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81–520 2002

HOW CAN TECHNICAL ASSISTANCE STIMULATE

NEW JERSEY’S MANUFACTURING BASE

FIELD HEARING

BEFORE THE

SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

PASSAIC, NJ, FEBRUARY 20, 2002

Serial No. 107–44

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS 

DONALD MANZULLO, Illinois, Chairman 

LARRY COMBEST, Texas 

JOEL HEFLEY, Colorado 

ROSCOE G. BARTLETT, Maryland 

FRANK A. LOBIONDO, New Jersey 

SUE W. KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

JOHN R. THUNE, South Dakota 

MICHAEL PENCE, Indiana 

MIKE FERGUSON, New Jersey 

DARRELL E. ISSA, California 

SAM GRAVES, Missouri 

EDWARD L. SCHROCK, Virginia 

FELIX J. GRUCCI, JR., New York 

TODD W. AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

NYDIA M. VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

DANNY K. DAVIS, Illinois 

BILL PASCRELL, JR., New Jersey 

DONNA M. CHRISTENSEN, Virgin Islands 

ROBERT A. BRADY, Pennsylvania 

TOM UDALL, New Mexico 

STEPHANIE TUBBS JONES, Ohio 

CHARLES A. GONZALEZ, Texas 

DAVID D. PHELPS, Illinois 

GRACE F. NAPOLITANO, California 

BRIAN BAIRD, Washington 

MARK UDALL, Colorado 

JAMES R. LANGEVIN, Rhode Island 

MIKE ROSS, Arkansas 

BRAD CARSON, Oklahoma 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

DOUG THOMAS, Staff Director 

PHIL ESKELAND, Deputy Staff Director 

MICHAEL DAY, Minority Staff Director 

SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS

PAT TOOMEY, Pennsylvania, Chairman 

STEVEN J. CHABOT, Ohio 

DARRELL ISSA, California 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

FRANK LOBIONDO, New Jersey 

JIM DEMINT, South Carolina 

JOHN THUNE, South Dakota 

JAMES LANGEVIN, Rhode Island 

GRACE F. NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

DANNY K. DAVIS, Illinois 

ROBERT A. BRADY, Pennsylvania 

MIKE ROSS, Arkansas 

SEAN M. MCGRAW, Staff Director 

(III)

C O N T E N T S 

Page 

Hearing held on February 20, 2002 ....................................................................... 1

WITNESSES

Watson, John, President, Premium Color Graphics Company ............................ 6

Mitchell, James, N.J. Procurement Assistance Center ......................................... 16

Rashkow, Burt, N.J. Small Business Development Center .................................. 18

Loderstedt, Robert, N.J. Manufacturing Extension Program .............................. 20

APPENDIX

Prepared statements: 

Watson, John .................................................................................................... 28

Mitchell, James ................................................................................................. 32

Rashkow, Burt .................................................................................................. 40

Loderstedt, Robert ............................................................................................ 85

(1)

HEARING ON: HOW CAN TECHNICAL ASSISTANCE STIMULATE NEW JERSEY’S MANUFACTURING BASE? 

WEDNESDAY, FEBRUARY 20, 2002 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The subcommittee met, pursuant to call, at 1 p.m., at Passaic 

City Hall, 330 Passaic Street, Passaic, New Jersey, Hon. Patrick J. 

Toomey (chairman of the subcommittee) presiding. 

Mr. BARKLEY. Good afternoon, everyone. I would like to thank all 

of you for coming this afternoon. Mayor Rivera had a prior commitment that he couldn’t get out of. 

I’m Councilman Barkley, it is my distinct pleasure to welcome 

these members of the United States Small Business Community, 

thank you for coming. 

Today the House of Representatives Small Business Subcommittee on Tax, Finance and Exports will hold its official Field 

Hearing to investigate the challenge facing the small and medium 

manufacturers and the performance of three federal programs that 

provide technical and procurement assistance to small and medium 

manufacturers. 

Obviously the success of our manufacturing base is vital to our 

area. As you know most Congress Committee Hearings take place 

in Washington, D.C. So I’m most appreciative that both members 

felt that this topic was important enough to discuss right here in 

the city of Passaic. 

Congressman Toomey, thank you for coming. I would like to welcome Pat Toomey, the Representative from the 15th Congress District of Pennsylvania. Congressman Toomey has chaired this subcommittee since February 2001. And joining him is our local Congressman, Congressman Bill Pascrell. 

Congressman Toomey’s real-world expertise, his experience in 

areas of international finance, as a small business man, he has 

helped this important panel take the leading role in matters that 

are near and dear to the hearts of many small business persons. 

As a ranking Democrat on this subcommittee, Congressman 

Pascrell is constantly on the lookout to ensure that small entrepreneurs thrive in the hyper-competitive world marketplace. 

It is encouraging to see Chairman Toomey and Congressman 

Pascrell to do everything they can to give small businesses the 

2

tools they need to succeed, and they are doing this in a bipartisan 

way. 

Now I would like to turn over these proceedings to Chairman 

Toomey. Thank you very much. 

Chairman TOOMEY. Thank you very much, Councilman Barkley. 

I certainly appreciate your kind words. I also appreciate your making this facility available to us so that we can conduct this Hearing 

in this great facility. So thank you very much for your hospitality. 

This morning’s House Small Business Subcommittee on Tax, Finance and Exports comes to Passaic, New Jersey, to examine the 

impact that the Technical Assistance programs have had on New 

Jersey’s manufacturing businesses. 

It is certainly my hope that the technical assistance programs 

have provided New Jersey’s small businesses valuable assistance, 

as they search for additional procurement opportunities, employee 

training, and strive to improve quality of their existing business 

practices. 

As our nation’s small businesses work to compete in a global 

marketplace technical assistance programs have served in other 

places as a valuable resource to help them grow. I want to learn 

more about how well they work here in New Jersey. I hope to learn 

lessons that may apply in my district, in my state of Pennsylvania, 

and across America. 

Today we will receive testimony from the New Jersey Manufacturing Extension Program, the New Jersey Defense Procurement 

Technical Assistance Center, and the New Jersey Small Business 

Development Center Network, about their contributions to New 

Jersey’s small businesses. 

I would like to say a brief word about each of these organizations. The New Jersey Manufacturing Extension Program is a notfor-profit organization charged with assisting New Jersey’s small 

and medium sized manufacturers to become more productive, profitable, and globally competitive. 

The New Jersey MEP has field agents assigned to every county 

in New Jersey, and these field agents have worked their entire career in manufacturing, several have owned their own businesses. 

Their job is to work with New Jersey-based manufacturers to 

identify opportunities to improve business or to assist in implementing solutions to an opportunity that may already have been 

identified. 

New Jersey Small Business Development Center Network is 

composed of the Headquarters located at Rutgers’ Graduate School 

of Management and ten, full-service regional centers. They provide 

a variety of educational and business resources to counsel and 

train small business owners to finance, market, and manage their 

companies. 

Their clients are assisted in exploring their business ideas, developing and assessing their business plans, making cash-flow projections, and accurate financial statements, as well as formulating 

marketing strategies. 

