[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

TRADE ADJUSTMENT ASSISTANCE FOR U.S. FIRMS: EVALUATING PROGRAM
EFFECTIVENESS AND RECOMMENDATIONS

=======================================================================

HEARING

before the

SUBCOMMITTEE ON GOVERNMENT ORGANIZATION,
EFFICIENCY AND FINANCIAL MANAGEMENT

of the

COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

NOVEMBER 14, 2012

__________

Serial No. 112-190

__________

Printed for the use of the Committee on Oversight and Government Reform

Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform

U.S. GOVERNMENT PRINTING OFFICE
77-041 WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, gpo@custhelp.com.

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director

Subcommittee on Government Organization, Efficiency and Financial
Management

TODD RUSSELL PLATTS, Pennsylvania, Chairman
CONNIE MACK, Florida, Vice Chairman EDOLPHUS TOWNS, New York, Ranking
JAMES LANKFORD, Oklahoma Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
FRANK C. GUINTA, New Hampshire ELEANOR HOLMES NORTON, District of
BLAKE FARENTHOLD, Texas Columbia

C O N T E N T S

----------
Page
Hearing held on November 14, 2012................................ 1

WITNESSES

Ms. Patricia M. Britton, Vice President of Business Development,
Topflight Corporation, Glen Rock, PA
Oral Statement............................................... 5
Written Statement............................................ 8
Mr. Thomas G. Zieser, President and CEO, Jace Systems, Cherry
Hill, NJ
Oral Statement............................................... 10
Written Statement............................................ 14
Mr. Drew Greenblatt, President, Marlin Steel Wire Products,
Baltimore, MD
Oral Statement............................................... 18
Written Statement............................................ 20
Mr. Bryan Borlik, Director, Trade Adjustment Assistance for
Firms, Economic Development Administration U.S. Department of
Commerce
Oral Statement............................................... 31
Written Statement............................................ 33
Mr. Williams J. Bujalos, Director, Mid-Atlantic Trade Adjustment
Assistance Center
Oral Statement............................................... 41
Written Statement............................................ 44
Mr. J. Alfredo Gomez, Acting Director, International Affairs and
Trade, U.S. Government Accountability Office
Oral Statement............................................... 48
Written Statement............................................ 50

APPENDIX

The Honorable Todd Russell Platts, Member of Congress from the
State of Pennsylvania, Opening Statement....................... 77
The Honorable Gerald E. Connolly, Member of Congress from the
State of Virginia, Opening Statement........................... 79
The Honorable Elijah E. Cummings, Member of Congress from the
State of Maryland, Opening Statement........................... 81
Western Trade Adjustment Assistance Center, Clarification
Memorandum..................................................... 83

TRADE ADJUSTMENT ASSISTANCE FOR U.S. FIRMS: EVALUATING PROGRAM
EFFECTIVENESS AND RECOMMENDATIONS

----------

Wednesday, November 14, 2012

House of Representatives,
Subcommittee on Government Organization,
Efficiency, and Financial Management,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:18 a.m., in
Room 2247, Rayburn House Office Building, Hon. Todd Platts
[chairman of the subcommittee] presiding.
Present: Representatives Platts, Lankford, Towns, Connolly,
Norton, and Cummings (ex officio).
Staff Present: Alexia Ardolina, Assistant Clerk; Molly
Boyl, Parliamentarian; Katelyn E. Christ, Professional Staff
Member; Linda Good, Chief Clerk; Mark D. Marin, Director of
Oversight; Tegan Millspaw, Professional Staff Member; Jaron
Bourke, Minority Director of Administration; Beverly Britton
Fraser, Minority Counsel; Jennifer Hoffman, Minority Press
Secretary; Adam Koshkin, Minority Staff Assistant; and Elisa
Lanier, Minority Deputy Clerk.
Mr. Platts. The committee will come to order. I want to
welcome everybody here and first apologize for keeping everyone
waiting with my delayed arrival, and especially for our
witnesses on both panels. I appreciate your understanding with
rescheduling this hearing from back in October when--it was the
first time I had to cancel a hearing and you would not have
wanted to be with me. I was unfortunately very under the
weather and couldn't speak literally because of a throat issue,
but we do appreciate your patience and returning here today to
share your testimony.
Today's hearing will evaluate the Trade Adjustment
Assistance for Firms program, or TAAF. TAAF is a program
administered by the United States Department of Commerce and it
has helped small and medium sized companies in the United
States stay competitive with overseas markets for the past 50
years. TAAF operates out of the Commerce Department's Economic
Development Administration and has been helping firms since it
was first put in place in 1962.
The program is currently authorized through 2013 at an
annual spending level of $16 million. TAAF support is provided
to eligible firms through a network of 11 EDA funded Trade
Adjustment Assistance Centers, or TAACs, located throughout the
country. The director of the TAAC for the Mid-Atlantic region,
Mr. Bill Bujalos, is here with us today.
Consultants at each TAAC work along side eligible trade
impacted firms to develop business recovery plan or
``adjustment proposals'' that are tailored to increase
productivity for their specific business model. Companies have
5 years to implement proposals once they are approved with EDA
typically covering up to 50 percent of the implementation cost.
According to the American Business Council, 829 were firms
assisted nationally through TAAF from 2006 through 2010. More
recently in 2011, 149 American firms with average sales of $20
million and approximately 100 employees each received a total--
I'm sorry, received a total of $12 million in financial
assistance through TAAF. The vast majority of these small
companies were in manufacturing in an industry that is still
struggling nearly 4 years after the 2009 recession.
Today's hearing will evaluate the extent to which TAAF has
increased the productivity of participating firms. According to
EDA's most recent annual report, firms receiving funds in 2009
now report that average sales actually decreased by 1.6
percent, average employment decreased by 1.9 percent. This low
productivity is thought to be temporary, however, as companies
often need time to adjust to their new business strategies.
Firm performance must also be considered alongside broader
economic indicators like the nationwide unemployment rate which
has remained considerably strained for the past several years.
Mr. Bryan Borlik, Director of TAAF at EDA, is here today
and will be part of our second panel to explain the operation
of TAAF along with some of these long-term performance
considerations.
Another goal of this hearing is to determine how Congress
can improve execution of TAAF. In 2010 the United States
Government Accountability Office claimed the impact of Federal
assistance to firms through TAAF was unclear. In September of
this year the GAO released an updated report arguing that the
program has been useful for participating firms. We will hear
from GAO today as well about their recommendations of how to
make TAAF even more effective going forward.
Today we will also hear from companies in our first panel
of witnesses that have participated in the TAAF program. This
subcommittee is honored to have these job creators from these
firms with us who have received TAAF assistance to testify how
they've been impacted. And we welcome Ms. Patricia Britton of
Topflight Corporation in Glen Rock, my home district. We are
delighted to have you here with us to share your knowledge and
insights. We also have Tom Zieser of JACE Systems in Cherry
Hill, New Jersey and Drew Greenblatt of Marlin Steel in
Baltimore which is located in the full committee member's--the
full committee's ranking member's district, Mr. Cummings. We
sincerely appreciate all the witnesses being with us today and
thank them for their willingness to share their knowledge and
insights regarding the TAAF program.
There is no doubt that trade is critical to the prosperity
of our country. The United States is the world's largest
trading nation. In 2011 alone we exported goods and services
totaling over $2.1 trillion. These exports supported nearly 10
million jobs. It can therefore be easy to overlook what a
devastating impact increased overseas competition has had on
the profitability of our small businesses. It is a well known
fact that small businesses are key engines of new job creation
and that small U.S. Companies are struggling in the face of
international competition.
So today we want to focus on these firms, on the severe
economic dislocation that businesses today often face when
trying to meet their bottom lines on a daily basis.
We must ensure that in doing right by our Nation's trade
impact and employers we also protect the financial interest of
all American taxpayers. I look forward to hearing from our
witnesses about how we can help continue the TAAF program and
make it even stronger so that the firm should participate or
not just survive but will prosper in an increasingly
competitive and globalized world in which we live.
I'm now honored to recognize the distinguished ranking
member and the former chair of the full committee, Mr. Towns
from New York, for his opening statement and again, Ed,
appreciate your patience with my late arrival.
Mr. Towns. Thank you very much, Mr. Chairman, and thank you
for holding this hearing.
I'm pleased to join you today to talk about the Trade
Adjustment Assistance Program for firms. It is important that
we focus on and celebrate those initiatives that are aimed at
preserving American small businesses and creating jobs.
The Economic Development Administration and the Department
of Commerce has done a terrific job at improving the Trade
Adjustment Assistance Program through the Recovery Act of 2009.
As a result hundreds of United States companies have been able
to turn around businesses, business loss, due to important
competition and create or preserve much needed jobs. This is an
important program and I hope that we can do something today to
make sure that it continues and even that it's expanded.
In the last 10 years United States free trade agreements
with countries like South Korea, Panama and Colombia have
increased goods imported into this country by $1.3 trillion.
Naturally many small businesses struggle to compete with
imported goods and some are plunged into economic distress.
Others who cannot make the right adjustment simply go out of
business. Many struggling businesses are built by people who
have worked for years, sometimes decades maintaining those
businesses. Some of those companies are the foundation of an
entire community, either as the largest employer or the largest
provider of important services. Others support the livelihood
of countless families and businesses with their presence.
I am pleased to welcome the representatives of a few of
those companies here today. You have unique and impressive
stories of change and development. Thank you all for taking the
time to share your journey with us on the impact of trade
assistance.
Too many here in Congress take the position that the
government should not take any part in whether private
businesses succeed or fail. But I think that view is too short-
sighted. Global trade rules may confer benefits, but they can
also have consequences that may be severe for certain workers
and certain businesses. I do not believe there's a single trade
impacted company just sitting around waiting for a government
handout for its survival. Rather, there are hard working
companies needing a helping hand and tools to make them better
positioned in the globalized economy. Sometimes that is all a
small business needs to remain competitive. The Trade
Adjustment Assistance Program does just that.
I look forward to hearing the testimony from you. And just
before I get going I want to make certain that I have the
correct pronunciation of your name. Is that Mr. Zieser or Mr.
Zieser.
Mr. Zieser. Mr. Zieser, sir.
Mr. Towns. Okay, fine. Thank you very much. I'm helping the
members of the committee. Thank you, I yield back.
Mr. Platts. I thank the gentleman and yield to the
gentleman from Virginia, Mr. Connolly, for an opening
statement.
Mr. Connolly. Thank you, Mr. Chairman. And I want to thank
you. I think this is I think your penultimate hearing as
chairman of this subcommittee, one more, yeah. And I just want
to thank you for your friendship and your leadership. You have
approached issues with judicious analysis, you have avoided
strident headlines, you have avoided bitter partisanship, and I
think you are a model that many could learn from and as a
member on this side I just want to tell you how much I've
appreciated your friendship and your collegiality.
Mr. Platts. Gerry, I appreciate the kind words, and members
of my local media that are shadowing me here today are going to
think I paid you.
Mr. Connolly. If it helps him back home, he's the most
strident Republican I have ever met.
Mr. Towns. Would the gentleman yield?
Mr. Connolly. I certainly would yield.
Mr. Towns. I would like to associate myself with the
remarks of the gentleman of Virginia.
Mr. Platts. Appreciate it. Gerry, Ed and I have traded
seats here where I was chairman and he was ranking member and
then he was chairman and I was ranking member and now we're
back.
Mr. Connolly. I hope to do that with James.
Mr. Platts. I think one of the hallmarks of our
subcommittee, not just for that but from our members, is that
approach that you just referenced. It is about policy, about
issues, not partisanship. So I certainly thank you for your
kind words.
Mr. Connolly. This subject is also a terribly important
one. I come from a district that very much is supportive of
free trade. And if you look at what's happened both to our
export performance and the value of trade, it clearly overall
has been beneficial to the United States and we need to put
more pressure on export driven parts of our economy, because
compared to so many other economies it is actually a small
percentage of our GDP. And the 14 trade agreements we've had in
the last number of years I think on balance clearly have
benefited the United States as well as our trading partners.
However, it does, the fact of the matter is trade
liberalization leaves some behind. That's why this subject is
so important in terms of the adjustment programs we've got and
how are we doing. And it's important both from an economic
point of view in trying to help communities under distress, but
also frankly from a political point of view in terms of trying
to broaden the stakeholders in free trade. If we fail to do
that, if we fail to adequately address the fair part of free
trade, we're going to lose a fragile coalition in this country
of support for broadening and further liberalizing trade
regimes.
So I look forward to the testimony. I think GAO has done a
great job. And again Mr. Chairman, I thank you for having a
hearing on this committee that doesn't begin with a conclusion.
Mr. Platts. I thank the gentleman. We will keep the record
open for 7 days if anybody wants to submit additional
statements or extraneous materials for the record.
I am delighted to welcome our first panel: Ms. Patty
Britton, as I said, Vice President of Topflight Corporation in
Glen Rock, Pennsylvania; Mr. Tom Zieser, President and CEO of
JACE Systems in Cherry Hill, New Jersey; and Mr. Drew
Greenblatt, President of Marlin Steel in Baltimore, Maryland.
Pursuant to committee rules, if I could ask all three of
you to stand and raise your right-hand and we will have you
sworn in.
Do you solemnly swear that the testimony you are about to
give this committee will be the truth, the whole truth, and
nothing but the truth?
[Witnesses sworn.]
Mr. Platts. Thank you. You may by seated and let the record
reflect that all three witnesses affirmed the oath.
We will set the clock at 5 minutes. Ms. Britton, we will
start with you, but if you need to go over that, it is kind of
a guideline but we want to make sure we get a chance to have
your testimony. We do appreciate the written testimonies. I got
through my final one that was revised yesterday last night late
but that gives us an opportunity to be better prepared for
today's hearing. So we appreciate you submitting them in
advance.
Ms. Britton.

