Part of EDA’s mission is to support economic development by promoting  innovation, global competitiveness, and regional collaboration. EDA Has Taken A Number of Steps to Implement the ITM Program, but Key Tasks Remain Before Loan Guarantees Can Be Issued

Since our 2013 report on the ITM program, EDA has made progress on  implementing the program, but several key tasks remain to be completed  before EDA can issue loan guarantees. As of November 2015, key tasks remain in developing the program, and  EDA officials expect they could begin issuing loan guarantees for the ITM  program as early as July 2016. EDA officials stated that the most  significant of the remaining key tasks are finalizing the ITM program  regulations, manuals, and forms. EDA Has Coordinated with Other Agencies on Some Issues, but Has Not Clearly Differentiated ITM from Other Programs

EDA has coordinated with other federal agencies to learn from their  experiences with loan guarantee programs, but as currently designed,  EDA has not clearly differentiated the ITM program from other  comparable programs that we identified. EDA officials said they reached out to officials from SBA, USDA, and  DOE—agencies that have loan guarantee programs comparable to the  ITM program—to learn from their experiences and identify practices that  could be incorporated into the ITM program. Based on what they learned, EDA officials said they decided to  largely model the ITM program after the 7(a) program. EDA’s coordination with other agencies has helped avoid duplication of  the effort those agencies have already expended in designing loan  guarantee programs. SBA’s 7(a)  program, USDA’s Business and Industry Loans program, USDA’s  Biorefinery, Renewable Chemical, and Biobased Product Manufacturing  Assistance program, and DOE’s Federal Loan Guarantees for Innovative  Energy Technologies program already provide loan guarantees to a  similar pool of borrowers as those eligible for the ITM program, with  roughly equivalent limitations. As required by COMPETES 2010, small and medium- sized manufacturers are to be eligible for the ITM program. EDA officials acknowledged that the ITM program is potentially  duplicative with other federal loan guarantee programs in a number of  respects. However, as  discussed, COMPETES 2010 directs the Secretary of Commerce to  ensure, to the maximum extent practicable, that the activities carried out  under the ITM program are coordinated with, and do not duplicate, the  efforts of other federal loan guarantee programs. GAO’s fragmentation,  overlap, and duplication analysis guide states that one way to help  minimize duplication among government programs is to identify and  target service gaps that the programs could fill. A 2011  study commissioned by MEP about the capital access needs of small and  medium-sized manufacturers identified several capital access gaps  resulting in potentially underserved populations for federal loan  guarantees. Coordinating more  extensively on targeting marketing materials and outreach efforts to  potential applicants in need of access to capital could give EDA greater  assurance that ITM program loan guarantees will not duplicate the efforts  of other federal loan guarantee programs. COMPETES 2010 directed the establishment of the ITM program to help  small and medium-sized manufacturers gain access to the capital they  need for the use or production of innovative technologies. Working with SBA and NIST to examine how the  ITM program could fill capital access gaps not filled by other federal  programs, and then marketing the program to target those gaps could  help EDA ensure, as COMPETES 2010 directs, that ITM program  activities do not duplicate the efforts of other federal loan guarantee  programs. Recommendation for Executive Action

To better ensure that the activities carried out under the ITM program do  not duplicate the efforts of other federal loan guarantee programs, such  as SBA’s 7(a) program, the Secretary of Commerce should direct EDA to  work with SBA and NIST to further identify any gaps in capital access that  may be present that the program could fill, and then develop marketing  materials and conduct outreach to help target those gaps. Agency Comments and Our Evaluation

We provided a draft of this report for review and comment to the  Secretaries of Agriculture, Commerce, and Energy; Director of the Office  of Management and Budget; and Administrator of the Small Business  Administration.
Why GAO Did This Study

To help small and medium-sized manufacturers obtain the capital they need to develop innovative technologies and remain competitive, COMPETES 2010 directed the Secretary of Commerce to establish the ITM program. When implemented, the program is to provide loan guarantees to small and medium-sized manufacturers for the use or production of innovative technologies. Under COMPETES 2010, Commerce must ensure that activities carried out under the ITM program do not duplicate the efforts of other federal loan guarantee programs. Commerce's EDA is responsible for implementing the program.
COMPETES 2010 also included a provision for GAO to biennially review the program. This report assesses (1) the status of EDA's implementation of the ITM program and (2) the extent to which EDA has coordinated with other agencies to ensure that ITM program activities do not duplicate the efforts of other federal loan guarantee programs. GAO analyzed applicable laws and program documents, interviewed EDA officials and contractor staff, and interviewed officials from agencies with comparable loan guarantee programs or with other expertise about the needs of small and medium-sized manufacturers.

What GAO Found

The Department of Commerce's Economic Development Administration (EDA) has taken a number of steps to implement the Federal Loan Guarantees for Innovative Technologies in Manufacturing (ITM) program, but several key tasks remain before EDA can issue loan guarantees. EDA hired a contractor to assist with developing the program, drafted program documents and published them in the Federal Register for comment, and submitted documents to the Office of Management and Budget for review, as required when creating new federal credit programs. EDA officials said the most significant of the remaining key tasks are finalizing the ITM program regulations, manuals, and forms. Other key tasks remaining include hiring additional staff, finalizing the requirements for the program's information technology systems, developing marketing materials, and conducting outreach. As of November 2015, EDA officials expected they could begin issuing ITM program loan guarantees as early as July 2016.
EDA has coordinated with other federal agencies to learn from their experiences with loan guarantee programs, but EDA has not clearly differentiated ITM from other programs, which may result in duplication.
Coordination. EDA officials said they reached out to officials from the Departments of Energy and Agriculture, and the Small Business Administration (SBA)—agencies that have loan guarantee programs comparable to the ITM program—to learn from their experiences. EDA officials decided to largely model the ITM program after an SBA program that provides loan guarantees to small businesses, and they adapted or plan to adapt the SBA program's application forms, and regulations, among other things. EDA's coordination has helped avoid duplication of the effort those agencies have already expended in designing loan guarantee programs.
Potential duplication. As currently designed, the ITM program is not clearly differentiated from SBA's program or from other programs that already provide loan guarantees to a similar pool of borrowers. EDA officials acknowledged that the ITM program is potentially duplicative with other programs in a number of respects. However, the America COMPETES Reauthorization Act of 2010 (COMPETES 2010) directs the Secretary of Commerce to ensure that the activities carried out under the ITM program are coordinated with, and do not duplicate the efforts of other federal loan guarantee programs. GAO's fragmentation, overlap, and duplication analysis guide states that one way to help minimize duplication among government programs is to identify and target service gaps that the programs could fill. In 2011, the National Institute of Standards and Technology (NIST) identified several gaps in capital access for small and medium-sized manufacturers, including gaps companies face in early stages of growth. However, in coordinating with SBA and NIST, EDA did not seek information on how the ITM program could target these capital access gaps to minimize duplication with other programs. Coordinating more extensively with SBA and NIST on targeting the ITM program could provide EDA with greater assurance that ITM loan guarantees will not duplicate the efforts of other federal loan guarantee programs.

What GAO Recommends

GAO recommends that EDA work with SBA and NIST to further identify any gaps in capital access that the program could fill, and conduct outreach to help target those gaps. Commerce agreed with GAO's recommendation.