Although manufacturing has a key role in the U.S. economy, growth in this sector has slowed in recent years. In 2010, Congress created a loan guarantee program aimed at bolstering technological innovation among small- and medium-sized U.S. manufacturers.
We found the Department of Commerce, which is charged with implementing this program, has not done so.
Commerce officials told us:
- It would be difficult to implement the program without duplicating already available federal programs
- They perceived little demand for the program or lender interest, although economic conditions and demand may be changing
What GAO Found
The Department of Commerce's (Commerce) Economic Development Administration (EDA) has not taken steps or made plans to implement the Innovative Technologies in Manufacturing (ITM) federal loan guarantee program since January 2020, when GAO last reported on the program. EDA therefore has not issued any loan guarantees under the program. EDA officials provided several reasons for not implementing the program:
- Perceived lack of demand. EDA officials told GAO that they expected limited demand by small and medium-sized manufacturers for loans under the ITM program. However, they said that it would be helpful to gauge potential demand for loans, because the United States entered an economic recession around 2020 and the recent Coronavirus Disease 2019 (COVID-19) pandemic has led to changing conditions in the manufacturing sector and the global supply chain.
- Alternative loan programs. EDA officials said that it would be difficult to execute the ITM program without duplicating alternative loan programs available to help businesses, including those in the innovative manufacturing sector, such as the Small Business Administration's (SBA) 7(a) loan program.
- Lender participation uncertainty. EDA officials expressed uncertainty over the level of interest and participation that potential lenders would have in the ITM program if EDA were to implement it—for example, because potential lenders are familiar with and might be more likely to continue their participation in SBA loan programs.
Why GAO Did This Study
Manufacturing plays a key role in the U.S. economy as a source of economic growth, high-paying jobs, and technological innovation. Small and medium-sized manufacturers represent a majority of manufacturers in the country but may lag behind large firms in Manufacturing plays a key role in the U.S. economy as a source of economic growth, high-paying jobs, and technological innovation. Small and medium-sized manufacturers represent a majority of manufacturers in the country but may lag behind large firms in innovation and adoption of new technologies. To invest in innovative manufactured goods and processes, improve U.S. competitiveness, and help address the capital needs of U.S. manufacturers, the America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science (COMPETES) Reauthorization Act of 2010 directed the Secretary of Commerce to establish the ITM program. The ITM program was to provide loan guarantees to small and medium-sized manufacturers for the use or production of innovative technologies. Commerce's EDA is responsible for implementing the program.
The America COMPETES Reauthorization Act of 2010 also included a provision for GAO to conduct a biennial review of the Secretary of Commerce's execution of the program. GAO's January 2020 report found that EDA had not taken additional steps to implement the program after ceasing its implementation in October 2017 because of uncertainties about the demand for the program, among other reasons. This report examines any steps EDA has taken to implement the ITM program since GAO's January 2020 report. GAO analyzed applicable laws and program documents, interviewed EDA and SBA officials, and collected information from other stakeholders.
For more information, contact Candice N. Wright at (202) 512-6888 or firstname.lastname@example.org.