WITNESS STATEMENTS

STATEMENT OF PATRICIA M. BRITTON

Ms. Britton. Good morning, Mr. Chairman and members of the
committee. Thank you for having me here today.
Since 2003 I have worked at Topflight Corporation in Glen
Rock, Pennsylvania in a variety of roles, most recently as Vice
President. Topflight is a printer and convertor for the medical
electronics, consumer and cosmetics industry with customers
primarily in the U.S., as well as a few in Europe and Asia. We
are a privately held, family-run organization initially formed
in 1943 to manufacture airplane parts for World War II.
In the forties, Topflight made hundreds of thousands of
small parts, such as rivets, bolts, nuts and connectors. In
fact, employees at the time found that handwriting the
identification tags for so many parts was in some cases more
time consuming than actually producing the parts. So with good
old-fashioned American ingenuity Topflight invented one of the
first desktop label printers in their machine shop and began to
label these parts with what looked like printed Scotch tape.
Once the war ended Topflight embarked on a business
reinvention, the first of many business reinventions over the
years. Mr. Huber, Topflight's owner, convinced Black & Decker,
our very first customer, who is still a customer today, to
replace the metal name plates which were bolted on to their
hand tools with a pressure sensitive adhesive label. This was a
revolutionary concept at the time, and as a side note, Mr.
Huber's contemporary with Stan Avery, who you will recognize
the name of Avery Dennison. Mr. Huber went on to create many
patents, including the first tamper-evident label, which was
more than 20 years before the Tylenol scare, and an entire
business and industry was born during those years out of
innovation and manufacturing.
Since that time Topflight has undergone changes, many
changes in customers, product lines and capabilities, as I'm
sure almost all businesses do that survive for that long period
of time. However, in recent years the pace of technological
change and intense competitive pressure have resulted in a
business climate unlike any I have seen in the past. For
example, instead of pricing escalators being written into our
contracts as they were many years ago, we are now negotiating
contracts where customers expect year over year price
decreases, the most recent one when a major customer asked for
a 7 percent price decrease. In order to continue doing business
with them it is a requirement. This means that as our costs
rise and our prices decrease, our margins erode unless we find
ways to become more efficient.
Reverse auctions on top of that have allowed overseas
competitors with a much lower cost basis to drive down pricing
to unsustainable levels in some of our markets. Often these
companies are not held to the same quality or regulatory
standards as U.S. companies, so again their costs are lower.
And in addition their overhead in general is less.
I believe that Topflight and many other manufacturers have
risen to the challenges of continuous improvement and have
found ways to become more lean in response to these issues.
However, that strategy can only go so far in sustaining and
growing a business. By the end of 2009 Topflight was feeling
the effects of the economic slowdown and unprecedented pricing
pressures. In fact, our revenue had decreased within 2 years by
almost 30 percent. And most of this was from competition from
offshore manufacturing locations. Many of our consumer products
customers were moving their lines overseas.
The erosion of the business had begun and in face of the
new reality Topflight needed to do something different. In 2009
Topflight worked with Mantec, a manufacturing consulting
company based in York, Pennsylvania, on a program called
Eureka, which was intended to create a process and environment
of innovation. In the course of those meetings representatives
from Mantec mentioned that Topflight may qualify for assistance
from MATAAC based on the amount of business we were losing to
the overseas competitors. The timing couldn't have been better.
I contacted the MATAAC group and began the required
paperwork. We were assigned a consultant, Todd Shevlin, who was
able to provide guidance and insight into where we might
benefit from the program. In the course of his management
interviews, it became clear that many of the problems facing
our business came back to lack of critical data and technology
integration. For example, we didn't know the true cost of
producing products. We didn't know which product lines and
customers were the most profitable. In many cases the time it
took to process an order was longer than what was required to
make the order, very similar to our innovation problems back in
the 1940s.
Many manufacturing and paperwork processes were manual,
which wasted time and introduced errors, and our estimating
software was not integrated with our costing system so we
couldn't tell if we made the product as specified. Basic
information needed to analyze the business was missing, making
strategic planning almost impossible and largely based on
educated guesses.
So Topflight, with MATAAC's input, decided to use the funds
in 2011 to implement an ERP system that integrated all
functional areas of our company from estimating to cash
collections, including the entry of shop floor manufacturing
data. We chose Radius, a printing and packaging system tailored
to our industry, and launched the software in February of this
year. Going through the management interview process and
obtaining the grant was a key factor in deciding to go forward
with this investment.
Although it's too early to analyze the full effects of this
implementation, I can say that since 2009 all of Topflight's
key indicators and metrics are moving in the positive
direction. Most notably, we are on track to replace revenues
lost to offshore locations and have been able to increase our
revenue per employee by 20 percent. On the qualitative side
managers are now having in-depth conversation about costs,
profits and margins now that were not possible with our old
system. Inventory accuracy increased, which has reduced our
carrying costs and raw materials, one of the major expenses.
Based on Topflight's experience with MATAAC, I am a very
strong believer in this program. In order to compete in today's
ultra competitive global environment manufacturers need to be
willing to do things differently, to innovate, to train and to
respond to constant change. MATAAC and its team helped us do
just that.
Thank you for your time and attention.
Mr. Platts. Thank you, Ms. Britton.
[Prepared statement of Ms. Britton follows:]

[GRAPHIC] [TIFF OMITTED] T7041.001

[GRAPHIC] [TIFF OMITTED] T7041.002

Mr. Platts. Mr. Zieser.

STATEMENT OF THOMAS G. ZIESER

Mr. Zieser. I thank you, Mr. Chairman, for the opportunity
to testify before the committee regarding the effectiveness of
Trade Adjustment Assistance for Firms. Since 1999 I have been
President an CEO of JACE Systems.
JACE Systems is a medical device manufacturer and medical
services provider in Cherry Hill, New Jersey, approximately 8
miles east of Philadelphia. Our products are used by patients
recovering from orthopedic surgery to their joints. The company
manufactures devices that exercises the patient's affected
joint in a passive manner immediately following their surgery.
This is commonly referred to as continuous passive motion
therapy, and the devices used in CPM therapy are identified as
CPM machines. Most common application is after surgery of the
knee, usually total knee replacement, or sports injuries like
anterior cruciate ligament, or ACL, repair. Other applications
for our product include the hand, wrist and toe. Surgery to the
hand and wrist are usually a result of trauma and injuries in
the workplace. These products are particularly helpful for
complex injuries that involve bone, soft tissue and nerve
damage. The devices are used to prevent the formation of scar
tissue, adhesions, reduce swelling and edema and reduce the
need for pain medication.
The company also manufactures a neuro muscular electro
stimulation device, MNES, JACE TriStem, that is used to reduce
pain and swelling and also retrain damaged muscles, soft tissue
and nerves. When the knee ECPM is at the end of range of motion
the CPM pauses and the TriStim stimulates the muscles through a
small electrical current via attached skin electrodes. The net
result is the flexion and extension of the joint, combining
with electro therapy hasten the rehabilitation of the joint.
Patients return to work and resume daily activities as a result
of our therapy.
The company has been in business since 1990. Our products
are used throughout the United States and also exported to
Europe and Japan. The company is an FDA licensed medical device
manufacturer with ISO 9001 and ISO 13485 certifications. The
company is also recognized by Japan as a foreign medical device
manufacturer. The K 100-A knee CPM is also recognized by the
European Union to display the CE Mark on our product.
My business experience includes an undergraduate Bachelor
of Science degree from Northland College in Ashland, Wisconsin
and a Masters of Business Administration from Seton Hall. My
entire career has been in health care. I have held positions at
Nations Healthcare, Haemonetics, Baxter international,
Fresenius USA and so on. Positions held range from sales rep,
product manager, sales director, sales of business development
manager, vice president and general manager.
JACE Systems competes in the highly regulated medical
device industry. Over the last several years the demands and
complexity of foreign regulations have had significant impact
on our manufacturing operations and opportunity. Our flagship
product, the K 100-A knee CPM, was introduced in 1994. It is
electrically powered and controlled by a sophisticated hand
controller that is micro processor controlled through a soft
push button panel and viewed on a liquid crystal display. There
is also an interface on the controller for the TriStem that is
often used to retrain and exercise muscles affected by the
surgery.
Prior to the formation of the European Union most countries
accepted the U.S. FDA 510K product registration as proof of
acceptance and under the underwriters UL seal for electrical
safety. The Medical Device Directive Council of the EEC of 14
June 1993 concerning medical devices, is intended to harmonize
the laws relating to medical devices within the European Union.
The M.D. Directive is a new approach and consequently for a
manufacturer to legally place a medical device in the European
market the requirements of the medical directive had to be met.
Manufacturers products meeting harmonized standards have a
presumption of conformity to the directive. Products conforming
with the directive must have a CE Mark applied. The directive
was most recently reviewed and amended in 2007 and a number of
changes were made.
Compliance with the revised directive became mandatory in
March 2010. These included products currently distributed in
the EU. Consequently there was no grandfathering for our
products. JACE Systems had to be retested to the new standard.
We were essentially excluded from selling new products in the
European Union and our dwindling sales efforts were only for
the replacement parts for the existing fleet of machines.
Consequently, without the CE Mark our sales declined,
beginning in 2004 and 2005, and caused decreased profitability.
JACE Systems was forced to reduce overhead and lay off
employees. I was discussing our predicament with the U.S.
Commercial Team and they recommended I contact MATAAC to
discuss our situation. I applied for a grant and submitted the
necessary documentation, and in February 2008 we were approved
for a matching grant of $73,000. That is for every dollar JACE
invests in a MATAAC approved project MATAAC will match it
dollar for dollar.
In April our grant was approved and project work began. The
electrical safety testing was done at BEC Laboratories in
Pottstown, PA at a cost of 15,000 and 6,000 respectively. The
ISO registrations and quality management systems were completed
by Enterprise Strategy Group at a cost of 24,000. After the
tests were completed additional engineering and design had to
be done. Nelson Design Services in Willow Grove reviewed our
circuit board for compliance to the new standard at 17,000. And
none of these projects would have been done in the short
timeframe without the MATAAC matching grant assistance program.
Since acquiring a CE Mark in ISO registrations we have seen
our sales to Germany increase to 177,000 in 2011 from a low of
76,000 in 2007. In addition, we have hired one new employee in
2010. But the real impact of the assistance, however, is not
just seen at JACE Systems and the test laboratories and design
services we contracted with. We are an assembly operation. We
purchase parts and assembly for many companies in our area and
throughout the USA. The grant assistance helped JACE design new
tools and first articles that reduced cost, improved design and
made us more efficient. For example, C&K Plastic, Metuchen, New
Jersey, redesigned our tools that vacuum formed the plastic
pieces for the K 100-A knee CPM at a cost of $9,970. The new
design reduces waste and evens out our parts inventory
imbalances. Kaiser Medical designed a new anatomical hinge
movement for $10,000 that reduced cost and increased flexion
and range of motion from 120 degrees to 130 degrees. Pittsville
Plastics, Pittsfield, Massachusetts, created first articles for
$30,000 for injection molded parts that reduced our unit cost
and increased assembly efficiency. JACE Systems is the export
engine for the many companies that do not export at all. JACE
Systems is the tip the of spear in all of our export efforts.
The MATAAC grant has not only helped the companies listed
previously, it also had a trickle down effect that aids in the
sales growth and development of many other small companies in
the past year. Cardinal Precision, Oreland, PA received no
grant assistance but they fabricated the metal parts that are
the product of the MATAAC funded Kaiser Medical anatomical
hinge that netted Cardinal sales of $27,000. Youngtron
Electronics, Hatfield, PA, designed the circuit boards and the
electronic layouts that make us compliant to the CE
requirements. That netted the sales of $9,000 to them.
Should I stop?
Mr. Platts. Go ahead and finish.
Mr. Zieser. Okay.
In addition to helping small companies grow JACE made
significant purchases from large companies like Merkle Korff in
Chicago, $23,000; Thomson Linear, Radford, VA for 30,000.
Gaining the CE Mark has also helped JACE develop businesses
in Turkey. Turkey signed a Customs Union agreement with the
European Union in 1995. The CE Mark enables us to sell our
products in Turkey and enabled JACE to establish a beachhead in
that part of the world and distribute our products to the
Middle East region, a rapidly growing market for Made in
America medical products. We have shipped 1 knee CPM to Turkey
and it is being evaluated in a large hospital group, and I
expect positive results after the trial period. We also
received inquiries from the UAE, Saudi Arabia, Kuwait, Egypt
and other countries in that area, and because of the language
and cultural differences and time it is difficult for a small
company to establish business relationships in that part of
world. I sincerely believe that our partner in Turkey will help
JACE establish business in the Middle East.
So the data and information gathered from the K 100 was
extremely helpful in establishing our presence in Mexico.
Mexico does not require a CE Mark, they do require medical
device manufacturers registration and approval by the Mexico
Health Authority to market and sell in Mexico. We identified a
distributor while participating in the U.S. Commercial Trade
Winds event in Mexico City. The distributor, Kuxtal DME,
assisted us in getting our knee CPM approved and registered
with the Mexico Health Authority. Much of the technical
information and test data we completed for the CE Mark was also
required by the Mexico Health Authority. Having this data
available greatly accelerate our product registration.
Consequently, Kuxtal was successful in selling five knee CPMs
in a public tender to the Mexico Defense Department in June of
this year, and there are other tenders coming in the next few
months and I feel it will be equally successful to penetrate
Mexico and establish a beachhead for Central and South America.
In conclusion, I want to thank the committee members for
allowing me to share my JACE Systems journey. I encourage you
to support the TAAF and other programs like Trade Winds the
Americas offered by the U.S. Commercial Service. They are a
valuable resource for small companies like JACE to compete in
the world and provide jobs for JACE employees and the many
suppliers throughout the USA, and thanks again for your time
and attention.
Mr. Platts. Thank you, Mr. Zieser.
Mr. Zieser. That was over 5 minutes.
Mr. Platts. We are glad to have your knowledge and to hear
your story, and one of the aspects of your story, and I know in
Mr. Greenblatt's testimony, is not just dealing with the
competition from abroad but is actually helping you to export
products from America abroad and that's an important part of
what this program is all about.
[Prepared statement of Mr. Zieser follows:]

[GRAPHIC] [TIFF OMITTED] T7041.003

[GRAPHIC] [TIFF OMITTED] T7041.004

[GRAPHIC] [TIFF OMITTED] T7041.005

[GRAPHIC] [TIFF OMITTED] T7041.006

Mr. Platts. So Mr. Greenblatt.