The New Jersey Institute of Technology’s Defense Procurement 

Technical Assistance Center provides marketing, contractual, and 

technical assistance to small established New Jersey businesses, 

small disadvantaged businesses, and women-owned businesses, inVerDate Sep 04 2002 04:35 Sep 17, 2002 Jkt 081520 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 E:\HR\OC\C520A.XXX C520A
3

terested in marketing their products and services to federal, state, 

and local agencies. 

The Center operates under a cost-sharing cooperative agreement 

between the Department of Defense, and the New Jersey Institute 

of Technology under the auspices of New Jersey Institute of Technology’s office of economic development. 

In addition the subcommittee will hear from three small businesses that have worked with these organizations to obtain technical assistance. And I want to thank Mr. Mike Patel, President 

and CEO of PPI/Time Zero; Mr. John Watson, President of Premium Color Graphics Company; and Mr. Jack Yecies, President of 

Herman W. Yecies, Inc., for relaying their experiences with these 

technical assistance programs. 

I look forward to the testimony of the witnesses before us today, 

but I want particularly to thank the subcommittee’s ranking member, Congressman Bill Pascrell, for inviting the subcommittee and 

me to examine the resources available for small businesses in his 

congressional district. 

As I said earlier, I think the lessons we learn here will apply 

elsewhere, as well. Mr. Pascrell clearly understands the needs of 

small businesses in his district, and throughout the nation, and I 

appreciate his attention to this matter. 

I would like to also commend Representative Pascrell for the 

dedication and the passion that he has consistently shown in defense of the interests of the small businesses that he represents. 

At this time I will now yield to my good friend, Bill Pascrell, for 

his opening statement. 

Mr. PASCRELL. Thank you, Pat, and welcome to Passaic, New 

Jersey, and the 8th Congressional District. We are honored to have 

you. And I want to thank Council President Barkley for your hospitality, which is always there, always. 

Congressman Toomey from the 15th District of Pennsylvania, I 

was there in 2001 for a Hearing, a Subcommittee Hearing into agriculture and dairy problems. And I said, what the heck are you 

doing out there in Pennsylvania, you don’t have any farms in your 

district, really. 

That is the point. When we talk about education and information, we need to understand each other’s problems, which is part 

of my job, and part of my responsibility. And I had an earful out 

in Pennsylvania, I enjoyed it. Those people struggle just like all 

folks in this room, and they have hit, many of them, hard times. 

Unless we think that that is foreign to us, we are never going 

to accomplish anything in trying to resolve the problems of our 

economy. I know that Chairman Toomey has shown that he is committed to small entrepreneurs, time and again, and is a true honor 

to have him here in the district. 

I’m particularly appreciative that this hearing will examine 

something that is of great importance to me, all my life, and that 

is manufacturing. The manufacturing sector of our economy, which 

has been knocked from pillar to post over the last 30 years, not 

only in this state, but in many other states throughout the Union. 

Manufacturers face difficult new demands in a turbulent world 

marketplace. The federal government, in my opinion, has not provided enough assistance to help them incorporate new technologies 

4

or become more successful and productive to assist them in the federal contracting process. 

Pat and I have worked very hard on that aspect of the problem 

of federal procurement, where small business folks for many times 

have been shut out when large corporations bundle contracts so 

that small companies have no way in. 

Pat has been particularly sensitive to that, and we have been 

working on this for five years, and we hope we’ve made a little 

progress. And this shouldn’t be the case. There are some 12,000 

manufacturers in New Jersey, they employ close to 450,000 people, 

that is 11 percent of our workforce. 

Nationally there are 380,000 small manufacturers hiring about 

12 million people. So it is the largest contributor to economic 

growth, believe it or not, for what you say about the service sector 

of the economy, manufacturing is still a critical part of this economy. 

The Bureau of Economic Analysis Study for example, manufacturing contributed 29 percent of the nation’s economic growth between 1992 and 1997. This is larger than any other sector, believe 

it or not. 

And trouble, we have trouble here. The New Jersey Department 

of Labor estimates that our state will lose 34,000 more manufacturing jobs by 2008. We’ve already lost 300,000 in the past 20 

years. 

Of that number Passaic and Essex Counties are projected to lose 

about 9,300 jobs, manufacturing jobs. That is a lot of small companies that are involved, a lot. We are trying to stop the projections 

from becoming a reality. And that is what this hearing is all about, 

to listen first-hand. 

The folks that we’ve invited will explain the dynamics that they 

face, and the very real problems that they encounter on a daily 

basis. And then Chairman Toomey and I will bring these ideas 

back to Washington. 

The federal government must seek ways to assist not only the 

manufacturers of old—imagine brick smokestacks, if you will. 

Budget we must find ways to enhance the productivity, the efficiency, the management, the communication of those involved in 

our digital revolution. 

I want to thank the panelists. They have been introduced to you 

by our Chairman. But while we listen to their problems, let us not 

forget some of the exemplary programs that are already in existence. 

One problem that I have heard from manufacturers is that they 

are not aware of what currently is out there to help them. Hopefully this hearing can change that. 

I want to particularly thank Bob Loderstedt, from the New Jersey Manufacturing Extension Program, who I have worked with before. Burt Rashkow, who is Manufacturing Mentor of the Small 

Business Development Center, and Jim Mitchell, of the Defense 

Procurement Technical Assistance Center. 

And I know we will get into some good questions about federal 

procurement. The Department of Defense is the largest buyer of 

goods and services at the federal level. In fiscal year 2000 the DeVerDate Sep 04 2002 04:35 Sep 17, 2002 Jkt 081520 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 E:\HR\OC\C520A.XXX C520A
5

partment had a procurement volume of $126.2 billion. Small enterprises need to be able to tap into this. 

Again I want to thank the Chairman, I’m anxious to get the testimony, and thank you, and welcome to the 8th District. 

Chairman TOOMEY. Thank you very much, Representative 

Pascrell. 

Before we proceed I omitted from my opening comments recognizing Mr. Cliff Lindhom, III, I want to thank you for joining us 

today as well. 

And then let me say a brief word about the way our lighting system works. I will ask each witness to limit their comments to five 

minutes. The full text of your message will be submitted for the 

record, and will be available. The lights will start in green, when 

there is one minute left it will go to orange, and then when your 

time is finished it will go to red. We will try to honor that as well 

when we go to our questioning stage. 

At this time I’m happy to welcome, and recognize for his comments, Mr. Mike Patel. 

STATEMENT OF MIKE PATEL, PRESIDENT AND CEO OF PPI/

TIME ZERO 

Mr. PATEL. Thank you, Chairperson Toomey, Congressman 

Pascrell, thank you for taking the time to listen to the Small Business Manufacturing Specialty Sector. 

PPI/Time Zero is a company, a manufacturing company, high 

tech business, we manufacture circuit boards that are used in a 

wide variety of different industries. And 30 percent of our business 

is with the defense industries. 

We’ve been in business for 30 years, and over the years a lot of 

things have changed, and especially in the last 10 years or so, 

things have gotten to the point where it is a hyper competitive 

world. We no longer are just talking about New Jersey, or the tristate area, we are no longer just talking about the United States, 

it is a global marketplace, and we are competing with off-shore day 

in and day out. 

And we have found ways to compete with overseas. As you know, 

electronics is mainly made up in the off-shore marketplace. But 

with the help of some of the programs that are available from New 

Jersey State Department of Business Development, and New Jersey State Government trying to customize training programs, we’ve 

been able to, in 1999 we grew the company by 50 percent, in the 

year 2000 we grew the company by one hundred percent. 

