Manufacturing plays a key role in the U.S. economy as a source of economic growth, high-paying jobs, and innovation. According to data from the Bureau of Economic Analysis and the Bureau of Labor Statistics, in 2014, the manufacturing sector accounted for about $2 trillion—or 12 percent of the U.S. economy—and employed approximately 12 million workers—or about 9 percent of the U.S. workforce. The development of innovative products and processes serves as an important driver of U.S. competitiveness, and small- and medium-sized manufacturers are particularly important to U.S. competitiveness because they represent a majority of manufacturers in the country. However, small- and medium-sized manufacturers often lag behind large firms in innovation and adopting new technologies and, according to a report by the National Institute of Standards and Technology (NIST) Hollings Manufacturing Extension Partnership program, many have reported difficulty gaining access to capital, which could present a challenge to developing and commercializing innovative technologies.
To invest in innovation, improve U.S. competitiveness, and help address the capital needs of small- and medium-sized manufacturers, the America COMPETES Reauthorization Act of 2010 (COMPETES 2010), among other things, directed the Secretary of Commerce to establish the Federal Loan Guarantees for Innovative Technologies in Manufacturing (ITM) program, which is intended to support loan guarantees for small- and medium-sized manufacturers for the use or production of innovative technologies. Through fiscal year 2015, Congress has appropriated $19 million for the ITM program; each year’s appropriation can support up to $70 million in guaranteed loans. As the federal government continues to experience budgetary constraints, there is an ever-increasing need to ensure that governmental resources are appropriately targeted and that unnecessary duplication is mitigated, and akey issue debated during consideration of COMPETES 2010 was whether the ITM program would duplicate existing loan guarantee programs at other federal agencies. 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. Ultimately, the Department of Commerce’s Economic Development Administration (EDA) was assigned the task of implementing the ITM program.
 The number and percentage of workers is based on Bureau of Labor Statistics data on nonfarm employment estimates.
 The National Institute of Standards and Technology Hollings Manufacturing Extension Partnership, Connecting Small Manufacturers with the Capital Needed to Grow, Compete, and Succeed: Small Manufacturers Capital Access Inventory and Needs Assessment Report (Gaithersburg, MD: November 2011).
 Pub. L. No. 111-358, § 602, 124 Stat. 3982, 4026-27 (2011). This law reauthorized the America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science (COMPETES) Act.
 A federal loan guarantee is a binding agreement between an agency and a lender. If a borrower defaults on a guaranteed loan, the lender is to be reimbursed by the agency for the balance of the guaranteed portion of the loan. Consistent with statutory language, each year’s appropriation, for example the $5 million provided in fiscal year 2013, can support up to $70 million in guaranteed loans. The $70 million in guaranteed loans can potentially be supported with a smaller appropriation because the government incurs costs only when a borrower defaults on a loan.
In February 2016, GAO found that EDA has not yet begun issuing ITM loan guarantees; according to the agency’s fiscal year 2017 congressional budget justification, EDA plans to begin issuing loan guarantees in fiscal year 2017. GAO found that EDA coordinated with other federal agencies with comparable loan guarantee programs to learn from their experiences in implementing such programs, but EDA has not clearly differentiated the ITM program from other programs, which creates the risk of duplication. GAO identified four examples of programs implemented by the Small Business Administration (SBA), the U.S. Department of Agriculture (USDA), and the Department of Energy that are comparable to the ITM program because they provide loan guarantees for domestic manufacturers and allow or specifically target businesses producing, using, or commercializing innovative technologies, among other criteria.EDA officials said that, based on what they learned from officials at these agencies, they decided to largely model the ITM program after an SBA program. EDA officials also said they have adapted or plan to adapt the SBA program’s application forms, regulations, and manuals, among other things.EDA’s coordination with other agencies and its adaptation of existing federal loan guarantee program materials has helpedavoid duplication of the effort those agencies have already expended in designing those programs.
However, as currently designed, the ITM program does not clearly differentiate its potential applicants from those of the comparable federal loan guarantee programs GAO identified. Those programs already provide loan guarantees to a pool of borrowers similar to those who would be eligible for the ITM program, with roughly equivalent limitations. For example, the ITM program and all four examples of comparable programs provide loan guarantees for manufacturers producing, using, or commercializing innovative technologies, although for a couple of the comparable programs this support is limited to certain types of technologies.