STATEMENT OF DREW GREENBLATT

Mr. Greenblatt. Thank, Mr. Platts. Good morning to the
members of House Committee on Oversight and Government Reform.
My name is Drew Greenblatt. I'm the owner of Marlin Steel.
We make wire baskets, sheet metal fabrications all in Baltimore
City. We export to 36 countries, we import nothing. The Trade
Adjustment Assistance for Firms program, TAAF, is one of the
many tools that we have used to help us create a dramatic
turnaround for our company. We were established in 1968. Right
now we're rocking and rolling, we're growing. We won the INC
5000 honor roll. We are the 162nd fastest growing company
manufacturer in America out of 223,000 companies, and we hire
only people from the city of Baltimore. We have had many
distinguished visitors in our factory, including Secretary
Geithner, Senator Mikulski, Senator Cardin, amongst many other
representatives from the State of Maryland. We have embraced
many new ideas to grow, but TAAF is one of the ones that has
really helped ignite us.
MATAAC is the organization that works with us so very
closely. The value of assistance in helping us grow can be best
understood to understand where we came from. I sold a security
system company that was small, I used that as down payment to
buy Marlin. We made bagel baskets. I felt like a genius when we
bought it because there was a bagel basket boom in the nineties
and we were going to grow to the Moon we thought. We were
quickly in a bad way, it was a perfect storm.
The first thing that happened was the Atkins diet. I don't
know if you remember the Atkins diet in the late nineties. Last
place you want to be if you own a bagel basket manufacturer.
All of a sudden everybody stopped eating bagels because of the
carbs. Also China started dumping bagel baskets into America.
They started selling bagel baskets for cheaper than I could buy
steel. So I couldn't pay my employees. I couldn't have them
weld, I couldn't pay rent or I couldn't have a marketing
campaign, couldn't do health insurance to compete with China.
So we were in a devastating position. We were about to
close. We were losing a lot of money, we were hemorrhaging
cash. We had to transform. Right around that time we had a
fortuitous phone call from an engineer at Boeing who needed a
custom made basket. We designed it, engineered it, and sent it
to them. They were delighted and this was the epiphany that
saved my company.
We morphed from commodity bagel baskets, which was a
disastrous business model, to precision engineered sheet metal
fabrications and wire baskets and it that has taken us and
grown us and that's why we are doing so well.
We have invested over $3 million worth of robots. We don't
fear the competition anymore, we actually love shipping
overseas. That's 25 percent of our business and 25 percent of
our employees' compensation. When I first bought the company
the average employee was making 6 bucks an hour and their
health insurance plan was you walk to the emergency room. Now
they have Blue Cross/Blue Shield and we've come a long way.
The beauty of TAAF is that it makes manufacturers have skin
in the game. We pay 50 percent, TAAF pays the other 50 percent.
So we're really focused on making sure our money is spent well,
but it is like giving our money steroids so it is amplified and
accelerated, the benefits are pushed forward faster. So it
helped us graduate out of bagel baskets much quicker into this
precision manufacturing.
TAAF has done things like help us get ISO, like Mr. Zieser,
and it has also helped us with other products like business
software. For example, we bought an American made laser, we buy
steel from Pennsylvania and we export this part to Japan, a
Japanese automotive factory, okay, 100 percent USA made, made
in Baltimore City. The training for my engineers was done
through a TAAF program. It is very expensive. I had to fly them
to Connecticut, they had to spend over a week there. We sent
six people to learn how to run our laser to its fullest extent.
And that's why Japanese automakers are buying from a Baltimore
company using American made lasers and American made steel so
that we could ship to Japan.
See, American manufacturers have a significant challenge.
We're competing with Vietnam where they pay a buck an hour. We
are competing with China where they pay $2.50 an hour. We are
paying our guys $20, $25 bucks an hour. And for us to meet that
kind of competitive head winds we have to be much more
productive. We have to work smarter, not harder. You have heard
that line. So it is imperative that we arm our employees with
the best training and the best skills and the best technology
so that we can beat them. That's imperative, and that's going
to grow jobs in this bad recession.
It's critical that we coddle American manufacturing in our
country. $75,000 is the average compensation of an American
manufacturing employee. You can send a kid to college, you can
buy a home, you can take vacation with that kind of livelihood.
So in conclusion, please support TAAF. It is critical for
us growing and being able to compete with foreign competition.
[Prepared statement of Mr. Greenblatt follows:]