And in the year 2001 when our economy was going through the 

tailspin, we were still able to grow the company by another 20 percent. 

So the programs that are available in New Jersey have direct impact on us. For example, the New Jersey Small Business Development Center, Mr. Burt Rashkow, Sy Reich, Brenda Hopper, these 

are the folks that work with us to get us to our ISO 9002 certification, which is probably one of the most influential certifications 

that we have gone through, in order to achieve the growth rates 

that we did achieve. 

The ISO 9002 certification would not have been possible without 

the help of those folks that I’ve mentioned. And the New Jersey 

6

Small Business Development Center has again, and again, came 

through for us, for customized training programs, for ISO 9002 

training program. 

Also when we had an opportunity to do an acquisition, Debrah 

Hoffman, from Passaic County, without her help we could not have 

done acquisition. She introduced us to all different kinds of banking people, got the loans packages for us, and worked tremendously. 

So the programs are there, I think that we have been able to 

take advantage of some of them, to a great extent. Again, going 

back to the problems that we, as a small manufacturer face, I think 

that for us, in particular in our situation, there are two things that 

we, in the last two years, we have definitely, because of our growth 

rate, we have been very much up against a problem, which is 

human resource. 

I am not aware of any type of human resource assistance that 

is out there for us to be able to attract the right type of engineering 

and technical level personnel, it has been very much of an uphill 

battle. 

When we talk about attracting talent from out of state it is very 

difficult, because the cost of living from say, Carolinas to here, or 

if we stay within the New Jersey territory, it has been a very difficult process for us to find that. That is just one of the problems 

that I think that I was going to talk to Mr. Burt Rashkow, to see 

what available assistance is out there. 

Besides that, basically an issue in reference to—because 30 percent of our business is in a hub zone, it is in defense area, hub zone 

would have been perfect for our business, except Patterson, which 

a lot of the areas are in the hub zone, except our address just happens to be one street away from hub zone. 

That would have done wonders for us to get Raytheon, Allied 

Signals, these are the people that we do, currently, business with 

to some level. But they all told us that if we can have hub zone, 

that would have been—they would have given us tremendous 

amount of——

So these are some of the things that are out there that are federal government programs, that we would love to take advantage 

of. But, hopefully, there is some stuff that we can get assistance 

in getting. Otherwise all the programs that are available are an example of that. 

Chairman TOOMEY. Thank you very much. 

Mr. PATEL. Thank you. 

Chairman TOOMEY. Now I would like to welcome and invite the 

comments of Mr. John Watson, the President of Premium Color 

Graphics. 

STATEMENT OF JOHN WATSON, PRESIDENT, PREMIUM COLOR 

GRAPHICS 

Mr. WATSON. Premium Color Graphics is a commercial printer 

and prepress provider located in Clifton, New Jersey. We have been 

in business for roughly 10 years. We currently employ about 30 

people, and we have annual sales of approximately $5 million. 

Over the past three years we’ve actually transitioned from a 

prepress provider, which is all the work that is done upfront prior 

7

to getting the press, into a printer, where we actually put ink on 

paper. 

And most of that was because of the technology that changed all 

that, where other printers were putting in what we prepress, we 

set the specialty business, which is now pretty much gone, which 

is why we were forced to get into the printing market, and the 

whole visual revolution. 

But we managed to do very well because we saw it coming three 

years ago, and we were able to get into printing, we bought some 

of our own presses, we are looking to buy new presses, and hire 

more people. 

Because of the rapid growth of our business we needed outside 

assistance from a place like NJMEP. And I have a partner, and 

even with that partner it is hard to run a business and keep an 

eye on dealing with the strategic half of where your company is 

going. 

And that is where NJMEP has been able to help us. They’ve 

come in, they’ve assessed our company and the way that we run 

it, and made suggestions. They’ve offered solutions. We have 

choices to either move forward with it, or reject it, based on the 

amount of money that it is going to cost us. 

But the fact of the matter is that you always have somebody that 

you can bounce ideas off of, and give you really good information 

on where to find the resource to do what you want to do, and to 

keep moving your business forward. 

Some of the things that NJMEP has done for us is, like I mentioned, they did a business strategy assessment, where they came 

in and they assessed, you know, how we are running our business, 

suggestions. 

One of the big things that we needed, as we were moving into 

this new printing phase of our business was more of a marketing 

plan. So they came in and they did a full marketing audit, and 

came up with ideas on how we could attack that. 

One of the things was to create a customer satisfaction survey 

of our current customer base. And that was tremendously helpful, 

and it is something that we probably would not have done without 

the help of NJMEP. 

That allowed us to really understand how we were perceived in 

the marketplace, and I would have to say that it probably increased our business because we found out a lot of things that we 

didn’t realize, like leaving business on the table because of various 

reasons. 

So we were able to address that immediately and get new business out of our existing customers, as well as take that message 

to customers. So it was definitely a great thing to do. 

Right now one of the things we are working on is the sales management reporting system. We have four sales people, but as we 

continue to grow our business we need to grow our sales force. So 

it is getting to the point where you can’t sit down and talk to two 

sales people and figure out who is calling on who, you need a system in place, and they have been able to help us with that. 

Another huge thing that we are about to do, in 2002, is human 

resource program development and implementation. One day I 

called Tony, I said, you know we are this size now where there is 

8

no real structure or management, because we grew from a five person shop to 30 people. 

And although we all have our own responsibilities we know what 

it is, it is not organized enough. So they were able to come in and 

analyze that, and come up with a human resource type place, that 

is going to come in and help divide up the lines, even on the executive management level we cross over too much. 

And being able to break that apart and really focus on certain 

things, it makes you a more efficient company. And what they are 

also doing is they are going through and helping us put together 

assessment tools for our employees. 

Because right now reviews, basically, wind up being something 

that happens once a year, and you sit down and you talk, and that 

is about it. And now they are going to give us the tools to put in 

place to really measure and quantify what people are doing, and 

pay them accordingly. 

And just in closing, as mentioned, we engage NJMEP in 2000, 

in 2001 our sales revenue increased to about 45 percent, due in 

large part to help we received from them. I don’t think we would 

have hired an outside consultant to help us due to the costs of 

those services and the trust factor of those relationships. 

They bring a real comfort knowing that they are not making a 

living, so to speak, off of us like a consultant would. We probably 

would have managed to grow five or ten percent, but with the systems that I mentioned that we put in place, we were able to post 

a 45 percent increase. 

That is pretty much it. 

[Mr. Watson’s statement may be found in the appendix.] 

Chairman TOOMEY. Thank you very much. 

At this time I would like to welcome and invite the comments of 

Mr. Jack Yecies. Welcome, thank you for being here. 

STATEMENT OF JACK YECIES, PRESIDENT, HERMAN W. 

YECIES, INC. 

Mr. YECIES. Representative Toomey, Representative Pascrell, I’m 

an industrial distributor supplying one of these gentlemen, anyhow, at one time. 

We have been in business for about 75 years, and New Jersey 

Engineering has been in business for over 100 years. We have 

watched, and I’ve watched in my 50 years in the industry, industry 

leave, first change, then leave, and as I said in my letter, I think 

it is inevitable and inexorable, it is like this glacier coming down 

from New England, going through Connecticut, eastern New York, 

eastern Pennsylvania, and so forth. 

