The Manufacturing Extension Partnership Program

Summary

The Hollings Manufacturing Extension Partnership (MEP) program is a national network of centers established by the Omnibus Trade and Competitiveness Act (P.L. 100-418). MEP centers provide custom services to small and medium-sized manufacturers (SMMs) to improve production processes, upgrade technological capabilities, and facilitate product innovation. Operating under the auspices of the National Institute of Standards and Technology (NIST), the MEP system includes centers in all 50 states and Puerto Rico.

The MEP program received $130.0 million in appropriations for FY2016, equal to its FY2015 level and $11 million less than the President’s request. NIST provides funding to support center operations, with matching funds provided by nonfederal sources (e.g., state governments, fees for services). Initially established with a goal of transferring technology developed in federal laboratories to SMMs, MEP shifted its focus in the early 1990s to responding to needs identified by SMMs, including off-the-shelf technologies and business advice. As MEP evolved, its focus shifted to reducing manufacturing costs through lean production, quality, and other programs targeting plant efficiencies and to increasing profitability through growth. Current MEP efforts focus on innovation strategies, commercialization, lean production, process improvements, workforce training, supply chain optimization, and exporting.

In 2014, MEP began a system-wide revamp intended to align center funding levels more closely with the national distribution of manufacturing activity; allow a federal cost-share of up to 50% for the first three years of each center’s new cooperative agreement; and result in a single center in each state and Puerto Rico. Other objectives include aligning center activities to the NIST MEP strategic plan; aligning center activities with state and local strategies; providing opportunities for new partnering arrangements; and restructuring and reinvigorating the boards of local centers.

The MEP program has, at times, been included in discussions surrounding termination of federal programs that provide direct support for industry. Proponents assert that SMMs play a central role in the U.S. economy and that the MEP system provides information and assistance not otherwise available to SMMs. Some opponents have asserted that such services are available from other sources and that MEP inappropriately shifts a portion of the costs of these services to taxpayers.

Continued federal support for MEP centers remains a point of contention. As conceived, the centers were intended to become self-supporting after six years. The original legislation provided for a 50% federal cost-share for the first three years of operation, followed by declining levels of federal support for the final three years. Federal funding after a center’s sixth year of operation was prohibited. In 1998, Congress eliminated the prohibition on federal funding after year six. Invoking the intent of the original legislation, the George W. Bush Administration proposed in its FY2009 budget to eliminate federal funding for MEP and to provide for “the orderly change of MEP centers to a self-supporting basis.” Congress has continued to appropriate funding for MEP.

A related issue is the level of the federal cost-share for the centers. Currently, centers may receive a 50% federal cost-share in their first three years of operation, a 40% cost-share in year four, and a one-third cost-share in their fifth and subsequent years. Some MEP advocates would like the federal government to provide up to 50% of center costs, regardless of how many years a center has been in operation, to allow centers to reach SMMs they might not otherwise be able to serve. The ongoing system-wide competition of the centers will essentially reset the clock, allowing centers to receive a 50% cost-share for the first three years of their new cooperative agreements.

As Congress makes appropriation decisions, it may continue to discuss support for MEP in the context of the federal government’s role in facilitating technological advancement and bolstering innovation and competitiveness.