[GRAPHIC] [TIFF OMITTED] T7041.007

[GRAPHIC] [TIFF OMITTED] T7041.008

[GRAPHIC] [TIFF OMITTED] T7041.009

[GRAPHIC] [TIFF OMITTED] T7041.010

Mr. Platts. I want to thank each of you for your testimony
and certainly wish each of your companies continued success in
going forward. As Mr. Greenblatt, I think you had it in your
testimony, which I think captures now we export wire forms to
China made in the USA. How cool is that? That's a perfect
summation of what we want to help do, is to promote American
products, American workers and competing throughout the world.
Let me ask if each of you could give me one thing we want
to look at is how the program is benefiting companies and each
of you shared that, but also the operation of the program, and
so if you could share from the time you first learned of the
program, one, were you on a waiting list, did you have to wait
at all before you were able to start participating? And if you
were or were not, what would be the general time frame when
from when you first learned of it, submitted materials for
certification and then were actually able to access grant or
technical assistance to start putting it to use in your
companies? Go left to right.
Ms. Britton. The entire process from us, actually we were
more of the holdup on our end just trying to gather the
documents but start to finish it was about 7 months.
Mr. Platts. And so really not a waiting list issue for you.
Ms. Britton. No waiting list at all, no, very efficient.
Mr. Platts. Mr. Zieser.
Mr. Zieser. Yeah, I would say about 6 months from the
initial meetings to--the hardest part was for us to get the
necessary documentation and the financial data that MATAAC
required.
Mr. Platts. And the 6 months, was that until were you
certified as eligible or until when you actually had an
approved----
Mr. Zieser. It was a 6-month process to get the approval.
Mr. Platts. Of your certification.
Mr. Zieser. Yes.
Mr. Platts. And then from there going forward actually
accessing grant funds.
Mr. Zieser. Yeah. We had to gather the 8 most recent
quarters of financial history and sales and personnel records,
that kind of thing, head count, and we submitted it to, you
know, to Bill and they analyzed it and they'd come back with a
few more questions. So it was a process. It was good for us to
understand our business better by just going through that
effort. And the analysis that they provided was very helpful
too. Upon approval they gave us a written report about
weaknesses within our company that we needed, we should
address, that kind of thing.
Mr. Platts. And that kind of gets into the second question
I had, it wasn't just financial assistance but the managerial
expertise.
Mr. Zieser. Yes. Yes, of course the whole spectrum of the
organization. It was business, manufacturing, but financial,
also more strategic 5-year type of plan, that type of thing. As
opposed to just here is your money and do it, it was very good
assistance.
Mr. Platts. Mr. Greenblatt.
Mr. Greenblatt. There was no waiting list for us, it was an
extended process for us. I think a lot of small companies to
survive the recession have had to streamline their
organization. And unfortunately that means we are running
extremely lean and thin and we don't have a lot of talent to
spend the time to do the paperwork. I don't think it is
MATAAC's fault. I think they have a tremendous number of
regulations they have to adhere to do their job. I would
recommend, this is constructive criticism, to streamline the
paperwork. It is a lot of paperwork and I think that probably
inhibits the growth of this program because the people you most
want to embrace this have a tremendous challenge organizing all
that paperwork and getting it over. And again, MATAAC was doing
their job adhering to the law; however, if you want to grow
this program, my suggestion to you is massively reduce the
paperwork necessary because it is very cumbersome and it is
challenging for us to accomplish that when we are so lean and
we are obviously fighting these Chinese imports.
Mr. Platts. Yeah, you are for the most part small companies
to begin with, maybe medium, so you are smaller staffed and so
you're struggling to keep the doors open from a prioritization
of manpower.
Once you went through the certification process and then
were then receiving some technical assistance or grant
assistance, can you share how MATAAC, and I think all three of
you were part of MATAAC for the mid-Atlantic, how they stayed
with you through that process, because I think, Mr. Zieser, you
just said they didn't just say here is money, good luck. But
can you share how they kind of partnered with you as you moved
forward with your implementation plan?
Mr. Zieser. Well, all projects have to be approved. You're
right, why do you think this project would help with your
business. There was some conversation around why I need to get
this tool made to improve the efficiency of the thermaform
plastics. They were very understanding, and they agreed with
the logic behind it when you saw the inventory imbalances in
the stockroom. And we did have discussions with John Mercer,
was our contact and he has since retired from MATAAC, but he
was very helpful along the way.
Mr. Platts. But stayed with you kind of moving through that
implementation stage?
Mr. Zieser. Uh-huh, yes.
Ms. Britton. Our experience was very helpful as well
through both the analysis and the implementation. Our
consultant helped us really formulate some of the arguments
that we needed to go to the owner of our business about making
a technology purchase. Our owner is 92 years old, went through
the Depression, is very technology averse. So we had to spend
quite a lot of time really truly understanding the depths of
how this would change our business and improve it and allow us
to change going forward. So I would say the most value that
they brought through that implementation was helping us hone
that argument with the owner.
Mr. Platts. Okay. I yield to the ranking member for the
purposes of questions.
Mr. Towns. Thank you very much, Mr. Chairman. You know,
listening to the comments, and evidently the program was
extremely helpful, let me ask this question. Do you believe the
companies would be in its current position of growth and
profitability if it did not participate in TAAF? Do you believe
the company would have been?
Just right down the line.
Ms. Britton. I do not, because I can say that this help was
the deciding factor in us going with this technology. And in
savings alone from previous technology we are probably looking
at about $120,000 worth of savings, that's hard savings. In
addition we've been able to save on raw material inventory. We
think that is going to come out to almost $200,000 a year. In
addition, we now know about our profit lines, profitable
products. We are on track this year to improve our EBITA by
about 12 percent. I don't think any of those things would have
been possible without this grant, it just wouldn't have
happened.
Mr. Towns. Mr. Zieser.
Mr. Zieser. Our particular problem is being in the medical
device industry, it is highly regulated, and the regulations,
especially in Europe and throughout the world, are moving
targets. There used to be, like I said in my presentation about
the FDA to be the bellwether for the world, but the Europeans
have cleverly outwitted us and really putting burdensome
regulations and testing that needs to be repeated and repeated
and repeated. And without this MATAAC money I certainly
couldn't afford the design for circuit boards and sophisticated
things like that. We just don't have that talent pool within
our business. We are an assembly operation, we put parts
together. We utilize the software programs for the machines,
which the body doesn't change; a leg moves the way it moved
centuries ago. It is really a no-brainer, why they put all
these burdensome and heavily expensive regulations in front of
us. It just--we are going through it now again in Japan with
this IEC 60601-1, which is a new standard for electrical
safety. They had to put our machine into a humidity chamber, 90
percent humidity for I don't know 8 hours to see if it would
short out. You know, you don't take these machines into a
sauna. So why they make this regulation so intense it is just
ridiculous.
Mr. Towns. Mr. Greenblatt. Thank you very much.
Mr. Greenblatt. I think it is an accelerant, it cranks you
up, you get to the results faster rather than being pokey.
We're in a recession now so everybody needs to get super
charged. We have to get fired out of this recession fast.
Mr. Towns. Do you have a message for the Members of
Congress that are responsible for the TAAF budget in the
future; do you have a message?
Ms. Britton. Anything you can do to accelerate innovation
and help manufacturing is absolutely imperative. Manufacturing
has been moving away from this country and it provides jobs and
that flow needs to stop and reverse.
Mr. Towns. Thank you.
Mr. Zieser. I say again we're at the tip of the spear, many
of the people and vendors and suppliers that we do business
with would never export anything, but we're the assembly
operation that collects their output, puts it in a package and
moves it across the border. And for those reasons small
companies like myself are really dependent upon this type of
grant assistance to push us over the mark and keep us
competitive.
Thank you.
Mr. Greenblatt. This helps American manufacturers that have
been hit by trade improve their game so they can be profitable
and retain their employees and hire new ones and prosper in the
future.
Mr. Towns. Thank you very much. On that note, Mr. Chairman,
I yield back.
Mr. Platts. Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman, and I was
particularly struck, Mr. Zieser, by what you said a lot of
other manufacturers would never export anything. And I happen
to believe that may be part of the problem with the U.S.
economy. We're rather insular, we have a huge domestic market,
we don't have to. Or at least historically we didn't have to.
But frankly as you look at the global economy we have got to
reposition ourselves to be competitive. And I very much
appreciate all three of your stories in terms of how this
program--and I want to pick up on what you just said Mr.
Greenblatt. It isn't just help us survive, it actually is
reposition us to be competitive against Chinese, to pick one
country. I was particularly struck, I love your story, I mean,
bagel baskets, and now we're doing precision, custom fit, laser
guided products for very sophisticated clientele and we're out
of the bagel businesses, and we have ceded it to the Chinese, I
guess, but you have been able to create a new niche, with this
help, I wonder if you could tell us a little more about that
story. If the Chinese are paying $2.50 an hour for a worker and
you're paying $25. I mean on its face it sounds like you're
doomed, you can't possibly compete with that, and yet you are.
I wonder if you could just expand a little bit on that
transition and how you've in a sense gone global too with what
you're doing.
Mr. Greenblatt. We're using three techniques to beat China,
quality, engineering, quick. We are not going to be the
cheapest guy in town, but we're going to give the best quality
parts in the world. So for example our laser, it cuts plus or
minus 4/1000ths of an inch. Okay, our punch, our sheet metal
punch is punching plus or minus 4/1000ths of an inch. China
can't touch that. We have a press break in the back that when
it bends 132 tons of force, it's like 66 cars, it's doing it
plus or minus 10 microns.
So we're offering the best quality. We're also offering
engineering. 20 percent of my employees are degreed mechanical
engineers. So we are coming up with innovations that blow away
our competition. So we are figuring out ways to hold parts in
baskets so that, for example, Toyota, a big client of mine, is
able to run their factory more efficiently. So they are getting
33 percent improvement in their product lines and their
projects, okay, they don't have to hire 33 percent more people
or they don't have to build 33 more factories. They just need
to use my baskets which are engineered and so innovative that
it makes sense to buy from us.
And the third reason is quick. We ship faster than anybody
else in the world. Two weeks ago we got an order for 4,500
baskets that a Chinese company couldn't deliver and we did it
in 4 business days. We never made these baskets before. So we
go from 0 to 60 faster than anybody else.
So again it is quality, it is engineering and it is quick.
That's the critical secret sauce for our effectiveness.
Mr. Connolly. When were you in the bagel basket business
were you in the export business?
Mr. Greenblatt. We were in Brooklyn, New York, and an
export to us was shipping to the Bronx.
Mr. Connolly. Now you are in the export business.
Mr. Greenblatt. But now we ship to 36 countries.
Mr. Connolly. How did you develop the expertise to do
business overseas? How did you make that--I am thinking about
what Mr. Zieser said because it is so true about so many people
are just not export oriented and yet you made that transition
quite successfully and it is now a key part of your business
model.
How did you do it?
Mr. Greenblatt. It's a great point. I mean, 11 percent of
American manufacturers export. It's 25 or so--28 percent in
Canada. And they're very similar to us. But it's 45 percent in
Germany. So we're missing a key strategy to grow. If we were to
grow at 20 something percent, like the Canadians, the recession
is over. It's all done.
So what we need to do is get manufacturers to focus on 95
percent of the world's consumers. We're just 5 percent.
Mr. Connolly. How did you do it?
Mr. Greenblatt. We did it by--we have a significant
Internet presence. We've translated our Web site into multiple
languages. And what happened also is we get a lot of referrals.
So we sell to Americans transplants. So like a Japanese factory
that's built here will have engineers that talk with the mother
office and refer us. So we ship to--as Congressman Platts
mentioned, we ship wire forms to China now.
Mr. Connolly. Yeah, but you had to, if I can, just one
second, Mr. Chairman, if your idea of export was to the Bronx,
and today you're shipping to 36 countries, you had to learn--
you had to learn about laws governing entrance to other
markets, you had to learn about free trade or unfree trade laws
that might have tariff and non-tariff barriers to your ability
to export. You had to look at their laws in terms of, like Mr.
Zieser was talking about, European standards that are an
impediment actually to your exporting your product, maybe
deliberately to protect domestic markets. You had to learn all
that. You had to deal in other cultures and other languages you
weren't used to doing. How did you manage that successful
transition? Did that cost a lot of money?
Mr. Greenblatt. It's a challenge. Mostly, we're dealing
with mechanical engineers--degreed mechanical engineers,
process engineers, and in many of these countries they speak
English fluently. So there was less of a language topic. Number
two, we're not selling a product that a consumer's using in a
medical environment. We're selling a wire basket that goes into
a factory in another country. So there's less--the Singapore
equivalent of the FDA is not going to be focusing in on me. So
I have some advantages over some of the medical firms out
there; smaller medical firms.
So it's a challenge. The biggest challenge is the cost
differential. I mean, making something in America costs 20
percent more than it does in Canada or in Germany or in France.
So that's our biggest disadvantage. And we have to get more
competitive with these countries so that we can thrive and
prosper more.
Mr. Connolly. If the chairman would allow.
Mr. Zieser. You know, it's funny, he mentions Canada.
Canada is our largest trading partner. Unless you're registered
with Health Canada--and that application fee, I believe, is
like $35,0000--you can't export over there. And then they also
have to charge you a certain percentage of your sales in
Canada. So talk about these regulations, it is a trade barrier
between USA health care companies or private medical device
manufacturers and trading in Canada. And that's something that
maybe not this committee, but I would just like to bring that
to your attention.
The other thing about medical devices, small companies, I
rely a lot upon the services of the U.S. Commercial Service.
They have market sector specialists in all these countries.
They help you identify. They do a gold-key search program. They
identify potential distributors, customers. You can go on a
site visit like with this fellow in Turkey; I met him once. We
do Skype over the Internet for training. Because after you sell
our products, you have to warranty them and you've got to make
guarantees to the customer that you're not going to be stuck
with a lemon and how do you repair and reprogram the devices?
There are sophisticated electronics involved.
So it's kind of a challenge to set up an operation in a
foreign land, especially for a small company. And I rely a lot
on the U.S. Commercial Service and all the services that they
offer.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Platts. Thank you.
One quick final question and we'll wrap up this panel. You
basically have all addressed this but not stated this
specifically. In dealing with your TAAC--MATAAC, in this case--
it sounds like the expertise of the staff you're dealing with
all were very good matches for what your needs were. Because of
the loss of one our witnesses, we're not going to have another
TAAC represented.
But is that an accurate statement, that when you were
seeking that expertise, that the staff at the TAAC or those
consultants that you worked with through the TAAC all really
were good matches for the level or the type of expertise for
your specific industry, your specific needs, whether it was
regulatory help or working through other countries or data
gathering and really getting the knowledge base that you needed
internally? Is that a fair statement, that they had that level
of expertise?
Ms. Britton. No, I wouldn't say it was anything down to the
technical level or specific product knowledge of the technology
at all. I think it was more the business processes around it.
He asked enough questions. He surfaced enough conversation.
Sometimes they say in metrics and manufacturing what you look
at gets--what you measure gets changed. And there's a large
amount of truth in that with the MATAAC group. Because they
have your entire management team focusing and talking and
taking time out of their day-to-day operations to think about
improvement and what's better. And just that breakaway--and as
you were saying--Mr. Greenblatt was saying--it's very lean--and
it is for all of us very lean--the mere fact that we broke away
and spent that time generated a tremendous amount of
improvements and thoughts that I don't think we would have
gotten without that assistance.
Mr. Platts. Based on that, so it's a fair statement then
that when we look at the funding of this program, that the
funding of the TAAC staff that facilitated that communication
is an equally important part as the actual grant money that go
out to a company to implement some changes.
Ms. Britton. There is no question. Because if somebody just
drops money on you and you go along doing business the same way
you've always done it, then nothing fundamentally has changed
except maybe your bank balance. So I think it's absolutely
critical.
Mr. Platts. Thank you.
Mr. Zieser. I agree with Ms. Britton. What you measure, you
will improve upon. You've got to measure the right stuff. And
they certainly helped us measure the
yardsticks and set goals and mileposts and so on. And I
really appreciated their help.
Mr. Platts. Great. Mr. Greenblatt.
Mr. Greenblatt. We worked with Todd Shevlin. And he was A-
plus.
Mr. Platts. I want to thank each of you again for your
testimony, both written and your testimony here today, and
giving us some good insights of where the rubber meets the
road. We hear a lot about programs here, but how they actually
are implemented and benefiting or not. Clearly, as you shared,
they are, in this case, benefiting your companies. And we wish
you a great continued success. Thirty-six companies today, 50
tomorrow, and keep climbing. Thank you again.
We're going to take a very short break while we reset for
the second panel. And we'll stand in recess for about 5
minutes.
[recess.]
Mr. Platts. We'll reconvene our hearing here. I appreciate
our second panel of witnesses. One, I appreciate, again, your
patience with the change in date from earlier in the fall, as
well as your patience here today.
We are delighted to have three individuals who have some
great insights to share with us: Mr. Brian Borlik, Director of
the Trade Adjustment Assistance for Firms program at the
Commerce Department's Economic Development Administration; Mr.
Bill Bujalos, Director of the MidAtlantic Trade Adjustment
Assistance Center, and we heard great testimony about your
center and your staff and your assistance to our previous
witnesses; and Mr. J. Alfredo Gomez, Acting Director of
International Affairs and Trade for the Government
Accountability Office.
Now that you're seated, if I could ask you to stand so I
can swear you in. I apologize for having you to get up and
down. Will you raise your right hand?
Do you solemnly swear or affirm that the testimony you are
about to give this committee will be the truth, the whole truth
and nothing but the truth?
The record will reflect that all witnesses answered in the
affirmative.
As with our previous panel, the clock will be set at 5.
Kind of a guideline. If you have need some extra time, that's
fine. And we'll look forward to your testimony and then getting
into a Q and A with you.
Mr. Borlik, if you'd like to begin.

STATEMENT OF BRYAN BORLIK

Mr. Borlik. Chairman Platts, Ranking Member Towns, and my
own Member of Congress, Mr. Connolly, Congressman Connolly,
thank you very much for the opportunity to provide testimony
today on behalf of the Department of Commerce's Economic
Development Administration on the Trade Adjustment Assistance
for Firms, TAAF, program. I'd also like to quickly thank some
of the TAAF directors for being here today. Bill here, Dave
Hansberger, and of course, some of our important clients, JACE
Systems, Topflight Corporation, and Marlin Steel Wire, for
being here.
Through the Trade Adjustment Assistance for Firms program,
the Department of Commerce is committed to helping firms
throughout the United States adjust to import competition and
to increase their own competitiveness and to save and create
jobs. The mission of the TAAF program is to help U.S. firms
regain competitiveness in the global economy, and as a result,
save and create jobs. The program has received high marks from
participating firms, as well as from GAO, whose new report
finds that the program has a positive impact on the firms that
it helps.
Through the TAAF program firms can receive matching funds
that expand markets, that strengthen operations, and increase
competitiveness. The program essentially provides cost-sharing
technical assistance in the development of business recovery
plans, which are known as adjustment proposals, or APs, and
also matching funds to implement projects outlined in those
proposals. Firms contribute a matching share to create and
implement their recovery plans.
The TAAF program supports a national network of 11 Trade
Adjustment Assistance Centers, or TAACs, to help U.S. firms in
all 50 States, the District of Columbia, and the Commonwealth
of Puerto Rico. Firms work directly with the TAACs to apply to
EDA for eligibility for assistance in the preparing and
implementing strategies to strengthen their competitiveness.
As you've heard today from other witnesses, TAACs add great
value to the TAAF program. The expertise and structure of the
TAACs allow them to provide technical assistance to firms on a
timetable customized to the unique needs of each firm. TAAC
directors and their staff bring extensive business experience,
knowledge of information systems, management, marketing, and
quality to identify projects
best-suited to improve the competitiveness of each unique
firm that they serve.
Upon the creation of the Trade Adjustment Assistance
division at the Economic Development Administration in late
2009, we developed a 2-year strategic plan to address
challenges the program was facing in terms of operational
efficiency and customer service. And since then, the average
turnaround time for EDA certification of petitions has
decreased from 89 days to 36 days, while the average turnaround
time for the approval of adjustment proposals has decreased
from 20 to 16 days. And this was achieved despite significant
increases in the number of petitions from firms and APs
submitted to EDA for approval. Also, 100 percent of EDA grants
to the Trade Adjustment Assistance Centers are now being
processed on time and all payments being disbursed on time to
the TAACs.
And finally, relationships have improved between EDA and
the TAACs as well as among TAACs themselves as a result of
several meetings that we've held between TAAC staff, EDA, and
program stakeholders, including Congress.
Looking forward, EDA intends to focus on developing an
improved performance measurement process for all of our
programs, including this program, TAAF, over the next couple of
years. To assist with this effort, EDA has partnered with the
University of North Carolina Chapel Hill and George Washington
University to develop draft performance measures utilizing
state-of-the-art performance measurement and program evaluation
techniques.
Looking at recent TAAF program evaluations, the fiscal year
2012 Senate Report on Appropriations directed the Office of
Inspector General at the Department of Commerce to review the
administrative costs of the TAACs and also called on GAO, of
course, to evaluate TAAF program operations and effectiveness.
And this past May, the Department of Commerce OIG completed
their report, stating that they did not determine the level of
administrative costs of the TAACs to be unreasonable.
GAO's newly released report contains positive findings
regarding the effectiveness of the TAAF program, including that
program participation has resulted in a 5 percent to 6 percent
increase in sales, and a 4 percent increase in productivity. It
also found that manufacturing firms reported that the program
was associated with increased sales and productivity. An
impressive 73 percent of the firms reported the program helped
them with profitability, 71 percent said it helped them retain
employees, and 57 percent reported that the program helped them
actually hire new employees.
Just as a quick aside, I must say how impressed I was with
the professionalism and the thoroughness of the GAO team. It
was truly a pleasure to work with them. And I truly and EDA
truly appreciates their report, and thank them for that.
So with that, I'd like the thank you for the opportunity to
provide testimony. We look forward to working with you and
continuing to work to improve the Trade Adjustment Assistance
for Firms program. Thank you. And I'll be happy to answer any
questions you have when you like.
Mr. Platts. Thank you, Mr. Borlik.
[Prepared statement of Mr. Borlik follows:]