So the smokestack and chip-making industries we know is really 

no more to speak of. The thing that concerns me is we have lost 

so many of our major industries, and most of the small machine 

shops and manufacturers in support of the major industries. 

And I really feel that looking at what are the industry that we 

service has changed so drastically, that I think that our whole 

focus should be on the human resources side, of training people to 

make our state more attractive to the kind of industry we want to 

attract. 

9

Heavy industry, as I said, was legislated, and taxed, and badgered out of the state by zoning laws, planning boards, and so forth. 

And I think if we look at the miles, the pharmaceutical plants, 

which is one of our strengths, we look at all of the telecommunications and electronics plants, and high tech, we need trained people, whether it be from a sales point of view, or from a tech, you 

know, manufacturing point of view, to make other people want to 

move into the state. 

Because centralized labor pools, whether it be insurance companies in Newark, which at one point was one of the insurance capitals of the country, or Hartford in Connecticut, if we look in Pennsylvania, when I was out in Pittsburgh, Carnegie Mellon decided 

to emphasize information technology and they built that huge basis 

there. 

You look at all those hospitals up at the top of the hill, they decided that medical service would be their strong point to attract 

people in, when they lost all the mills and manufacturing. 

And I really feel that our strengths lie, one in logistics, and 

transportation. I heard one guy from the New York Authority, New 

Jersey Authority many years ago say, we are one of the only places 

in the world that has a major deep water port, major railheads, 

major international airport, major east/west, north/south highways 

right together. 

He also said you can’t swing a big truck around because none of 

the corners are cut back, you can’t get under the railroads except 

at one street, or you go around them. But when you look at the 

warehousing that is going on down at the turnpike, and moving 

away from our area, unfortunately, this is obviously one of the 

strong points, transportation being another, in spite of EPA. 

And also, of course, the training of people to fill these industries. 

And in reality that is about what I have to say. I watch our industry move, I don’t think we can stop it. We can try to attract different industry, because we are not going to make heavy manufacturing come back, I don’t believe. 

I don’t think we are going to make machine shops, or machinery 

manufacturers, the mills are never coming back, legislatively. They 

won’t do it, and competition is such, that they also won’t do it. 

So that is, really, I don’t say it is hopeless, but I say that we 

have to—the whole thing is changing so drastically, that we have 

to change our whole point of view as to what constitutes manufacturing. 

And by attracting them, through training, legislation, whatever 

you will, I think this is what is really going to create the new jobs 

in this state, and hold the ones we have. 

I thank you for your time. 

Chairman TOOMEY. Thank you for your testimony. 

At this time I would like to welcome, and invite the comments 

of Mr. Cliff Lindholm III. 

STATEMENT OF CLIFF LINDHOLM III, VICE-PRESIDENT, 

FALSTROM COMPANY 

Mr. LINDHOLM. Thank you very much, Chairman Toomey, and 

Congressman Pascrell for holding the Subcommittee Field Hearing 

here in Passaic. It is also nice to see Councilman Barkley, who I 

10

know from our time on the Passaic Enterprise Zone Development 

Corporation. 

I’m honored to have the opportunity to share my views this afternoon, about the state of manufacturing here in New Jersey, and 

some of the programs that have helped to keep manufacturing competitive. 

I think having a field hearing here in Passaic is fitting, as Passaic, like Patterson and some of the cities in Pennsylvania, such as 

Allentown, have a great manufacturing tradition. 

The programs that we are talking about here today help to continue that heritage and I believe are beneficial to the wider community. 

A little bit about Falstrom Company. Falstrom Company is my 

family’s business. We are located in Passaic, and have been in Passaic since 1870. I represent the fourth generation of ownership and 

management of Falstrom Company. 

As Mr. Patel’s business, PPI/Time Zero, Falstrom Company is a 

contract manufacturer serving a wide variety of aerospace and defense companies. Our niche is fabricating custom steel and aluminum enclosures that support a wide variety of military programs. 

The enclosures are mechanical and electro-mechanical assemblies. While our customer base is nation-wide, I can tell you that 

primarily our supplier base is right here in New Jersey. We do deal 

with a lot of smaller businesses here in New Jersey, and so I do 

have the opportunity to experience, first-hand, on a day to day 

basis, how manufacturing is thriving here in New Jersey, and 

where competitive pressures emerge. 

Falstrom Company, did have the opportunity, a couple of years 

ago, to take advantage of the technical assistance from the New 

Jersey Manufacturing Extension Partnership. We had a consultant 

come in and take a look at our painting operations. 

In our business painting is a very important aspect. Through the 

use of the NJMEP we were able to reduce, rework in our painting 

operations, as well as increase through-put in the paint shop. 

These are two very important aspects to maintaining competitive 

manufacturing processes. 

I will tell you that having an individual from the outside come 

in as a consultant lended a lot of credibility to the changes that we 

made, and helped to make those changes be long term and lasting. 

When I think about the challenges facing Falstrom Company, 

there are a number of different areas I could touch on today. And 

seeing that this is the subcommittee that sometimes deals with tax 

issues, I won’t talk about tax issues today. 

But I would like to echo what I heard from some of my other colleagues about the Human Resources side of business. In today’s 

business environment, we find ourselves facing a plethora of regulations that we must conform to, and make good faith efforts to 

comply with. 

Personnel law is becoming increasingly complex. And no matter 

the size of your business, you must find ways to comply with these 

human resources laws. Specifically in the manufacturing area, 

there are other regulations, such as OSHA and environmental regVerDate Sep 04 2002 04:35 Sep 17, 2002 Jkt 081520 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 E:\HR\OC\C520A.XXX C520A
11

ulations that sometimes come under the umbrella of human resources. 

Anything that this committee could do to increase and expand, 

perhaps, legal help and assistance in compliance with human resources issues, I think, would be beneficial to all manufacturers, 

not only here in New Jersey but elsewhere in the country. 

The second to last thing I would like to mention, as I begin to 

sum up, is that Falstrom Company derives its’ business from the 

defense industry. There is a multiplier effect to any defense spending that occurs. 

Every time that we are successful in securing a contract to support the defense industry, there is a multiplier effect that occurs 

here in New Jersey, five to ten other businesses also benefit. 

If we can tie in continued support of the defense industry, along 

with some of the programs we are talking about here today, I believe that manufacturers within this state, and nationwide, will 

benefit. 

Once again, thank you for the opportunity to speak this afternoon. I hope that the comments I have been able to offer will allow 

you to improve and expand the programs that we are talking 

about. 

Chairman TOOMEY. Thank you very much. Well, I will begin with 

some brief questions. 

I would like to start with Mr. Patel, if we could. 

Your story of your company is one that seems remarkably successful, spectacular growth in recent years. Is your company profitable? 

Mr. PATEL. Yes, we are. 

Chairman TOOMEY. Great. About 30 percent of your business is 

sales to the defense industry? 

Mr. PATEL. Last year we peaked at about 38 percent. 

Chairman TOOMEY. About 38 percent. One of my concerns would 

be that a company growing at the rate yours is growing may not 

be a small business for much longer, if it even is any more. 

But do you feel that you have any sort of structural disadvantages that you face vis a vis larger competitors, in selling products 

to the American defense industry? 

