had been continued and generally increased funding
for the program. The lower level of appropriations for FY1999 and FY2000 reflected a decrease
in the federal portion of center financing as the programs surpass the original six-year funding
limit, not declining congressional support for the activity. The ongoing involvement and financial
backing of state and local organizations may indicate additional, widespread commitment to a
program designed to expand private sector use of manufacturing technologies already funded by
the government and developed by the agencies in response to their mission requirements. While
the Administration’s budget proposals continued to call for substantial reductions in support for
MEP, with the exception of FY2004, the Congress had appropriated full funding for the centers
program. However, in FY2008 support fell 14.4% from the previous fiscal year. The
Administration’s FY2009 budget request recommends terminating federal funding for the
program, while the bill ordered reported from the House Committee on Appropriations and S.
3182 as reported from the Senate Committees on Appropriations contain large increases in MEP
In the current Congress, the America COMPETES Act created and authorized financial support
for a new program of partnerships between industry and other educational or research institutions
to develop new manufacturing processes, techniques, or materials. In addition, a manufacturing
fellowship program would be created with stipends available for post-doctoral work at NIST.
These activities differ from the established MEP effort where no new manufacturing research is
conducted as existing manufacturing technology is applied to the needs of small and medium-
sized firms.
The issue of the statutory six-year limitation on government financing of individual centers was
addressed by the Technology Administration Act of 1998 (P.L. 105-309). Yet, questions still
remain, particularly in light of efforts by the Administration and past efforts by the House to
reduce federal support for the centers. The original intent of the funding restriction was to
encourage the centers to be self-supporting. That does not appear to be feasible at the current
time. Does this mean the centers are not providing the help that companies are willing to pay for
or are reimbursements too costly for the small firms the program is intended to assist? What
increased role might state and local government play in supporting centers? And is it possible to
attract more resources from industrial providers of new manufacturing technologies and
techniques? These and other issues may be considered within the context of future government
funding for the Manufacturing Extension Partnership and overall federal support for research and

Wendy H. Schacht
Specialist in Science and Technology Policy, 7-7066