[GRAPHIC] [TIFF OMITTED] T7041.011

[GRAPHIC] [TIFF OMITTED] T7041.012

[GRAPHIC] [TIFF OMITTED] T7041.013

[GRAPHIC] [TIFF OMITTED] T7041.014

[GRAPHIC] [TIFF OMITTED] T7041.015

[GRAPHIC] [TIFF OMITTED] T7041.016

[GRAPHIC] [TIFF OMITTED] T7041.017

[GRAPHIC] [TIFF OMITTED] T7041.018

Mr. Platts. Mr. Bujalos.

STATEMENT OF WILLIAM J. BUJALOS

Mr. Bujalos. Thank you, Mr. Chairman. I am Director of the
MidAtlantic TAAC, responsible for administration of TAAF in New
Jersey, Pennsylvania, Virginia, West Virginia, Maryland,
Delaware, and the District of Columbia. My testimony has been
submitted earlier, so let me just briefly outline it so that
there should be some time for questions.
I've been the director of MATAAC for the last 13 years, and
I have to tell you, I am struck by the utter uniqueness of this
program. I could be wrong, but in my humble opinion, there's no
other agency or endeavor in the Federal Government that does
what we do. TAAF is an example of the government acting smart
by doing only a little. And doing it well. It's not a
manufacturing assistance program. It's not a jobs program. It's
not a corporate welfare program. Firms in the program receive
no public money. TAAF doesn't pick up the pieces after
catastrophic layoffs have taken place and attempt to create new
careers out of whole cloth.
We're not consultants. We don't sell projects to keep our
employees busy. In other words, we don't compete against the
private sector with public money. It is a firm stabilization
program. It is a trade remedy aimed at small firms under
existential threat. Let's be clear. I believe in free trade.
Let me say that again. I believe in free trade.
Further, I believe that it should be the policy of this
government to support the eventual elimination of all barriers
to global free market. Our focus is exclusively on heretofore
competitive small enterprises. Heretofore they were
competitive, blindsided by tides of imports, in many cases.
Sure, they should have kept up with the latest news about
pending trade agreements that might affect them. Sure, they
could have mitigated the damage had they done so. Of course, it
wasn't smart to ignore the necessary business process upgrades
so that they wouldn't be surprised as imports ballooned. Shame
on them for spending so much time trying to make payroll by
Thursday afternoon.
We've heard from previous testimony how lean some of these
companies are. And I can tell you from personal observation,
that's not quite an accurate statement. It's beyond that, in
many cases. More often than not, by the time I see them,
they've spent the last few years burning working capital--
burning it--in a vain attempt to remain competitive through
price cutting. I mean, that's all they had, just that.
For example, the aggregate profile of firms entering TAAF
in my region include the following: A 20 percent sales decline,
a 10 percent productivity decline, a 60 percent earnings
decline, and more than 12 percent of the employees have been
let go. More than simply not sustainable, this profile is a
death spiral for a small business. And there are ripple
effects. More than three-quarters of the firms that I deal with
are located in rural areas where they are either the primary
employer or, in some cases, the only employer in the township.
We only do three things: One, we prove trade injury; two,
we develop business plans unique to each firm's specific
circumstances. Three, we partner with them in engaging outside
consultants to implement change. In other words, to take on the
risks associated with not doing the same things over and over
again and expecting different results.
Our overarching mission then is the upgrade of global
competitiveness, something that only they can achieve. That's
why they have so much skin in the game. Not only do they not
receive any public money--and actually, they have to pay into
the program--but they also must do something to get any benefit
out of it.
Does it work? Well, nationally we surveyed just under 1,000
active clients. Nationally. This isn't just MidAtlantic, or
MATAAC. These are the aggregate results since program entry.
Aggregate results. Some companies do better. Some don't do as
good. These are the aggregate results: 4 percent jobs growth,
26 percent sales growth, and 21 percent productivity growth.
And by the way, I'm not foolish enough to believe that
TAAF can claim sole responsibility for those results. We
played a part, as did the consultants that we engaged and the
managers that provided leadership, and the employees who
learned how to work a lot smarter than they used to. This isn't
trivial, in my view. When then entered the program, every
company was seriously injured and unable to compete against
imports. What we did at the end of the day was facilitate an
environment where entrepreneurs--and you've seen some of them
today--could execute change that heretofore was financially
unattainable, at least immediately. Probably in several years,
if they had some luck.
Could the program be improved? I believe it can be. For
instance, if our mission is the upgrade of the global
competitiveness of the trade injured--that specific
classification of company--then what's the best methodology we
should use to measure, track, and score that achievement?
Secondly, what's the optimum deployment of resources that we do
engage? Third, what minimum levels of acceptable performance
should be evaluated, scored, ranked and held accountable
against the TAACs? And would it be worthwhile at some multiyear
interval, yet to be defined, to rank TAACs by their score and
subject the lowest one to a rebidding of their cooperative
agreement? And given the importance of our mission, shouldn't
we require substantial--and I'm using that word deliberately--
substantial business credentials of all key hires going
forward?
And finally, we've all heard the term AP or adjustment
plan. This is an adjustment plan. When we add the financials,
it's about a hundred pages. It's not trivial documentation.
Shouldn't approval of the adjustment plans be devolved to the
TAAC directors by virtue of the fact that these tones are
robust business plans unique to each firm's financial,
organizational, and operational circumstances, and that short
of actually remedying themselves, nobody external to the TAAC
is qualified to evaluate them in any meaningful way.
Make no mistake, even if none of what I've just
outlined, those four or five things, if none of those
things were ever implemented, TAAF is still an impressive,
agile, focused and effective trade remedy as it is. Its
business model is such that I would argue should we ever get
serious about the revitalization of the Nation's small business
sector, we would be well advised to at least consider it a
platform of choice.
I thank the committee for giving me this opportunity to
share my point of view on TAAF, but I only help manage it. It's
more important that you listened to and you heard the actual
entrepreneurs that have benefited from what we do, because
they're at the front line. The friend that was sitting right
here, they're at the tip of the spear, not us.
Thank you very much for at least allowing me to be part of
the discussion.
Mr. Platts. Thank you, Mr. Bujalos.
[Prepared statement of Mr. Bujalos follows:]

[GRAPHIC] [TIFF OMITTED] T7041.019

[GRAPHIC] [TIFF OMITTED] T7041.020

[GRAPHIC] [TIFF OMITTED] T7041.021

[GRAPHIC] [TIFF OMITTED] T7041.022

Mr. Platts. Mr. Gomez.

STATEMENT OF J. ALFREDO GOMEZ

Mr. Gomez. Mr. Chairman, Ranking Member Towns, Mr.
Connolly, good morning. I'm pleased to be here today to discuss
the Trade Adjustment Assistance for Firms program administered
by EDA.
Over the past decade, U.S. imports have almost doubled,
reaching $2.7 trillion in 2011. During the same period, the
U.S. entered into free trade agreements with 14 partner
countries.
Mr. Chairman, as you noted in your opening statements,
although trade expansion can be beneficial for all trade
partners, many firms and workers experience difficulties
adjusting to import competition. The program, through 11
centers, or TAACs, across the country provides technical
assistance to these firms so that they can remain competitive
in the global economy.
My statement today is based on a report that we issued
recently in response to a mandate that we review the operations
and effectiveness of the program. I will focus on three main
areas: First, the results of recent legislative changes in the
program's operations; two, the performance measures and data
that EDA uses to evaluate the program and what these tell us
about the program's effectiveness; and three, how program
funding is allocated and spent.
First, we found that the changes that Congress enacted in
2009 contributed to improvements in program operations and
increased firm participation. For example, the creation of a
director and other full-time positions for the program reduced
the time to certify firms. Also, the inclusion of service
sector firms and the expansion of the look-back period from 12
months to 36 months resulted in additional firms participating
in the program.
Second, we found that EDA's performance measures and data
collection for the program provide limited information about
the program's outcomes. EDA does not systematically maintain
data collected by the centers on the firms they assist,
resulting in gaps in centralized data that EDA could use to
evaluate the program and need reporting requirements. Given the
weaknesses we found in the data collection, we undertook
further analysis to determine the program's impact. So our
economic analysis showed that there is a small positive and
statistically significant relationship between program
participation and sales. Firms participating in the program
experienced a growth of 5 to 6 percent in sales, although other
factors had a stronger effect on performance.
So we also conducted a survey of 163 firms that
participated in the program. The survey showed that the program
had a positive effect. The graphic on page 7 of my statement
shows some of the survey results. So, for example, we found
that more than 90 percent of the firms reported that they were
satisfied with the services they received from their center and
the consultants. And you heard some specific examples from the
first panel this morning. Also, 82 percent of the firms
reported that the program helped them stay in business.
Third, in terms of how funds are allocated and spent, we
identified several weaknesses pertaining to EDA's funding
formula. EDA has allocated funding to the 11 centers. However,
its formula does not take into account the potential number of
firms in need of the program and differences in cost across the
centers. Consequently, centers that may have a greater number
of trade-impacted firms receive similar funding as those
centers serving a much smaller number of firms. A revised
formula should use reliable and appropriate measures of need in
each State or region.
In summary, although funding for the program at less than
$16 million is small relative to the rise in imports over the
past decade, our economic analysis and survey results show that
the program has delivered positive results for firms. The
changes that Congress enacted in 2009 gave EDA and the centers'
officials more flexibility in certifying firms and increased
firm participation.
Lastly, EDA's allocation formula does not factor in
differences in program need and cost across the regions. We
have recommended that Commerce establish more effective
performance measures, improve its data collection efforts, and
allocate funds in a way that considers program needs and costs.
Mr. Chairman, Ranking Member Towns, Mr. Connolly, this
completes my statement. I would be pleased to respond to any
questions.
Mr. Platts. Thank you, Mr. Gomez.
[Prepared statement of Mr. Gomez follows:]