Mr. PATEL. Yes, we absolutely do. We are about 165 employees 

at this point. So from a definition of 500 or less, we are a small 

business. 

Our competitors come in all sizes, but there are some giant, big 

billion plus contract manufacturers out there that are all over the 

country, in fact they have plants overseas, and what not. 

So we do face competition from those entities as well. That is 

why I mentioned that issue about the hub zone, because when we 

go head to head against a company that, for example SCI, which 

is based out of California, their sales last year, same business as 

us, but they were a $2 billion corporation. 

Their buying power is enormously a lot larger than ours. When 

we go compete against that kind of company for defense contracts, 

if our company was in a hub zone we get 10 percent differential 

against a larger company of that nature. 

So that is why I mentioned that if we were in a hub zone type 

of situation that would give us a lot of leg up. I mean, usually we 

12

are about five percent on material side higher than our competition. 

Chairman TOOMEY. And that is just because you don’t have the 

same economy of scale as a larger competitor has. But is there any 

bias that is actually intentionally designed to your disadvantage? 

I mean, it is understandable that a buyer would look to the lowest possible price. Is there any reason for which you feel that your 

company gets any additional disadvantage, other than your difficulty in matching price? 

Mr. PATEL. Again the size and the location. We, at this point, 

have two locations versus our competition, they have multiple location. So geographically if we are talking about a Raytheon plant 

that is in Florida, there is a distance thing that we are competing 

versus this giant company that would have a plant right there in 

Texas or Florida. 

Chairman TOOMEY. And you mentioned, if I have it correctly, 

that the Small Business Development Center helped you with a 

certain certification process, and I was not familiar with that. What 

is that certification process, and what does that do for your business? 

Mr. PATEL. Yes. About four or five years ago it was becoming 

very evident that whenever we go to Allied Signal, Honeywell, or 

Raytheon, the bigger boys, what they generally do is in order for 

us to present our subcontract to them, they usually first give out 

a 30 page questionnaire to fill out, give a history about the company. 

The very first question, usually, in that 30 is are you ISO 9002 

certified? And, again and again we were coming to an opportunity 

where if the answer to the question was if you are not, continue 

filling in the rest of 30 pages, if you are, stop right there, you don’t 

need to fill out any form. 

So it was very crucial for us, being in a high tech business, to 

be ISO 9002 certified. So we approached Mr. Burt Rashkow and his 

department to say that if it is a tremendously costly affair for a 

small business to go through ISO 9002 certification on their own. 

And they provided us with the help that we needed, from an outside consultant standpoint, and a grant, and they basically took our 

hands and got us through the ISO 9002. And because of that we 

have added so many different new, bigger customers that wouldn’t 

have, ordinarily without a certification would not have done business with us. 

And in the last two years we have been fortunate to get all these 

boys, to play in that league. 

Chairman TOOMEY. Thank you. If you would indulge me, as I’ve 

exceeded my own time limit on the clock, I have a question I would 

like to ask Mr. Watson. 

And the question is, I’m familiar with the manufacturing extension programs in other areas, and I have heard many great stories 

about the services they provide. 

Very candidly I think one of the important questions that we 

have to ask ourselves is, when a quasi-governmental type entity, 

or an entity that gets government assistance provides valuable 

services, which there is no doubt it does, what is the appropriate 

balance in terms of who pays for it? 

13

The client that receives the benefits versus the taxpayers, how 

do you strike that balance, what is the appropriate combination. 

And just some questions for you. You spoke very highly of the service, and many people do, without doubt. 

Is your company profitable? 

Mr. WATSON. Yes, it is. 

Chairman TOOMEY. And did you pay anything at all for those 

services, or are all those done at no direct cost to you? 

Mr. WATSON. We paid for the services. 

Chairman TOOMEY. You did? Okay. 

Mr. WATSON. Yes, because there is some stuff, advice they are 

giving me on a—not on a daily basis, but when we sit down and 

meet, I mean, I’m not being charged per hour to have somebody 

come in and consult with me. 

But there are projects that they put out on the table and they 

bring in a third party vendor, and we pay for that. 

Chairman TOOMEY. So you pay when a third party vendor comes 

in and provides a service. Do you pay anything for the direct services provided by the NJMEP, or—— Mr. WATSON. Yes, we do. 

Chairman TOOMEY. In addition to paying for the third party? 

Mr. WATSON. Yes. 

Chairman TOOMEY. And so in your judgment, obviously, you 

think there is benefit value? 

Mr. WATSON. Yes, it is extremely good value. I think that whatever tax dollars are being given to that organization, I believe it 

is money well spent, because they are helping businesses within 

the state grow their business. And by growing their business there 

is more jobs. 

So I guess there is a burden for the taxpayer also, but it means 

more jobs. Overall, I think, it is a benefit. 

Chairman TOOMEY. Thank you very much. 

Mr. PASCRELL. Thank you, Mr. Chairman. I would like to put out 

some questions, and perhaps whoever wants to respond to it, make 

your responses brief so we get as many people, and I will try to 

make sure I keep my questions brief. 

What do you say Mr. Lindholm to Mr. Yecies, who said that 

these factories we see in towns all over, you mentioned some, the 

market will never come back again; do you agree with that, or 

what are your thoughts? 

Mr. LINDHOLM. My thoughts are that being a manufacturer that 

has its history in the smokestack era, we are a sheet metal fabricator doing business here in the east coast is extremely competitive. 

Some states to the south and to the west offer to fly me and my 

wife out there, so that we can look at them in hope of relocating 

our businesses out there. Some states try to entice us to move our 

business. 

I believe that the business can thrive in this area. However, it 

becomes increasingly difficult when we face more regulation, increased environmental pressures that some of our states to the 

west and to the south don’t have, and the increased tax burden, 

that we enjoy here in New Jersey, that some other states don’t 

enjoy. 

14

There is competitive pressure, but you can survive if you are 

tough. 

Mr. PASCRELL. You mentioned taxes, and that is part of our 

Committee’s responsibility, business taxes, that is us. What are you 

suggesting we do in terms of taxes, what is the most onerous, what 

is the most—needs the most change, which would help you immediately in your businesses? 

Does anybody want to take a shot at that? 

Mr. YECIES. All right, I will take a shot. First of all, to attract 

capable people, the cost of—I tried to hire a fellow who lived in 

Pennsylvania, outside of Philadelphia, in a lovely home. This is 

some years ago. 

And he agreed that the salary and the compensation I offered 

him was very generous. But when he came to look for a home to 

move he couldn’t afford to move. I mean, my daughter lives outside 

of Philadelphia, and I look at her taxes, and her cost of living 

there, as compared to here, where you are really just a few miles, 

and it is unbelievably different. 

If I might, there is one thing that I wanted to say, which I forgot 

about, or got carried away in my thought. We have done, in order 

to replace a lot of the business that we lost by the industry moving, 

we are doing a great deal of business with the GSA and the Department of Defense, and DOA. 

And Jim Mitchell, and Dule Chapman, from MJIT center, down 

in the procurement technical center, have been immensely helpful 

in getting us into that area. And also the ECRC, which had a place 

in Scranton, I don’t know if they still do, and we went up to see 

them at Picattiny, were very, very helpful in getting us there. 

