Look Who’s Touting a 3,200 Percent Return on Investment: The Commerce Department

Thumbing through the proposed 2012 Federal budget I noticed $143 million earmarked for the Hollings Manufacturing Extension Partnership — a relatively unsung arm of the Commerce Department’s National Institute of Standards and Technology. “M-E-P,” as it’s called, was created in 1988 to assist companies with fewer than 500 workers tap a nationwide network of public and private resources attuned to growth, cost cutting and innovation.

The results sound stunning. On average, Commerce claims, every dollar the federal government earmarks for MEP generates $32 in new sales growth – a 3,200 percent return, or $3.6 billion in new sales annually. What’s more, a miniscule investment of $1,570 creates or retains a job.

Could it really be true, I wondered, that 45 bureaucrats on the federal payroll in Gaithersburg, Maryland, leveraging 1,400 experts nationwide, help thousands of companies generate returns that venture capitalists drool over?

Skeptical about self-serving government data, I checked out Delivering Measurable Results to Manufacturing Clients for more detail. That’s where Commerce explains how it arrives at such a stunning claim. Short answer, it’s what companies report so I’d expect that numbers were tweaked favorably but otherwise credible. Since 1996, MEP has asked client companies to quantify results of collaboration in a survey conducted by Turner Marketing Inc., an outside market research firm. Six months after local centers complete assignments, companies answer a dozen questions about resulting sales, investment and cost savings.

In 2010, 7,786 companies reported on the payoff of MEP programs completed during 2009. Return calculations were based on those replies. And there was more. Reportedly, programs led also to:

* Creating and retaining more than 72,000 jobs;

* Helping firms increase and retain sales by over $8.4 billion;

* Leveraging nearly $1.9 billion in new private sector investment;

* Generating cost savings of over $1.3 billion.

For companies too small to leverage economies of scale or hire blue-chip consulting services, MEP furnishes a low-cost “human and digital portal” to resources in every department of the federal government including commerce, labor, environment, finance and countless executive and legislative agencies at all levels, says deputy director Aimee Dobrzenieki. Local MEP agendas vary, she says, but all are keyed to help clients attack two overarching questions:

* Do you need to identify ways to cut costs, increase productivity and improve quality through lean manufacturing?

* Do you want to grow your business, add sales, products and new markets and link up with technology resources?

At Ossagian Canoes in Lebanon, Missouri, the prohibitive cost of shipping finished aluminum canoes once ruled out exports. But as USA Today has reported, MEP opened a door to foreign partnerships. Ossagian linked up with a Danish manufacturer that assembles and sells the canoes in Europe, an arrangement that now rings up 15 percent of the canoe-maker’s sales.

Under price pressure from global rivals, Accurate Screw Machine Products (ASM) in Fairfield, New Jersey has attributed $250,000 in cost savings and $500,000 in retained sales to NJMEP in 2010, allowing it to remain open with 90 employees. How? By educating frontline employees on the merits of a lean manufacturing operation with state money that MEP helped ASM obtain.

The list goes on, much but not all of it related to coping with overseas competition. All told since its launch, MEP has completed more than 430,000 engagements at small and mid-sized companies to make them more competitive. The service is not free, but leveraging government resources keeps costs low. The meter starts after an assessment of manufacturing and business operations shows that a project can yield benefits. Companies and local centers negotiate a price tag based on a company’s means and expected benefits, usually somewhere between a couple of thousand dollars and $50,000, and more often at the lower end of the range. It’s enough so that firms with skin in the game demand services they value and see them through to completion.

Not every outing chalks up stellar returns. But, according to the latest survey, two of every three MEP protégés would recommend MEP to other companies. If MEP is big government at work, maybe small business needs more of it.