[GRAPHIC] [TIFF OMITTED] T7041.023

[GRAPHIC] [TIFF OMITTED] T7041.024

[GRAPHIC] [TIFF OMITTED] T7041.025

[GRAPHIC] [TIFF OMITTED] T7041.026

[GRAPHIC] [TIFF OMITTED] T7041.027

[GRAPHIC] [TIFF OMITTED] T7041.028

[GRAPHIC] [TIFF OMITTED] T7041.029

[GRAPHIC] [TIFF OMITTED] T7041.030

[GRAPHIC] [TIFF OMITTED] T7041.031

[GRAPHIC] [TIFF OMITTED] T7041.032

Mr. Platts. I will yield myself 5 minutes for purposes of
questions. Most of my focus is going to be on really a cross-
section of all three of your testimonies and the administration
of the program. Because clearly, from the previous panel,
companies are benefiting from the program. And certainly the
three that were here today and their interactions with MATAAC
shared their great appreciation and, in fact, they perhaps
wouldn't still be in business today, but for that assistance.
But looking at the big picture is what I really want to try to
focus on on this panel.
Mr. Borlik, in your written testimony as well as today, you
talk about improving your performance evaluation of the
program. I think that's critically important. In your written
testimony, you say EDA intends to focus on developing an
improved performance measurement process over the next 2 years.
I guess a two-part question. One, is that performance
measurement process that you're looking at going to include
annual review of the TAACs? My understanding is their contracts
are renewed annually. Is that accurate?
Mr. Borlik. That is correct. The grants are made annually.
They are for several years, usually. But several years. But
yes, annually.
Mr. Platts. As far as this new approach on performance, is
there going to be a more involved review or evaluation of that
performance of each of the 11 TAACs as part of this new
process. And then you talked about in your testimony that in
putting this new process in place, that it's going to take 2
years. The second part of my question is: Why is it is going to
take 2 years?
Mr. Borlik. Right. So the performance analysis process,
performance improvement process that we're working on with the
University of North Carolina and George Washington is going to
include the TAAF program and the intent is certainly to develop
a whole suite of performance measures where EDA with its
regular programs now focuses on investment leveraged and on
jobs created. With the TAAF program, we look at a number of
performance measures, including the sales and employment and
productivity of participating firms at the time of
certification, after 1 year following certification, and 2
years after completion of the program.
So the point of this performance measurement improvement
system is going to result in an increased larger suite of
performance measures. And we plan to work in collaboration with
the TAACs and with a great amount of EDA grantees and also with
Congress along the way to develop what those metrics will be,
and then yes, the intent would be to apply the relevant metrics
to the TAAF program in close consultation with the TAAC
directors.
Mr. Platts. But specifically, to the evaluation of the 11
TAACs, is there going to be a strengthened, enhanced annual
review of those? Again, why the 2 years?
Mr. Borlik. Right. So yes, the performance metrics that we
develop would be applied to the TAACs. We don't know exactly
what those will be quite yet. We'll work in consultation with
the TAACs to make sure those make sense, but the intent is to
apply those to each of the 11 TAACs, whatever those end up
being.
The 2 years, that takes into account the GPRA, or the
Government Performance Reporting Act, requirements for forms
that need to be filled out by grantees. But it's not as if we
won't be able to do anything for 2 years. We're going in
phases. And we anticipate fairly soon, hopefully over the next
6 months or less, 3 to 6 months, to actually begin piloting
some of these measures and sharing those with the Trade
Adjustment Assistance Centers.
We're in the process right now with the our research
partners of developing a suite of what those measures might be
like. It's not going to take 2 years to completely develop
those. The 2 years is the whole process when you include the 9
months for developing the forms for GPRA reporting.
Mr. Platts. I won't be in this position a year from now and
the coming 2 years. Perhaps Mr. Connolly or Mr. Lankford. As
two retiring Members, Ed and I won't be here, but we know our
colleagues that still will.
When I read your testimony in preparation for the hearing--
and I am glad you're focusing on performance evaluation--but
we're talking about a 2-year plan to put that in place and then
begin. I hope it's 3 to 6 months and not just as a pilot but
that--that is one heck of a long time.
Related to that specific evaluation of the TAACs, do you
know when--and I know you're relatively new in your position in
the division being stood up--but when the last time any one of
the TAAC's contracts was put out for bid; rebid?
Mr. Borlik. No. They have not been. They traditionally have
not been. I know that that--the Department of Commerce's OIG
alludes to that--not alludes, but recommends that we consider
doing that.
Mr. Platts. My understanding, it's been 30 years. Is that
accurate?
Mr. Borlik. Right. Yes, I think it has been about 30 years.
Mr. Platts. When I read that, it seemed like 30 years we've
not rebid any of these seems pretty much a closed market. And
competition for those companies that are participating for the
government itself, the fact that we're not looking at is there
something else in that region, wherever it may be, that may
able to do it better, we don't know unless we ask.
Mr. Borlik. Right. It's a great question. I think the
Department of Commerce is open to that possibility. We would
want to work very closely with Congress on that because I do
know that we have some stakeholders in Congress who feel
strongly about whether or not to bid it out. But I would say
the Department of Commerce is open to that.
Mr. Platts. Well, any of my colleagues that want to stand
in front of the camera and say they don't think it's a good
idea to rebid taxpayer contracts on a regular basis, I would
love to stand next to them and tell them why I think it's a
good idea. Because to me, when I read that, I hope that's part
of that reinvigorated performance process, is that these are
11--no disrespect, Mr. Bujalos to yours. I don't have the data
to compare you to the other 10. But the fact that we're not
saying, Hey, here's what you're doing. Let's see if somebody
else can do it better or not. But the fact that we're not even
asking the question over 30 years is just unacceptable.
Mr. Borlik. Point very well taken.
Mr. Platts. To my colleagues that will be here, I hope that
question is followed up on very closely.
I've got a whole host of other questions that relate to,
Mr. Bujalos, your testimony. And Mr. Gomez. But we'll come back
around for a second round. But I'll yield to the ranking member
for purposes of questions.
Mr. Towns. Thank you very much, Mr. Chairman.
Let me ask, if you have companies that are not failing
because of trade injury, do you think this model would work?
Mr. Bujalos. Oh, yeah. I mean, I can't be any more specific
than that. I've had a long history of working in companies. And
in my last gig before I took this gig, I was vice president of
one of the East Coast's largest management consulting firms.
And I've spent a long amount of time with a lot of companies
that weren't trade-injured. And I spent that time with
companies that were in the Fortune 500 and also in the Inc.
100. The majority of them were family-owned. Some were traded
publicly.
There is something magical--and I'm using that word
deliberately--there's something magical about not giving
somebody welfare but convincing them, and in many cases,
against their own initial intuition, to make changes that
they're not used to that are not part of their default. And
working through that exercise, almost emotionally in some
cases, where they say, Okay, if I have a partner that will
partner with me and guide me during that process, then it might
work, because all we are is seed money. It's just a seed.
We have to get a company--in many cases, they're in crimson
red ink--off the edge of the table in mid-air by the time we
see them. And all I've got to do is get them to the point where
they have the confidence and they're looking at black ink and
the training wheels can be taken off and they're own their own
and doing their own investments.
One of the things we do in the plans, we write these
Adjustment Plans for the entire turnaround of the enterprise.
Not for $75,000. Does anybody really think it takes $75,000 to
turn around a $10 million business? No. It's closer to a
million by the time you throw in hardware and software and
equipment and robotics and a whole bunch of other things. We
want them to get to the point where they willingly and can
afford to invest on their own on a routine basis. And that's
the objective of what we do.
Mr. Towns. You know, thinking about the fact that you only
have $16 million, how are you able to reach and have such a
great return--reach all these people and have such a great
return? How can you do it?
Mr. Bujalos. It's not universal. I don't want you to walk
away with the impression that they're all successful. They're
not. We're dealing with a bell curve, right. And we're dealing
with a certain part of the business bell curve--the extreme
left-hand side of it; those that are injured. By the time we
see them, they are injured. They're not part of the normal
universe of companies.
By the time we see them, there is a higher percentage of
those owners and chairmen and CEOs that have been mugged and
they're willing to listen now. This isn't a sales pitch
anymore. This is existential discussion. And I have a
sneaky feeling that that has a greater impact by that point
than the same discussion a year earlier would have had. And I
think that has something to do with it, too.
You put yourself in their shoes. You've risked your
children's education. You've risked your ability to make your
mortgage payments on your house. You've risked, in some cases,
your marriage. And all of that now is in jeopardy. And somebody
comes along and says, I want you to take even a further risk.
But I'm going to be your partner in that effort and we're going
to measure it one step at a time. And that has an effect on
people. It really does. And I suspect that that platform, the
fact that they get no money, that they have to put their skin
in the game, and that we set it up so we that can measure the
metrics on a short time interval so they can see the
improvements that are taking place, it changes attitudes and it
changes peoples' default behavior. And I think that's
applicable to business in general, not just the trade injured.
But that's just my opinion.
Mr. Towns. Right. The uncertainty of 2011 in terms of
budgetary and all of that, how does that play--does it play in?
Because the point is the uncertainty around whether it's going
to be there or not there.
Mr. Bujalos. It's a worry. See, all of our--I shouldn't say
all, but darn close to all of our outreach is associated with
some sort of referral. Somewhere, somebody referred somebody to
us as a result of people like me making speeches and doing
presentations to trade organizations, banking consortia or
their consultants that will send their clients here or clients
will talk to other clients during the rubber chicken meals.
When the word gets out that this possibility is going to go
away, well, there's--I've gotten many, many calls and emails
from companies saying--I mean, it's an investment. Put
yourselves in their shoes. You're going to invest the better
part of a year. Why should you if now you figure what, I'm
going to get a piece of paper and that's it?
It is the same kind of effect as uncertainty has in
general. Businessmen loathe uncertainty. Business in general
loathes it. Not just for TAA but for taxes and regulations and
a whole bunch of things that you all know about. Uncertainty
for TAA is just as injurious as uncertainty generally.
Mr. Towns. Thank you very much, Mr. Chairman.
Mr. Platts. Yield to the gentleman from Virginia for
questions.
Mr. Connolly. Thank you, Mr. Chairman. It's been a
fascinating discussion. Of course, as has been the case, every
time we have a witness from the 11th District of Virginia,
there's a certain aura that's projected. And, Mr. Borlik, you
certainly are keeping that tradition. So thank you.
Mr. Gomez, let me just say in the GAO report, you look at,
Commerce should establish more effective measures of program
outcomes. It should improve its data collection. And it should
allocate funds in a way that considers program needs and costs.
Those almost sound like generic critiques of any Federal
program. There's nothing unique about this. And I heard Mr.
Borlik say how grateful he was to the GAO and so forth, but it
just seems to me one could bore down a little bit more to be
more helpful than these kinds of generic critiques.
In those critiques, would one part of the solution be:
Let's invest more in technology so we can do that stuff?
Mr. Gomez. Well, in regards to the first recommendation
that we made to have Commerce look at developing more
performance outcome-oriented measures and goals is that the
whole purpose of our study was to look at the impact of the
study, or to look at the impact of the program. So from the
performance measures that Commerce has and the data that they
have, we weren't able to determine what's the impact. So we put
together an economics model, we did a regression model, where
we looked to isolate the impact that participation in the
program had while controlling for other factors.
Mr. Connolly. Mr. Gomez, I appreciate that. I'm just trying
to get at a simple question: Would more investment in more
technology, IT capacity, help them help this entity better
comply with your recommendations?
Mr. Gomez. We didn't look specifically at that, but I think
that's something that perhaps Mr. Borlik could answer if that
is a specific need.
Mr. Connolly. Mr. Borlik, do you think that might be part
of the solution in terms of looking at the GAO recommendations
and going, how are we going to implement those or better comply
with those?
Mr. Borlik. I certainly do, yes.
Mr. Connolly. Mr. Bujalos, I was absolutely fascinated by
your testimony. But as somebody who's in the consulting
business--and I heard you say you were a management
consultant--it sounds like that's what you do. You ticked off a
whole bunch of stuff we don't do and I'm sitting here thinking,
Then what is it you do do? And obviously you feel passionate
that there's great value added in what you do. But if I'm
sitting here as a layman, and I am, trying to understand your
mission in life, I don't understand what your value added is.
Mr. Bujalos. We don't want our clients to think of as
consultants. So we don't use that term. A lot of what we do----
Mr. Connolly. I don't want my clients to think of me as a
politician. We don't use that term. But I don't always succeed.
Mr. Bujalos. We bring to the table all the things that you
and I both know about. And why do we do it? We do it because it
works.
Mr. Connolly. But in fact, you function as a consultant?
Mr. Bujalos. Yeah.
Mr. Connolly. All right. So, all right. We don't want the
term, but. With the time that's left me, because I was thinking
about the bagel baskets, give us an example, if not two, walk
us through a successful example or an unsuccessful one from
soup to nuts how you functioned and how it made or did not make
a difference. Because I think you made a very impassioned
example of what's at risk; what some of these small businesses
risk. Just walk us through how it works.
Mr. Bujalos. I'll give you two. One is not in MATAAC. This
one is in northwest United States. And the company no longer
exists because it was acquired and split up and--the function
still exists, but it's is not there anymore. I think the owner
now lives on an island someplace.
The company made--and I tell this in a lot of my
presentations because I've done the research to make sure it
was true because I couldn't believe it at first. The company
was a family-owned company that made ceramic clay flower pots,
the kind you buy at Home Depot. High tech? Not so much.
Expensive? Not so much. They did it for like 50-plus years
until a family in Taiwan realized they could do the same thing,
ship them across the Pacific, offload them up and down the West
Coast of the United States, and sell them for a price that was
less than our client's cost.
Now flash forward 6-1/2 years. A ceramics engineering
company was hired and a marketing firm were hired. The company
was sill in the ceramics business, but now they were making
ceramics for Boeing Aircraft. Not everybody survived. About 70
percent of the employee base decided to stay on the train, but
they had to listen to something that modified their behavior
and was not necessarily pleasant; i.e., you've got to go back
to school. But I've got a family to raise, I've got this and
I've got that. But that is why God made nighttimes and
weekends.
So now they're making a much more sophisticated product
mix. They're making it for a customer mix that isn't very
tolerant of an occasional chip or crack. Not very forgiving at