And quite honestly, as far as I can see, this is why we are still 

in business, is because what originally was supposed to be additional business has now replaced a great deal of business we’ve lost 

through movement south a defense contractor was enticed to West 

Virginia, a naval installation in West Virginia. There is a lot of 

water down in West Virginia, and things like that. 

But, anyhow, I really think the cost of doing business here, because of the high real estate taxes, among others, and we have a 

tax for everything, we have sales taxes, we have the gambling revenue. 

But no matter what we do everything seems to go up. 

Mr. PASCRELL. The major factors that contribute whether we 

stay in business or not, you mentioned all of them, all of you have. 

The state of the art of technology, because we would all agree, 

for instance in the textile business, you need to keep up with the 

state of the art, besides the imports that came into this country, 

but the industry did not keep up with the state of the art. 

And you have to apply that to your own industries. The human 

resource problems, two or three of you did mention, in training personnel, how do we get those personnel, how do we attract them 

here. 

And then capital investment, you need money to invest, and low 

interest loans, if you are going to grow your business to compete. 

Would you add anything or subtract anything from what I just 

said, any of you? 

15

Mr. YECIES. Only one thing. As far as personnel we don’t have 

to bring them in, we have the personnel here, we just have to train 

them in the right areas. We have a lot of very bright people in this 

state.

Mr. PASCRELL. That is true. 

Mr. LINDHOLM. If I might add? In my business, we attract a lot 

of first generation immigrants, primarily from South America and 

Eastern Europe. I can tell you that they come with a very good 

skill set that is difficult to find here in the United States. 

I would imagine in some of your dealings you have heard that 

the training for high school, and just out of high school aged youth 

is not focused on going into a manufacturing career. 

It is becoming increasingly difficult to find individuals who have 

that training, that were born and raised here in the United States. 

This paradox speaks to the diversity of the United States, but it 

also points out something that I think we are all aware of. 

Mr. PASCRELL. One more quick question, if I may, Mr. Chairman? 

What is, very briefly, because we are running out of time, what 

is the impact from competition of off-shore manufacturing on your 

own business, and what do you see happening in that regard? 

Mr. WATSON. In the printing business we don’t get much offshore 

competition, other than in packaging, where a lot of—I have one 

customer that just shut down in Neptune, New Jersey, their whole 

printing operation. They will still do the design, and the publishing 

here, but all the printing and everything is getting done in China 

because of costs, obviously. 

Mr. PASCRELL. Anyone else? 

Mr. LINDHOLM. If I could quickly add, some of the products we 

make are exported to other countries, and so occasionally we do 

run up against issues where export licenses are slow and coming, 

and that is a competitive pressure that we face. 

Mr. PASCRELL. It is not reciprocal? 

Mr. LINDHOLM. No. 

Mr. PATEL. Well, offshore competition is here to stay, I mean, 

that is the norm, you just have to be a little more creative, and find 

the niche markets that are here to stay, for example medical, or 

defense, or short run prototype stuff that is never going to go offshore. 

And you have to be that much smarter, and let go of the motherboard type of business that is done offshore. But plenty of business 

out there, it just takes some skills, and some support from local 

government. 

For example, the training that we talked about, there are boot 

camps for electronics. I agree with everybody that sits here, there 

are plenty bright people, especially immigrants. But if I take somebody off the street and have them try to run a million dollar pick 

and pace line, which is one of the robotic lines that help us compete, there are boot camps that we can send that high school graduate, they cost $5,000. 

If there was some kind of program assistance that would take 

maybe 10 of these people and train them, they are going to be golden. So those are the kinds of things that we——

16

Chairman TOOMEY. Well, I would like to thank all of the witnesses for your testimony, it is very helpful to me, and I’m sure to 

Mr. Pascrell as well. So I would like to thank you for being with 

us today, and at this point I would welcome the members of the 

second panel to the stand. 

We will be taking a very brief recess and return in just a moment. 

[Whereupon, the above-entitled matter went off the record at 

1:57 p.m. and went back on the record at 2:00 p.m.] 

Chairman TOOMEY. Before we get started with the second panel, 

I would ask the second panel to please keep in mind what was said 

to the first panel. We are looking to you, gentlemen, for resolution. 

And if you could keep that in mind I think it would really be a productive afternoon. 

I want to introduce the Mayor of the City of Passaic, New Jersey, 

who has been a Mayor for a very short time, who has had a very 

positive impact on this city, quality of life issues, he has impacted, 

and I want to commend him for that. 

Mayor, thank you for joining us. 

STATEMENT OF SAMUEL RIVERA, MAYOR, PASSAIC, NJ 

Mr. RIVERA. It is a pleasure to be here, and I was unable to be 

here before. There were some personal matters I had to take care 

of. 

But whenever I’m not around, Mr. Barkley is around, and he 

does a great job for us here in the district, and I’m sure that he 

does a very outstanding job. 

So thank you very much for being here, and this is city hall, and 

this is your home, if at any time you need this, we are very grateful for what you do for us, and welcome here. 

Chairman TOOMEY. Thank you Mayor. 

Mr. PASCRELL. Thank you, Mr. Mayor, and thank you for making 

this facility available to us. 

Chairman TOOMEY. At this time we will resume and take the testimony from our second panel. I would like to thank the witness 

for enjoining us this afternoon, and to begin the testimony I would 

like to welcome and invite Mr. James Mitchell, from the New Jersey Procurement Assistance Center to begin with his testimony. 

STATEMENT OF JAMES MITCHELL, NEW JERSEY 

PROCUREMENT ASSSISTANCE CENTER 

Mr. MITCHELL. Thank you, sir. Chairman Toomey and Congressman Pascrell, it is a pleasure to have us come and share what we 

do. 

I’m James Mitchell, and I’m a marketing specialist for NJIT Defense Procurement Center. Our center provides free technical assistance in marketing and bidding government contracts to all 

small firms in the state of New Jersey. 

The Department of Defense and New Jersey Institute of Technology, jointly fund the program. The federal government provides 

less than $300,000 per year. We have more than 1,000 clients, and 

we maintain four locations. Newark, the main location, Trenton, 

Mount Holly, and Atlantic City. 

17

Our clients have won more than $550 million in contract since 

the creation of the center in 1986. As set forth in the attachment, 

and there is a copy of the attachment on the table. 

We help businesses to obtain contracts with all of the federal 

agencies, both state and local governments, and also large businesses. Doing business with the government can be a challenging 

task, even for the most enthusiastic business owner. 

We evaluate our clients’ capabilities, and we direct the center’s 

resources to respond effectively. A major tool the center employs is 

our bid matching services. We electronically bid match what the 

Government, state or federal agency, wants to buy, with what a 

company is selling. And this is done on a daily basis. 

We send an email to the clients, at night, so that when they 

wake up the next morning, the bids are there. Keeping in mind 

that the DOD purchased more than 220 billion in goods and services, annually. We specialize in that agency’s procurement process. 

When selling to DOD manufacturers have targeted marketplaces. 

For example, the Defense Supply Center, Philadelphia, Pennsylvania, buys clothing and textiles, general and industrial supplies, 

medical supplies, including subsistence for all of the services. 

Companies such as Lola Fashions, Jackie Evans, and Jacob’s 

Textiles, have received marketing assistance in the bid preparation 

from the Center. And we have successfully assisted them in submitting bids, whether the solicitation was paper, or an electronic 

bid. 

