Manufacturers face higher training fees
A Commerce Department decision to slash 63 percent of its funding to a national
nonprofit manufacturing group could mean fewer training services at higher costs
offered to small- and medium-size manufacturers by the Rhode Island Manufacturers
Extension Service.
U.S. Sen. Jack Reed and more than 50 other senators are calling for the Commerce Department to up its funding to the Manufacturing Extension Partnership before the federal fiscal year begins in October.
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In anticipation of a funding loss, RIMES – which receives funding from the partnership – has already eliminated three jobs and will impose a 25 percent fee hike as of May 1 for all new contracts.
“To maintain that level and support of projects, they’d have to raise rates and many small companies, especially manufacturers, can’t afford that. (RIMES) won’t be a viable alternative for many. It would be a blow to manufacturing,” said David P. Braman, vice president of engineering and operations for Crafford-LaserStar Technologies in East Providence.
Crafford-LaserStar is currently expanding and growing in Rhode Island, and has been using RIMES’ services and guidance to transform and update the company, particularly in the lean manufacturing enterprise, Braman said. If rates go up, or if RIMES ceases to exist, Crafford might have to search out of state for similar services.
“We would have to go outside Rhode Island to get these services or hire an outside consultant,” he said, adding that there has been discussion of leaving RIMES if rates increase.
The Manufacturing Extension Partnership received $106 million in fiscal year 2002, but President Bush had proposed to slash funding for 2003 to only $13 million. Reed and others fought to restore funding to the program for the $106 million, but this year funding has again been cut back to $39 million for fiscal year 2004.
RIMES received approximately $450,000 last year, and according to CEO John Cronin, a cut as significant as being proposed could result in an appropriation next year of $100,000, resulting in increased rates to customers and less focus on long-term work force development projects.
“We’ve had to cut overhead costs and do more with less,” he said, in anticipation
of the fund cut. RIMES laid off three staff people – a marketing manager, finance
manager and managing consultant – in March. RIMES has also increased its rates
to customers by 25 percent, Cronin said.
Remaining competitive
In an effort to have funding restored, more than 50 U.S. senators, including Reed, wrote a letter to the department emphasizing the importance of the partnership.
In the letter to Commerce Secretary Don Evans, the senators wrote that the partnership program helps small manufacturers remain competitive in the global marketplace by providing technical assistance, support and engineering services and business advice.
“Restoring MEP funding is necessary to ensure the sustainability of our domestic small manufacturing industry and its high-quality jobs,” the letter said. “The fiscal year 2004 appropriated level of $39.6 million for the MEP is insufficient to maintain the existing network of MEP centers.”
Each year, RIMES works on 80 to 100 projects, Cronin said, and after going through its first year of no direct state funding, the RIMES model (of federal-state-private partnership) was reworked to obtain more money from the private sector.
RIMES is now focusing on more projects that will create revenue with shorter turnaround, like its Lean Office product. A 6-month-old program, the New England Defense Supply Chain, combines the efforts of RIMES and other regional MEPs, and aims to create revenue for manufacturers in the defense industry.
“There are projects we have done as public service that we need to be more careful of,” like the Community College of Rhode Island’s Training and Technology in Quonset. “It’s harder to sustain our attention to work force development projects because they’re more long term,” Cronin said. “We’re focusing more on services for fees.”
“We’re diversifying our relationships with federal agencies and forming new partnerships,” Cronin added. “In the short-run, we’re lucky to have a good customer base.”
According to a recent survey by the Modernization Forum, every MEP center in the country is downsizing, the letter said. The program has closed 58 centers across the country and has reduced staffing levels by 15 percent.
According to Adam Bozzi, a Reed spokesman, the federal fiscal year ends in September, so the Commerce Department has until that time to respond to the letter and/or restore funding to the program.
“The Department of Commerce has offered no comment” on the subject so far, Bozzi said, adding that Reed and the other senators would like for the department to restore funding, “the sooner the better.”
As to what impact this cut could have on Rhode Island manufacturers and RIMES customers, Cronin said, “Companies won’t be investing as much because that subsidy won’t be there to lower the costs” of RIMES’ services. “We need it to supply mom and pops with more leverage. We’re hoping that if the senators are successful, we can lower our rates.”
Picking up the slack
Cronin said in the normal course of the year, RIMES loses some companies as customers, but this cut could amplify that trend. For now, the CEO said he and his staff are picking up the slack and have planned for two budgets for next year – one if they receive $450,000 and one for $100,000.
“It’s real to us but it hasn’t been felt yet because the budget hasn’t impacted us yet – that will start July 1.”
Braman said that without support from entities like RIMES, many small manufacturers couldn’t remain competitive.
“We need local support – we need to continue support of this to help with the offshore issue,” he said. “We can be competitive with the type of support that the MEP and RIMES provide … but we have to compete by getting properly trained.”
Marc Amato, vice president of operations at Walco in Providence, agreed. Walco has been working with RIMES for more than two years, specifically on lean manufacturing practices. Amato said he’s concerned for the future of the group.
“Without (RIMES) being here, I’m not sure we would have had the support to get our project up and running,” he said. “Anytime the fees or rates jump more than 10 percent, it raises the eyebrows of the consumer. If they raise the rates, we might need to look for outside consultants or get competitive bids for these services.”
At some point, remaining a customer “becomes impossible for us to do,” Amato added. “It makes us re-evaluate our participation. It would definitely put a crunch on whether we’d continue with the program. It’s an issue of resources.”
Supporting manufacturing in the state is vital, Amato said, and lost manufacturing jobs won’t be recovered.
“Anything we can do to support manufacturing in Rhode Island is necessary,”
Amato said. “It’s sad that funding has been cut, and I think it’s inappropriate.”