all. And they have to understand--and now they do--that they
are in a kind of a business where somebody on this planet is
going to clone it in 9 months--and probably cheaper than you're
doing it. That means they had to become pretty masterful at
creating new products quick time; knowing also that 80 percent
of the time, your new product is going to be a miserable
failure, or even mediocre, at very best. So you've got to do a
lot of them and you've got to be prepared for a lot of failure.
But one or two of those are going to be the blockbuster that
are going to pay for all the other mistakes. That's the kind of
world they're living in now. It's not necessarily comfortable,
but it's quite rewarding. That's the first example.
Second example. This one does exist right now in your
State. And I like it because it's not sexy. This is the kind of
a business and a kind of an industry that the experts and the
gurus like us would have said 30 years ago: Give it up. Don't
mess with it. The world's going away from this stuff. It's
going to Indonesia. It's going to Vietnam. It's going to China.
It's going to wherever. The company makes shoes. Shoes. Feet,
shoes.
The company was in mid-air, in red ink, bought by a former
salesman from another shoe company. I think he bought it out of
bankruptcy but I'm not sure about that fact. They were in very
bad shape. Joined with us. The problem was we didn't get to
join with them until the third year. That's why lots of time
they're burning their working capital like crazy, figuring they
can compete by simply slashing prices. Whey they finally
realize that that's not working, it's really dangerous.
One of the first projects we did after they were certified
and given the grant was we decided to hire a small software
company, a three-man shop, and they were able to work with the
company's CEO and his engineers to come up with an RFID tag. If
you don't know what that means, it's a tiny little grain of
sand that's a radio frequency identification. And the company
inserted one RFID tag in every single shoe in inventory.
Now as a side bar, understand if you're in the business of
making shoes, it's shocking, I know, but they tend to walk at
the end of each shift. So you have what is called inventory
shrinkage occasionally. Putting an RFID tag in each shoe
eliminated that by a Monday morning, saving about a million
dollars worth of inventory costs. That began to turn red ink
into black ink.
Second thing. Hired another software company. Because
consider something, if you're in the rag trade you have bolts
of fabric and you use geometry to figure out what the pattern
has got to be and use a cutter or laser to cut out maybe a
thousand sheets of fabric to come up with the dress or the
shirt or the suits of whatever you're doing. But if you're in
the business of making shoes, you're not dealing with a perfect
rectangle. You're dealing with an animal hide. Each one is
unique. But you still have the same yield problems, you still
have the same waste problems. So how do you deal with it?
So we had another software company that took a table like
this, but made it a light table with a camera up in the ceiling
so that the company could take the hide, place it on the table,
a picture was taken of it, digitalized. The software then
arranged the geometry of the pattern that was unique to that
piece to maximize the yield from that piece and a laser cut it
out. And then the next one and on and that sort of thing. I
don't know what the savings was. It wasn't as great as the
millions dollars, but it was significant. And it also gave this
particular company a niche no one else ever thought of.
The third thing. And this one is still in process and it's
failed twice, so I don't know if this is going to work. But in
the shoe industry, traditionally, there has been an in-elastic
market, a niche in-elastic market. The very high end. Some
people have seen the movie called ``Prada.'' There's a shoe
called Prada, where people are willing to pay thousands of
dollars for well-made Italian leather luxury shoes. Those
particular customers don't care if it costs $1,500 or $2,500.
Well, our client wants to make an American Prada. One way
to do that, aside from branding, because it's just like with
Toyota and Lexus, you have to use a different distribution
channel, different names, different Web sites, different
everything, but also, he has to have new talent. So we've tried
so far twice to hire a retired Italian artist, but there was a
cultural problem with south Virginia and Rome. So we're trying
it again this next summer to see if that works. Because my
friend is determined to see if he cannot be successful in--it
won't be called Prada, obviously--but to create something
equivalent to that and proudly put a gold USA stamp in it.
Mr. Connolly. Thank you.
Mr. Platts. I thank the gentleman. Ms. Norton, did you have
questions? I yield to the gentlelady.
Ms. Norton. Thank you, Mr. Chairman.
Mr. Gomez, I was fascinated by the ratio of funding to
imports here. According to your report, $16 million available
for these 11 centers to deal with a universe of
$1.3 trillion in imports.
I have a couple of questions. You look at how the funds,
this small amount, are divided to these 11 centers and the one-
third allocated to the centers, according to what you call
three variable factors, look like it has to do with the
effectiveness of those centers: Approved business recovery
plans, employees in approved recovery plans, and firms
achieving expected results. That's really an effectiveness
measure, is it not?
You indicate as what needs to be done, and I am quoting
here: ``A funding allocation formula should distribute funds
according to the needs of respective populations.'' Now I need
you to define for me what you mean by ``needs,'' given the
diversity of the so-called populations that these centers deal
with. The needs of firms, the needs of the geographic area. I'm
not certain I understand.
Mr. Gomez. Right. So two-thirds of each of the centers'
budget is--essentially, they all get the same amount of base
funding. The one-third that you're referring to is based on
those three variables. The point that we were making on the
funding formula is that each region has different firms in
need. So we were asking Commerce to look at revising its
formula allocation to look and see the number of firms that may
be in need. So they may differ from one center to another.
Ms. Norton. So if a center had a----
Mr. Gomez. Greater need, for example, perhaps that should
be taken into account in their funding formula.
Ms. Norton. Rather than this base equal.
Mr. Gomez. Correct.
Ms. Norton. That's very interesting. I know that when
you're in Congress everybody wants to make sure they get the
same thing everyone else gets. But when you're dealing with
such a small, tiny amount of funds, it does seem to me the
highest and best use needs to be taken into account.
I have to ask you, given the small amount available to
these centers and it really miniaturizes when you divide it 11
ways, are there case studies, is there any way to make this
replicable to other small businesses, such as my colleague's
question, to give an example, to go through what a firm goes
through. You help a business. That business learns. Is there
any way that other businesses, either in that area or in the
larger universe can learn from that experience or is that--
forgive me the term--lost, because it helps one firm and nobody
ever hears about it and can replicate it himself or herself.
Are there case studies? Should those be done so that firms
see what other firms have done and perhaps one can get a bigger
bang out of this small amount of funds. Could I ask your views
of the three of you? And if not case studies that were
publishable, is there any other way to share whatever a firm
gets from its relationship with one of the centers?
Mr. Bujalos. We do at least one every month.
Ms. Norton. One what?
Mr. Bujalos. Case study.
Ms. Norton. And you publish that?
Mr. Bujalos. Yes. Well, we send it to the head office.
There is a book of them. We do them quite often.
Mr. Borlik. We've collected a great amount of those. And
the Trade Adjustment Assistance Centers have done a terrific
job in sharing those with us at EDA. They're busy as it is, and
we've asked for a little bit more in collecting these case
studies so that we can share them both within the Department of
Commerce, across the administration, and eventually, hopefully
on a Web site where we can promote the best practices. We do
have to be careful about confidentiality.
Just real quickly for an example--we don't have to use the
names of the companies--but there was a food processing plant
operating out of Salem, Oregon, and also in Kentucky, losing
sales to less expensive imports from both China and Chile. And
the Northwest TAAC in Portland, Oregon, helped them develop a
business recovery plan that was aimed at increasing market
share, sales and profitability, new product development. The
project started in 2005. And since completing the projects out
that were identified within the adjustment plan, they've
created 231 jobs, not only saving the business, but created 231
jobs and increased sales by $37.4 million, which for a small
business is a great increase.
I think it's a great question about whether or not we
collect examples. We do on a regular basis. We have quite of a
few of them. And the intent is to try and share those as much
as we can.
Ms. Norton. When you consider the small amount of money
obviously is not going to be get larger in this Congress and
perhaps in successive Congresses. It does seem to be that it is
perhaps the most valuable thing you could do. Otherwise, this
one-on-one as magnificent as it may be to each individual lucky
enough, and I use that word advisedly, because with the need
that may be out there, part of being one who gets this service
may indeed be luck. The value of making as much information
available to the larger universe of companies seems to me to
multiply many times what conceivably you do for an individual
firm.
I would like to ask Mr. Gomez whether or not GAO attempted
the gold standard of taking firms, or anyone has done this
perhaps with the program of taking firms that did not receive
the assistance and comparing them with firms that did, perhaps
in the same business or trade or category. Has that ever been
done, if not, should it be done?
Mr. Gomez. So in our study, that other group that you're
referring to is referred to as the control group.
Ms. Norton. Yes.
Mr. Gomez. So we had difficulty finding that control group.
So instead, the analysis that we did is we essentially compare
the firm to itself so we compared and gathered data for each of
the firms before they participated in the program and then
after participation. So that was the analysis that we did. We
did not find the information for that control group so you know
where the funds are that did not take advantage of the program
and why perhaps.
Ms. Norton. Oh, thank you very much, that's very helpful.
Mr. Platts. I thank the gentlelady, will yield to myself
for additional questions.
I want to come back on the issue of how we are evaluating
the TAACs and how it relates to the funding of the TAACs. And
it's my understanding that--and this was an issue raised by Mr.
Gomez's testimony in the study about the way the funding is
distributed, that in the 2010, 2011 fiscal year that there was
one TAAC, I believe the western TAAC that received the same
funds as New England, mid Atlantic and the western TAAC only
submitted one adjustment plan petition for a single company for
the entire year. One, is that accurate Mr. Borlik, to the best
of your knowledge?
Mr. Borlik. I would have to go back and look at that, I
know that that particular TAAC does produce many fewer
petitions than the other TAACs, I think that's accurate. I
don't recall whether it is one or not but it definitely
produced fewer.
Mr. Platts. That's my understanding, that in the entire
year, they had one adjustment plan petition submitted. And this
goes to, again, the evaluation. If that's accurate, and there's
other TAACs that have a waiting list, and it's my understanding
that mid Atlantic and New England have a backlog, I'm not sure
if this is a current number, it might have been in that same
fiscal year, but a backlog of over $6 million in unfunded
projects.
So we have some regions that have a backlog, and then we
have another one submitted just one plan. Again, that seems
like a natural to evaluate what's that TAAC doing, or I would
contend not doing to assist, because my guess is they've got
companies in as great a need as New England does or mid
Atlantic does, but they are, for whatever reason, not
performing, yet there is no annual review of that and no
consideration of making a change. And it really makes a point
of what I asked earlier about the fact that we haven't rebid in
over 30 years any of these. It just doesn't sound logical. And
it goes to the GAO recommendation that one of the flaws of the
program--again, we're trying to--how can we help raise issues
that will ultimately strengthen the program? That's the goal of
this as an oversight committee, the GAO's recommendation is to
change the funding formula so it's better allocated based on
where the need is and is being identified. And if we have
certain regions with a waiting list, we have companies saying,
hey, we need this help, and that TAAC is short of funds and
can't help all of those in need, but we have another TAAC
that's got funds they're not using. It is not a question of we
need more money, it is a better use, better distribution of the
money.
Mr. Gomez, you used a term, I think beneficiary equity is
the term used in your testimony, that the current formula
doesn't achieve that. That you could have a company in
California, you know, and a company in Pennsylvania that don't
have the same opportunity for assistance because of there's a
waiting list in Pennsylvania and there's excess funds. Is that
an accurate assessment or statement of what your report finding
is?
Mr. Gomez. That is correct, yes.
Mr. Platts. Is that something you're looking at at EDA and
to have the TAAF division to look at a change in how you're
distributing funds?
Mr. Borlik. Absolutely it is. We have for the first 2 years
of the TAAF division, we focused on operations and getting up
to speed in terms of quicker turnaround times in petition
review, and in the review and approval of the adjustment
proposals, moving forward and not just moving forward from now,
but over the past year, the TAACs and I have met and talked
about performance. We held--I think it was this past February
where we held a meeting in Washington with all 11 TAACs, and
the focus was almost entirely on performance, on what
performance accountability should look like, on what the
changes to allocation formula should look like. And the fact
that we all think, I believe, I certainly do, I know that EDA
does, and I know that many TAAC directors believe that this
allegation formula should be focused on performance. Now that
we with have kind of gotten through that initial phase of
improving the operations, we are heavily focused on
performance.
And I should clarify when the 2-year point is about EDA's
overall development of a performance measurement system for all
of its programs, by no means does that mean that we have to
wait to make changes to the TAAF allocation formula.
Mr. Platts. Okay.
Mr. Borlik. We are working on it now.
Mr. Platts. Understood. In the issue of performance of the
TAACs, for the fiscal year ended September 30th, did you have
some TAACs turn back money while you had others that had a
waiting list?
Mr. Borlik. We had TAACs turn back money, yes, we did. In
terms of a waiting list----
Mr. Platts. Unfunded projects----
Mr. Borlik. Unfunded projects in other TAACs. And EDA asked
for that money--well, required that money to be returned and
reobligated and reobligated solely to projects, not to
administrative costs, but solely to projects. And so we did
take that money back.
Mr. Platts. Is that a new approach? Because again, my
understanding is that, when I see in Mr. Bujalos's testimony,
14 times returned for every dollar that we are investing in the
program, there's a $14 returns to taxpayers because of the
productivity, because of economic growth that occurs. So it is
not a question of we need more money, but just the money we
reappropriating gets well used.
Mr. Borlik. Right.
Mr. Platts. And my understanding in the past we had TAACs
returning money, and other TAACs have unfunded liabilities, and
that goes to the beneficiary equity issue. So what you're
telling me now for the fiscal year that just ended, we are
changing that approach?
Mr. Borlik. That's entirely correct. It has always been, to
my understanding, again, I've been doing this for 2 years, that
any funds that have not been spent have been returned and then
equally divided per the allocation formula across all TAACs.
What we did this past year, and again, this is part of the new
approach under a new TAAF division, is to take those funds
back, and to redistribute those to be focused solely on the not
administrative costs, but on the backlog of services for
clients of unfunded projects for clients.
Mr. Platts. And that's where I'm hoping to get to in a
greater, in a more timely manner, meaning not just once a year