We direct electrical and machine parts, and computer manufacturers to places like the Defense Supply Center in Columbus, the 

ship parts out in Mechanicsburg, Pennsylvania, and Defense Supply Center in Richmond. 

Again, companies are experiencing competition with offshore 

manufacturers, especially orders less than 2,500. And our witness, 

Mr. Yecies has discussed his concerns there. But in this area the 

Center has assisted companies to obtain contracts, such as Empire 

Electric, Sun Dial and Panel Corporation, and Swiss Technology. 

We’ve made available copies of the websites of the logistical sites, 

on the table, for the small businesses that are present today. A 

particular challenge to the Center’s clients is the loss of business 

experienced by the offshore exodus of manufacturing facilities. 

To help overcome this negative impact to their bottom line, we 

encourage companies to leverage the competitive preferences made 

available by Congress in the area of certification. 

If a firm can obtain a certification, such as a hub zone, 8A, or 

SDB, or team with a company who is certified, it would give the 

company a competitive edge, and possibly level the playing field. 

We recommend another important marketing avenue to reach all 

federal agencies with buying opportunities. It is to obtain a General Services Administration, a GSA contract. We have assisted 

companies to do this, such as Phacil, Insap, Four Technologies, to 

bid these type of contracts. 

These contracts are particularly helpful to both the small business and to the Government buyer. The company has a place to advertise their prices, the contract terms are already negotiated, so 

the buyer can simply write the order. 

18

As I mentioned in my summary information, we strongly urge 

small business to market to large businesses. Ninety nine percent 

of all large businesses are government contractors. As such they 

are required to do business with small businesses. 

We develop a strong professional relationship with large business 

buyers, so to assist them in expanding their small business basis, 

and meeting their small business goals. We frequently broadcast to 

our clients those large business requirements by running a daily 

advertisement of their needs. 

And an example of this has been Stone & Webster with the Army 

Corps of Engineers. Thank you, respectfully submitted, James 

Mitchell. 

[Mr. Mitchell’s statement may be found in the appendix.] 

Chairman TOOMEY. Thank you very much for your testimony. 

At this time I would like to welcome the testimony of Mr. Burt 

Rashkow, from the New Jersey Small Business Development Center. 

STATEMENT OF BERT RASHKOW, NEW JERSEY SMALL 

BUSINESS DEVELOPMENT CENTER 

Mr. RASHKOW. Chairman Toomey, and Representative Pascrell, 

thank you very much, as well as the people in the audience who 

are here with us today. 

I really find it a pleasure to be able to speak to all of you about 

the Small Business Development Center. You should know that the 

New Jersey Small Business Development Center means small business, because that is our name, Small Business Development Center. 

The Small Business Development Center was brought into being 

as a result of a congressional public law in 1977. Since that time 

it has grown into a total of about 11 regional offices here in the 

state of New Jersey, along with—by the way, other small business 

development centers throughout the nation, were also part of an 

initial pilot group. 

We have 11 regional offices throughout the state, and 18 satellite 

offices. In addition we have a number of private consultants that 

we use. Our funding is a matched funding from the Small Business 

Administration. The Small Business Administration matches funds 

that are received either for in-kind, or direct contribution by other 

entities. 

The initial seeding contribution came from the New Jersey Commerce and Economic Growth Commission. That has been in effect 

since 1986. 

The Small Business Development Center, as its core services, include free counseling and training. Certain training may be 

charged for, on a minimal basis, for any small business in this 

state. 

Small business means small business, anywhere from a thought 

or a dream in somebody’s mind, or a going established business. 

Some of our going businesses are growing in size, as you may have 

heard from Mr. Patel, who was here just a few moments ago. 

We are measured by our economic impact. Economic impact is 

jobs. We understand very little else besides jobs. Of course that 

19

translates into a need for revenues. And revenues is where the 

planning and the effort takes place. 

The services that we offer, or the counseling services that we 

offer, which are all free, could be in business planning, marketing, 

government trade, government procurement rather, women-owned 

businesses, or minority owned businesses for certification, loan 

packaging, international trade, manufacturing alliances; add to 

that, technology commercialization. 

Our diversity is our strength. And with respect to that geographic diversity, hands-on experience in service and manufacturing industries. Ethnic diversity and personnel and consultants 

from most backgrounds. 

Within the SBDC, the Small Business Development Center, 

there are specialty centers. The manufacturing mentor prote ́ge ́ program, which is comprised by my colleague Sy Reich and myself, 

was formed, or at least tried out in 1993, Brenda Hopper, who is 

our director, state-wide director, felt that the drain in manufacturing jobs was excessive compared to any other industry. 

She felt that it would be reasonable to make alliances between 

small businesses and large businesses. To have the larger business, 

the larger manufacturer, assist the small business in getting jobs 

in the state of New Jersey. 

Would it not be reasonable that if the benefit accrues to both 

parties, an effort like that should take place? The larger manufacturer finds that he can get his products and materials right here 

in the state, versus getting it overseas. 

The Mentor’s question is, get the supply at a reasonable price, 

and at the quality necessary? In this mentor/prote ́ge ́ program a 

large manufacturer assists the smaller manufacturer to achieve 

these goals. Both of them have something to gain. 

As we progress from company to company, we found that the majority problem was training of the manufacture personnel. This 

happened in 1994, that we learned all this. 

Since that time, the Small Business Development Center’s Manufacturing Mentor/Prote ́ge ́ Program has been able to deliver $6 million worth of training manufacturing workers here in the state of 

New Jersey. Customized training is tailored to the company’s own 

defined needs. No canned training. It is what the companies wanted. 

In that time we had 192,000 hours of training to more than 5,000 

trainees, in about 107 facilitated here in the state of New Jersey, 

all manufacturers in appropriate manufacturing skills. 

What we find, in general, is that the manufacturers need managerial assistance. They need to know how to do things, they need 

to know more about such things statistical process control. They 

need to know things that will help their business run. 

In general manufacturers know what technology they need. What 

they need to do is training and connections. 

I can tell you that we have had success in our operation, and we 

look forward to being able to do it in the future. Thank you. 

[Mr. Rashkow’s statement may be found in the appendix.] 

Chairman TOOMEY. Thank you very much for your testimony. 

20

At this time I would like to welcome and introduce the testimony 

of Mr. Robert Loderstedt, from the New Jersey Manufacturing Extension Program. Welcome. 

STATEMENT OF ROBERT LODERSTEDT, NEW JERSEY 

MANUFACTURING EXTENSION PROGRAM 

Mr. LODERSTEDT. Thank you Chairman Toomey, and Ranking 

Member Bill Pascrell of the House Small Business Subcommittee 

on Tax, Finance, and Exports, for holding today’s field hearing. 

I would also like to thank you for allowing me to speak before 

you about the impact the New Jersey Manufacturing Extension 

Program is having on New Jersey small and medium sized manufacturers, and to further comment on ways to stimulate New Jersey’s manufacturing base. 

By conducting this hearing it is clear you have an understanding 

of the importance of manufacturing to our country, and you are 

looking to understand what more can be done to strengthen this 

national asset. 

Our manufacturing sector has always played a key role, if not 

the lead role, in leading this nation out of times of economic downturn, and threats to our national security. 

It is also good to see our colleagues from the New Jersey Institute of Technology’s Defense Procurement Technical Assistance 

Center, and the SBA Small Business Development Center. 

