Most of the $608.3 Million NIST Spent on the MEP Program in Fiscal Years 2009 through 2013 Directly Supported MEP Centers

NIST spent $608.3 million in federal funding on the MEP program in fiscal  years 2009 through 2013 and used most of these funds to directly support  MEP centers and their work with manufacturing firms. NIST spent $78 million for contracts, and for NIST staff salaries and  benefits, some of which NIST considers direct support and some  administrative spending. The remaining $35.7 million was spent for  agency-wide overhead charges and travel, training, performance awards,  and other items, all of which NIST considers administrative spending. NIST defines direct support as spending that directly supports the MEP  center system’s work with manufacturing firms, such as awards to centers  or spending on training for MEP center staff. NIST considers all other  spending to be administrative, including spending on performance  evaluations of centers and on agency-wide overhead charges that pay for  facilities operations and maintenance at the NIST campus. NIST is not required to track, and historically has not tracked,  administrative spending, but NIST officials told us the agency developed  its definitions of direct support and administrative spending in fiscal year  2013 in response to congressional interest. It then conducted an analysis  of fiscal year 2013 federal MEP program spending using those definitions. NIST estimated that about 88.5 percent of federal MEP program spending  in fiscal year 2013 was for direct support, and the remaining 11.5 percent  was administrative. NIST’s Cooperative Agreement Award Spending Is Inconsistent with Beneficiary Equity

NIST’s spending on cooperative agreement awards is based on the  historical amount awarded to each center when it was established. This  took into account each center’s identification of target manufacturing firms  in its service area—including characteristics such as business size,  industry types, product mix, and technology requirements—and its costs  of providing services to those manufacturing firms. However, because  NIST made the awards on an incremental basis to individual centers  serving different areas over a period of more than 15 years, NIST’s  awards to individual centers did not take into account variations across  different service areas in the demand for program services—a function of  the number and characteristics of target manufacturing firms—or  variations across different service areas in costs of providing services. NIST’s cooperative agreement award spending is, therefore, inconsistent   This standard—which is commonly  with the beneficiary equity standard.used in social science research to design and evaluate funding  formulas—calls for funds to be distributed in a way that takes these  variations into account so that centers can provide the same level of  services to each target manufacturing firm, according to its needs. NIST officials told us that an analysis they  recently conducted showed a wide variation across centers in the  relationship between their cooperative agreement award amounts and the  number of target manufacturing firms in their service areas. NIST officials  told us they are exploring ways to revise NIST’s cooperative agreement  award spending to take into account variations across service areas in  the number of target manufacturing firms, among other factors. The officials discussed various options they are considering, but they did  not identify an option they had agreed to implement or a timeline for  decision making and implementation. Conclusions

Manufacturing plays a key role in the U.S. economy, and NIST has  established a nationwide system of MEP centers dedicated to supporting  and strengthening the U.S. manufacturing base. However, because  NIST’s cooperative agreement award spending does not take into  account variations across service areas in the demand for program  services—a function of the number and characteristics of target  manufacturing firms—or variations in MEP centers’ costs of providing  services, centers may not be able to provide the same level of services to  each target manufacturing firm, according to its needs. Recommendation for Executive Action

To ensure that NIST’s spending on cooperative agreement awards to  MEP centers is more equitable to manufacturing firms in different service  areas, we recommend that the Secretary of Commerce revise the  program’s cooperative agreement award spending to account for  variations across service areas in:  the demand for program services—a function of the number and  characteristics of target manufacturing firms—and
MEP centers’ costs of providing services. Agency Comments

We provided a draft of this report to the Department of Commerce’s NIST  for review and comment.
Why GAO Did This Study

Manufacturing plays a key role in the U.S. economy. Congress established the MEP program in NIST in 1988. The program's objectives are to enhance productivity and technological performance and to strengthen the global competitiveness of target manufacturing firms, namely small and medium-sized U.S.-based firms. Under this program, NIST partners with 60 nonfederal organizations called MEP centers. The centers, located in 50 states and Puerto Rico, help target firms develop new customers and expand capacity, among other things. NIST awards federal funding to centers under annually renewed cooperative agreements, subject to the centers providing matching funds and receiving a positive performance evaluation.
The Consolidated and Further Continuing Appropriations Act, 2013, mandated GAO to report on MEP program administrative efficiency, which relates to funding provided to centers. This report (1) describes, over the past 5 years, how NIST spent federal MEP program funds and (2) examines the basis for NIST's cooperative agreement award spending. To conduct this work, GAO analyzed obligations data, reviewed relevant legislation and policies, and interviewed NIST officials.

What GAO Found

Of the approximately $608 million spent by the Department of Commerce's (Commerce) National Institute of Standards and Technology (NIST) in fiscal years 2009 through 2013 on the Manufacturing Extension Partnership (MEP) program, NIST used most of the funds to directly support MEP centers. Specifically, NIST spent about $495 million on awards to centers and spent the rest on contracts, staff, agency-wide overhead charges, and other items, some of which NIST considered direct support and some of which NIST considered administrative spending. Although NIST is not required to track, and has not historically tracked, administrative spending, NIST officials told GAO the agency developed definitions of direct support and administrative spending in fiscal year 2013 in response to congressional interest, then conducted an analysis of fiscal year 2013 federal MEP program spending using those definitions. NIST defines direct support spending as spending that directly supports the MEP center system's work with manufacturing firms, such as awards to centers or contracts to train MEP center staff on how to quickly assess innovative ideas for new products. NIST considers all other spending to be administrative, including spending on performance evaluations for MEP centers or on agency-wide overhead fees that pay for facilities operations and maintenance at the NIST campus. Using these definitions, NIST estimated that about 88.5 percent of federal MEP program spending in fiscal year 2013 was for direct support, and the remaining 11.5 percent was for administration.
NIST's spending on cooperative agreement awards is based on the historical amount awarded to each center when it was established. This took into account each center's identification of target manufacturing firms in its service area—including characteristics such as business size, industry types, product mix, and technology requirements—and its costs of providing services to those firms. However, because NIST made the awards on an incremental basis to individual centers serving different areas over a period of more than 15 years, NIST's awards did not take into account variations across service areas in the demand for program services—a function of the number and characteristics of target firms—or variations across service areas in costs of providing services. NIST's cooperative agreement award spending is, therefore, inconsistent with the beneficiary equity standard. This standard—commonly used to design and evaluate funding formulas—calls for funds to be distributed in a way that takes these variations into account so that centers can provide the same level of services to each target manufacturing firm, according to its needs. Because NIST did not account for these variations across service areas, NIST's cooperative agreement award spending may not allow centers to provide the same level of services to target manufacturing firms, according to their needs. NIST officials told GAO that an analysis they recently conducted showed wide variation across centers in the relationship between their cooperative agreement award amounts and the number of target manufacturing firms in their service areas. NIST officials told GAO they are exploring ways to revise NIST's cooperative agreement award spending to take into account variations across service areas in the number of target manufacturing firms, among other factors. The officials discussed various options they are considering, but they did not identify an option they had agreed to implement or a timeline for decision making and implementation.

What GAO Recommends

GAO recommends that Commerce's spending on cooperative agreement awards be revised to account for variations across service areas in demand for program services and in MEP centers' costs of providing services. Commerce agreed with GAO's recommendation.