toward the end, but perhaps on a quarterly basis, if you've got
New England, you've got this waiting list of projects that have
been identified, certified, hey, these companies need help;
they have got a plan, but we just need that seed money that
would generate a $14 return for every dollar we spend. We have
other money sitting out in western or wherever TAAC not being
used in access, especially if there's, my information is
correct, one plan even submitted in that fiscal year, to do
that on a more time sensitive, because those companies that are
in need can't wait, they need the help now.
And so it sounds like you're trying to move towards that
direction and that comes back to where I started my question
which is, performance evaluation of the TAACs, as the TAACs are
looking at how the companies are using money, the division, and
EDA, and ultimately the department need to look at how the
TAACs are using the money, and to make sure that we're getting
the biggest bang for the buck here. And that doesn't seem to
have been the approach in the past, whether it was in the lack
of any rebidding in 30 years, whether it was in the way of
distributing funds.
And then a final question, and this goes, Mr. Bujalos, you
raised it in your testimony when you highlighted a number of
suggested reforms. I appreciate that you stated even if none of
them were adopted you see the benefit of the program day in and
day out. You listed six different suggestions, one of which
was--I'm trying to find it here, but you talked about the
qualifications of those who are part of TAACs and the skill
set----
Mr. Bujalos. Yes.
Mr. Platts. --because in your own testimony, I appreciated
you listed your background, which is obviously very, very
extensive business background from management, project manager,
project processing engineer, project manager engineering--you
clearly have had a very extensive background. For your own
TAACs, could you comment about the staff you have, what type
of, I'll say real-world experience do they have, similar to
what you have?
And then, Mr. Borlik, is there, in that evaluation process,
are you looking at putting in place a more definitive
requirements for the type of staff that should be manning these
TAACs that they have real-life business experience to provide
the level of expertise and assistance that these companies
need. Mr. Bujalos, if you want to go first.
Mr. Bujalos. You know what my checkered past is, the
previous panel mentioned that Todd Shevlin they worked with,
and also Dr. Mercer. Dr. Mercer is a Ph.D. In management, a
Bachelors in finance, he's retired, but we see him
occasionally. Todd Shevlin is a relatively young guy, he's in
his middle 30s, he's got a bachelor of science in finance. He's
got a bachelor of science in IT, Information Technology, and he
has an MBA with a finance subset, some from Villanova, some
from Penn.
We have another individual who doesn't work too much with
clients but works in the back office and takes care of the
certification work who has a bachelor of science in accounting
and finance. She has worked with Watson Wyatt worldwide and a
few other large companies. Todd has also been a founder of two
companies that he has since sold. His predecessor was a Salman
Jean, who also founded several restaurants and has a degree in
engineering.
Mr. Platts. So they were out dealing with these issues?
Mr. Bujalos. He's still making payroll by Thursday
afternoon and that's all that has to say about it.
Mr. Platts. That's what came through in your testimony of
your own experience sounds like those who are working with you
and----
Mr. Bujalos. I just want to add, we have seen, and I'm sure
my friend from Virginia can back this up, when you're working
with business owners, if you can sit in front of them and prove
to them that they are not going through anything you haven't
already gone through, it's much easier for you to argue the
points you want to argue.
Mr. Platts. That, Mr. Borlik, goes to, my question to you
is, my understanding is, currently there is no requirements or
input from EDA or the division of what the staff training or
backgrounds are of those staffing the TAACs. Is that something
you're looking at to try to, again, better ensure that these
TAACs have expertise that really does relate to the real world
to these companies that are in great need?
Mr. Borlik. We can certainly do that to the greatest extent
possible. I should point out that all grants that are made to
these trade adjustment assistance centers have both standard
terms and conditions from the Department of Commerce and
special terms and conditions within each award. And I'm not
entirely clear as to the level of detail that they get into in
terms of requirements and qualifications of staff, but it
certainly--they certainly address that in terms of making the
point that we expect there to be the highest quality staff
available and that the TAACs should be held accountable to
that. So that is, in one way or another, within the conditions
of the award.
Also mention I do conduct site visits myself. I'm not able
to do as many as I would like because of--EDA's travel budget
isn't exactly the highest. But I do make site visits to meet
the staff myself. I also--and to tell you the truth, I've been
very impressed with the staff that I've met. I have also, am
responsible for reviewing the qualifications--I wouldn't say
approving, but reviewing and concurring with any changes or
hires and key personnel, that's part of the special terms and
conditions of the awards.
So I do that regularly and certainly pay very close
attention to what those resumes look like, make sure that they
are appropriate. And then we, the TAAF program staff and I meet
on a regular basis and discuss program operations, certainly
including how the interaction is going between our TAAF program
staff, and the staff within the Trade Adjustment Assistance
Center. So that is something we pay close attention to.
Mr. Platts. And again, I appreciate that in taking on the
role as director of the division and getting the division stood
up, and as you talk about moving to the next phase, that
performance evaluation is a big part of it, and what you just
said was having the best qualified staff out there possible,
and that will bring me back to where we started. If we're not
doing any rebidding of saying of these 11, these two or three
are the lowest performing, so this year we're going to look at
those two or three in the coming year to rebid and see maybe
there is a team of--because you said the key is the best
qualified people doing the work that taxpayers are paying for.
So my hope is, and I will summarize, and I kind of have
three areas I raised with you, annual review, the fact you
haven't done it in 30 years, to see if there is any way we can
do it better. I hope that's something that's going to stop.
While I'm leaving the staff on both sides, the committee staff
will continue to work, and Mr. Connolly and others, returning
Members can look at. The inequity, I'll say the not well-
thought-out funding distribution that results in beneficiary
inequity that you have a company need, can't get assistance,
and have dollars sitting out in another region where there is
no one asking for the assistance that we're not addressing
that, and then making sure that we do have the best people
possible in these important positions.
So you're focused on performance, I think, in the end will
take a good program and make it great, hopefully that $14
return will be $16 or $18, because it's not a question of, from
what I'm hearing, more money, but how we're using that money,
or better allocating it.
Mr. Borlik. I can assure you I will take all of that back
to our leadership.
Mr. Platts. I appreciate it. I know we're all on the same
page here, and we're all after the same thing and this is good
government and whatever dollars we spend result in a good
return for the American people, and especially when we are
helping save American companies that are now shipping products
to China, instead of receiving products from China, so we're on
the same page. I'm going to wrap up, Mr. Connolly, do you have
any closing remarks or final questions?
Mr. Connolly. I did, Mr. Chairman, if you don't mind.
Mr. Platts. Yes.
Mr. Connolly. Real quickly, Mr. Borlik, Mr. Bujalos, and
Mr. Gomez, for that matter, when Mr. Greenblatt testified, one
of the things he cited as a small businessman and a champion of
the program was the paperwork requirement. It is onerous, it's
costly, and a lot of small companies working at thin margins,
just, it's a struggle. You concur that we could streamline the
process, I think, Mr. Bujalos, you held up something that
ultimately is something that's 100 pages. Can we streamline it?
Can we make it more user friendly for our clients?
Mr. Bujalos. Absolutely. For instance, last week, I sent
out to all of our consultants, it's about 700 of them, but the
active bunch is about 500, a small piece of computer code that
has a graphic of the American flag on it, and I requested that
they put that on each one of their Web sites with the title
Federal assistance, TAAF. That will take whoever goes to their
Web site and wants to discuss it, they push it, it takes it to
my--our Web site in MATAAC, where we have added another page
that begins the process of applying online.
Now that isn't as necessarily as cool as it might sound.
There is a lot of paperwork, there is a lot of look-back that
we have to verify because of the statutory requirements, but
there is a silver lining in this effort also that I don't want
people to ignore. It's a good thing to work hard for something,
and if we can take a company through the paperwork as quickly
as we possibly can, and force them to be in a position where
they have to look back 4 years in their finances for a company
that you and I might operate that merely amounts to swiveling
in our chair and reaching into a cabinet and pulling out some
folders.
For a lot of these companies who have shaved everything
down but bone, that's a task. Okay, well there's a benefit for
them learning what that task is all about, and the value of
going through that. And that helps people like me to help
people like them to automate what they should have automated
already. So it's not all bad, but there is a lot of paperwork.
It probably should be looked at two or three more times before
we're sure of it.
Mr. Connolly. And you concur, Mr. Borlik?
Mr. Borlik. I do concur. I do think it is way too much
paperwork. I realize, of course, that there is the statutory
need to prove import impact, there is a statutory requirement
to prove that there is injury, financial injury, sales losses,
employment losses, the regulations, I do believe, I don't know
what my office of chief counsel will think about this when I
get back, but I do believe the regulatory requirements coming
out of the statutes are very complex and require a lot of
paperwork.
Mr. Connolly. Sometimes up here we don't want to admit, Mr.
Chairman, we're part of the problem, and the requirements we
sometimes impose. Mr. Gomez?
Mr. Gomez. Mr. Connolly, I wanted to add, many of the firms
that we spoke with during our study did have that common
complaint, it is a lot of paperwork requirements. It is, as Mr.
Borlik noted, that it is the requirement that firms have to
demonstrate that have been trade-impacted. So having to look
back a couple of years to show whether the impact was on the
sales or the employees, it's that sometimes they didn't have
that information readily available and they have to get it. I
think you heard it also from the three firms this morning that
that was something that held them up also.
Mr. Connolly. Well, let me ask you a question about that,
though. I mean, Mr. Bujalos and his colleagues, aren't they in
the business of certifying that someone has been negatively
impacted? So what's wrong with having them do the certification
rather than the onus on the potential client having to prove it
themselves? Come on in, and you decide whether I am eligible
for help.
Mr. Bujalos. My suspicion however is that this requires a
statutory chain.
Mr. Connolly. Okay. I have one final question, and I do
want to echo what the chairman said, there is a certain irony
in not rebidding. Our mission here is to help companies regain
their competitiveness if we can, but we're not competing. And
maybe we found the ideal 11 who just can never be perfected and
nobody can touch them, and they should be ad infinitum those
11. But I think we ought to hold ourselves to the same
standards of the efficiencies that can be achieved through
competition. And so I think we ought to do a little self-
examination there.
But final question, going back to you, Mr. Bujalos, you
gave us two great examples. Help me understand what your role
was. Were you the ones making the recommendation, put in the
radio identification so you cut down on loss? Were you the ones
who said, you know, let's digitalize this so that we can look
at that piece of leather and be more efficient in what to do
with it. Were you redesigning shoes or showing competition?
Mr. Bujalos. No.
Mr. Connolly. What was your role that helped them with
those two stories you told us.
Mr. Bujalos. Well, the first story about the flower pots, I
wasn't there physically, that was in the northwest United
States.
Mr. Connolly. When I said ``you,'' I meant the center.
Mr. Bujalos. Okay. In the second one, I was physically
there, that was one of my personal clients. I wrote the
adjustment plan for that company and I got to know the owner
quite well. The short answer is no. What I really did was, I
think, I'm not sure about this, I think what I did over a
period of time, because I visited with them physically,
extensively, in one case, spent the entire day with them
interviewing every one of their C level executives and also
their key plant people as well as the chief executive,
individually and collectively.
All I think I really did was provide an environment where
they could start thinking about something other than trying
make that order this afternoon to get on the loading dock.
Sometimes it depends on leadership, sometimes you have a
problem because there is no leadership in a company, and I will
grant you that. But in this particular case, the leadership
happened to be there, and the kinds of people we picked for his
particular staff were there. What they really needed was the
time and the ability behind a door that was closed and phones
that weren't ringing. And it took place. I don't think I did
any more than that, to tell you the truth.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Platts. Thank you, Mr. Connolly. And it really kind of
goes to Ms. Britton's testimony in the first panel that the
assistance of the TAAC helps facilitate those internal
discussions that they actually took the time to sit down and
start to have that dialogue as opposed to just trying to get
the products, the next order out the door.
So a couple final comments, one on the statutory
impediments to streamlining, Mr. Borlik and GAO and the TAACs,
we certainly, as a body, we are always glad to have
recommendations, we know what you intended, but the way you
wrote the statute is asking for things that are not relevant to
our assessment of whether someone is trade-impacted or injured.
Those kind of recommendations, I know Mr. Connolly would
welcome those for the new session as far as how we can
strengthen this program going forward and lessen that statutory
burden.
When I talked about the yearly rebidding, I wasn't
suggesting every year you should be rebidding 11 TAACs,
that would not be very efficient--and Gerry, thank you for
great input, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Platts. But that probably every year maybe one or 2
should be being looked at for multi rebidding process, so it's
not 30 years since we've done any.
And finally, in closing, I think goes to the really heart
of this program and leveraging a small amount of money that
ultimately generates a huge reinvestment in return for the
companies, and ultimately taxpayers, is Mr. Bujalos, in your
testimony, something that stuck out to me, when he says ``We
don't pick up the pieces after catastrophic layoffs have
occurred and try to create new careers out of the old cloth.
Our job is to help prevent catastrophe in the first place. It
is a lot cheaper and immensely more effective.''
And I think that captures the importance of this program.
This is trying to not help retrain workers, and my one brother,
his steel company, his job went away, he went back to get
retrained but the job was gone, it is to try to help that steel
company stay in business in the first place.
To each of you, I appreciate your testimony, I appreciate
what you do day in and day out. Whether it is at the TAAC, at
the division, GAO, we're grateful for your work and your
testimony. We will keep the hearing testimony open for 7 days
for any other materials you want to submit. With that this
hearing stands adjourned.
[Whereupon, at 12:42 p.m., the subcommittee was adjourned.]

[GRAPHIC] [TIFF OMITTED] T7041.033

[GRAPHIC] [TIFF OMITTED] T7041.034

[GRAPHIC] [TIFF OMITTED] T7041.035

[GRAPHIC] [TIFF OMITTED] T7041.036

[GRAPHIC] [TIFF OMITTED] T7041.037

[GRAPHIC] [TIFF OMITTED] T7041.038

[GRAPHIC] [TIFF OMITTED] T7041.039