Should Governments Subsidize Manufacturing Consultants?

Since 1988, the federal government of the United States has been subsidizing consulting firms through a program called Manufacturing Extension Partnership (MEP) out of the National Institute of Standards and Technology (NIST). The MEP has existed through five presidencies of both parties and now supports 1,300 consultants who provide cut-rate services to small and medium-size manufacturing companies, effectively shutting out other consultants from this market segment.

This raises the question of what qualifies an agency set up to calibrate measurement instruments to pick winners among consultants in areas like technology acceleration, supplier development, sustainability, workforce and continuous improvement. Clearly, the leaders of the MEP must have an extensive experience of manufacturing to make such calls.

Director Roger Kilmer just posted an article entitled A Blueprint for America: American Manufacturing on the NIST MEP blog. According to his official biography, the director of the MEP has been with NIST since 1974 and has never worked in manufacturing. On the same page, you can see that some members of the MEP management team have logged a few years in the private sector, in electric utilities, nuclear power, and IT services. None mention anything like 20 years in auto parts or frozen foods.

Roger Kilmer

I agree with Roger Kilmer that manufacturing is essential to the growth of the U.S. economy, and even that government should help. All over the world, particularly at the local level, governments provide all sorts of incentives for companies to build plants in their jurisdiction. But is it proper for a government to directly subsidize service providers? The alternative is that whatever help is given go directly to manufacturing companies, for them to pay market rates for services from providers they choose.

Christine Lagarde

In addition, the most effective help is not necessarily a subsidy. Hearing the CEO of a small, French manufacturing company uncharacteristically praise then finance minister Christine Lagarde, I asked what she had done to deserve it. “In 2009,” he said, “banks were denying credit to everybody. We were going bust. She decreed that bankers had to explain why for each case to her ministry. That was enough to pry the money loose.” It was done with a light touch, didn’t cost any money, and worked.

3 comments on “Should Governments Subsidize Manufacturing Consultants?

  1. In the beginning, when I was just getting established as a Manufacturing Consultant, I completed a few consulting projects for a Massachusetts MEP. It quickly became a win-win situation for the client company, myself, and the MEP.
    I soon discovered that many small to medium size manufacturing companies just can not afford to hire expert consultants, since many manufacturers need some type of financial assistance when paying for this type of service. If the consultant is willing to reduce his project fees, and the client is willing to pay a fixed percentage, and the federal government is willing to kick in a fixed percentage of the fees, then what is wrong with this formula? This is a good formula and equates to a financial gain for all parties involved. This type of assistance helps keep small companies in business, allows them to compete regionally and maybe even globally, helps saves jobs in the local market, allows them to pay taxes in the local market, and may provide long term sustainability for future growth.

  2. For a government to support small and medium-size manufacturing is a policy decision that is perfectly legitimate. The problem I have with the MEP system is that, in it, the government chooses the service providers. There are two things wrong with this:

    • The officials who anoint the service providers do not have the expertise to evaluate them.
    • The art of obtaining subsidies becomes the primary skill developed by their recipients.

    The best experts in the field are busy supporting clients, maintaining and developing their skills in Lean manufacturing implementation. They do not have the leisure to compete in filling out government applications and giving overview presentations that tell officials what they want to hear.

  3. Pingback: Lean manufacturing and government help, Interview in Russia’s Kommersant, Tatarstan edition | Michel Baudin's Blog

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