EDA officials acknowledged that the ITM program is potentially duplicative with other programs in a number of respects, and they said that it is possible that loan guarantees ultimately issued under the ITM program could be similar to those issued by another agency, such as SBA or USDA. For example, according to an EDA analysis of SBA 7(a) loan data, roughly 11 percent of the loans made under SBA’s 7(a) program from October 1991 through March 2014 were to manufacturers in subsectors identified as innovative. In addition, USDA officials estimated that about 25 percent of the agency’s Business and Industry program loan guarantees are issued to manufacturers. 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 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.While EDA officials coordinated with other agencies to design the ITM program, they did not work with agencies specifically to target service gaps—in this case, capital access gaps—because they have not yet developed a marketing and outreach strategy for the program. SBA officials stated that EDA did not specifically seek information from them on how to target the ITM program so as not to duplicate the efforts of SBA’s program. Similarly, while EDA officials coordinated with NIST about relevant topics, such as the optimal loan sizes and loan guarantee percentages to support small- and medium-sized manufacturers, EDA did not specifically coordinate with NIST about how to help address the capital access needs of manufacturers identified in its Hollings Manufacturing Extension Partnership program report. EDA officials stated that they intend to work with NIST by using its Hollings Manufacturing Extension Partnership centers to conduct ITM program marketing and outreach to borrowers and manufacturers, as was authorized by COMPETES 2010. However, according to a NIST Hollings Manufacturing Extension Partnership program official, as of November 2015, EDA had not worked with NIST to develop marketing materials or an outreach strategy and had not discussed other ways to ensure that the ITM program addresses capital access gaps. As a result,EDA has not taken full advantage of SBA and NIST officials’ expertise regarding the capital needs of small- and medium-sized manufacturers. 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 support that could be provided by other federal loan guarantee programs.
 The SBA 7(a) program is authorized by Section 7(a) of the Small Business Act. 15 U.S.C. § 636(a). The 7(a) program provides loan guarantees to small businesses, including manufacturers, for a variety of purposes.
 The USDA Business and Industry program provides loan guarantees to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities.
GAO recommended in February 2016 thatthe Secretary of Commerce should take the following action:
Implementing this recommendation could better ensure that the ITM program is appropriately targeted and does not duplicate the efforts of other federal loan guarantee programs, such as SBA’s 7(a) program. Financial benefits associated with this action cannot be quantified because they relate to loan guarantees for innovative technologies in manufacturing that have not yet been requested or provided. However, by helping to ensure that future ITM program activities do not duplicate the efforts of other federal loan guarantee programs, this action should enable more efficient use of federal funds associated with the ITM program’s credit subsidy costs.
The information contained in this analysis is based on findings in the February 2016 report listed in the related GAO products section. GAO analyzed applicable laws and program documents, interviewed EDA officials, and interviewed officials from agencies with comparable loan guarantee programs or with other expertise about the needs of small- and medium-sized manufacturers. In addition, GAO reviewed the 2014 Catalog of Federal Domestic Assistance to identify examples of comparable loan guarantee programs at other federal agencies and verified the program information listed against other sources. Using this methodology, GAO identified four examples of programs that are comparable to the ITM program.
Table 3 in appendix V lists the programs GAO identified that might have similar or overlapping objectives, provide similar services, or be fragmented across government missions. Overlap and fragmentation might not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.
 The Catalog of Federal Domestic Assistance is a government-wide compendium of federal programs, projects, services, and activities that provide assistance or benefits to the American public.
 GAO relied on the Catalog of Federal Domestic Assistance as an initial source for information and did not verify that the Catalog of Federal Domestic Assistance includes all potentially comparable loan guarantee programs. GAO asked agency officials to identify other potentially comparable programs that they were aware of and included those in its analysis as appropriate.
In commenting on the February 2016 report on which this analysis is based, Commerce concurred with GAO’s recommendation and said that EDA plans to work with SBA and NIST to further identify capital access gaps that can be filled by the ITM program. Commerce also noted that there can be no assurance that loan guarantees provided by the ITM program will never duplicate the efforts of other agencies’ programs. However, GAO’s recommendation to work with SBA and NIST to identify capital access gaps and then target those gaps in marketing the program would better ensure that the activities carried out in implementing the ITM program do not duplicate the efforts of other federal loan guarantee programs, but the recommendation would not eliminate the possibility of duplication completely. In addition to Commerce’s written comments, EDA provided technical comments, which GAO incorporated as appropriate. The Department of Energy and SBA also provided technical comments that GAO incorporated, as appropriate. USDA and the Office of Management and Budget indicated they had no comments on the report.
GAO provided a draft of this report section to the Departments of Agriculture, Commerce, and Energy and the Small Business Administration for review and comment. The Department of Energy indicated it had no comments on this report section. The Departments of Commerce and Agriculture, and Small Business Administration did not provide comments on this report section.
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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 fo...
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