We work together on issues involving New Jersey’s manufacturers. As you know, the mission of the New Jersey Manufacturing 

Extension Program is to work with New Jersey’s small and medium sized manufacturers to help them become more profitable, 

productive, and globally competitive. We focus exclusively on manufacturing. 

Having spent my entire career in the private sector, 26 years, 

prior to joining the New Jersey Manufacturing Extension Program, 

I tell people we are implementing a public sector manufacturing 

mission with a private sector mindset. 

We are a 501C3 not-for-profit. I tend to choke on that, I like to 

tell people we are a not-for-loss organization. And I always think 

in terms of return on investment. Whenever I have an opportunity 

to speak with our investors, of which you are one, I like to let you 

know what the return on your investment has been. 

During the five years the New Jersey Manufacturing Extension 

Program has been in existence, for every dollar invested by you, we 

returned $55. The State of New Jersey has realized a return of 

$155 on each dollar they’ve invested, and the combined federal and 

state investment has been $40 return for every dollar invested. 

That gets over most hurdles. That return is calculated by using 

the State of New Jersey economic input/output model, and the 

quantified responses provided by clients who are surveyed one year 

after completion of a project conducted by New Jersey Manufacturing Extension Program, by an independent third party. 

The quantified results are in areas such as new sales dollars, retained sales, and new jobs created. In actual dollars the economic 

impact in our five years of existence has totaled $511 million. 

The New Jersey Manufacturing Extension Program has worked 

with over 760 companies, and we have delivered over 1,300 

21

projects. Every manufacturer has been contacted at least 10 times 

through our telemarketing and newsletter. 

Manufacturing plays a key role in our nation, and in New Jersey. 

As you said, Congressman Pascrell, nearly 11 percent of the state’s 

jobs are in the manufacturing sector. That is 445,000 people. 

They are also some of the best jobs we have. Wages of manufacturing workers in New Jersey are 26 percent higher than the statewide average, and 67 percent higher than wages in the service sector. 

Manufacturing accounts for 12 percent of our gross state product, 

and a comparable share of all state revenues. As New Jersey Manufacturing becomes more efficient, through the deployment of advanced technologies and modern management methods, the total 

number of manufacturing jobs has declined in our state. 

However, productivity and output has increased significantly. 

The state of New Jersey ranks 14th in the nation in the number 

of manufacturers. 

What can you do to assist New Jersey manufacturing, and manufacturing in the nation? I would like to tell you a story, before I 

offer you a simple suggestion. When I was first offered the job of 

president of the New Jersey Manufacturing Extension Program, 

and told I was the first employee, and that I needed to create a 

vision, and get it up and running, I agreed with one proviso, that 

I be allowed to work on a 1099, because I wasn’t sure this thing 

could fly. 

Having spent 26 years in the private sector, and having just left 

the company I had started and owned, I wasn’t really sure this concept could work. I always thought the private sector made things 

go, and government got in the way. 

Well, I stayed on that 1099 for 18 months, and five and a half 

years later I can tell you this does work, and it is not something 

that the private sector can do, or we would be doing it. I would be 

getting venture capital and making it happen if I thought it could 

fly. 

This program, in my opinion, is the best use of my tax dollar. It 

produces quantified results, forces collaboration between the private and public sector, and draws the best from around a nationwide system of 75 manufacturing extension programs, making us 

more efficient and better. 

For example, Congressman Toomey, we work closely with Edie 

Ritter, and the Northeast Pennsylvania MEP on best practices, and 

assessment tools, management information systems, and sales 

processes, making each center better and more efficient. 

The end result, we have a stronger, more competitive, and more 

profitable small manufacturing base which is the backbone of this 

country’s manufacturing. 

In summary, you create wealth in an economy by making things, 

mining things, and growing things. We need to continue creating 

wealth by making things. The New Jersey Manufacturing Extension Program received $1.66 million of investment from you last 

year; the state of New Jersey invested $750,000, and we generated 

$1.6 million in client fees. Nothing is free. 

Our future, and our growth, will come from increasing our client 

fees. But for us to do that, and for you to help to continue to create 

22

wealth in our economy, we need the state of New Jersey to invest 

at the rate you are investing, and for you to continue to invest at 

your current level, your current level, not more money. 

Your investment allows us to put experienced and knowledgeable 

field agents out working with small manufacturers, we’ll grow the 

business, grow the assistance to small manufacturers, and help in 

creating wealth by growing client fees each year. 

You need to reinstate the federal investment of the national 

manufacturing extension program. Thank you, sorry for running 

on. 

[Mr. Loderstedt’s statement may be found in the appendix.] 

Chairman TOOMEY. Thank you. 

My first question is for Mr. Mitchell. 

Do any of your clients find themselves in competition, essentially, 

with the prison industries? 

Mr. MITCHELL. Yes, sir, especially many of the small manufacturers—— Chairman TOOMEY. If you could take the mike and explain a little bit about the nature of that. And if you could touch on the inherent advantages that the prison industry has, versus your clients. 

Mr. MITCHELL. The prison industry, their wage level is far lower, 

therefore they are able to manufacture and make items at a much 

lower cost. So it has impacted a number of our manufacturers, two 

or three, that have mentioned it. 

Chairman TOOMEY. And are there government buying entities 

that are essentially required to buy from the prison industry? 

Mr. MITCHELL. That I don’t know, sir. 

Chairman TOOMEY. It is my understanding that that does happen, and that there are industries where if the prison industry provides products, the Government is required to buy those products, 

and they are not even allowed to contemplate a competing bid. 

Mr. MITCHELL. We don’t see the prison industry bids, only the 

ones that are full and open. 

Chairman TOOMEY. Okay. You mentioned that your budget is 

less than 300,000 a year comes from the federal government. 

Where does the rest of the budget come from? 

Mr. MITCHELL. Matching funds from NJIT. 

Chairman TOOMEY. Okay. Mr. Rashkow, your services are not 

limited to manufacturing, they are any kind of small business, is 

that correct? 

Mr. RASHKOW. The New Jersey Small Business Development 

Centers cover a range of small business. The specialty program is 

called the New Jersey manufacturing mentor prote ́ge ́ program, 

where we match smaller and larger manufacturers for the improvement of skills in the state of New Jersey. 

We are a component of the New Jersey Small Business Development Center. 

Chairman TOOMEY. And as such you provide consulting and 

training services to small businesses? 

Mr. RASHKOW. That is correct, we do supply that. Some of those 

training services do carry a small fee with it. 

Chairman TOOMEY. With respect to the small business that happens to be in manufacturing, how would your mission and your 

23

services differ from the Manufacturing Extension Program Services? 

Mr. RASHKOW. We do not attend to technology. We concentrate 

on managerial requirements, managing the company, the marketing plan, packaging loans for small businesses. Getting them 

the opportunity to do a better marketing plan, getting them the 

consultants, and finally the match with the larger manufacturers. 

Chairman TOOMEY. Okay. Mr. Loderstedt, some of those services, 

it seems, are also services that you provide. How do we avoid duplicative services for the same sector of the economy? 

Mr. LODERSTEDT. I would respond to you this way. In five and 

a half years we have not arrived at the same company together in 

overlapping of services. Typically if we find companies that are in 

a start-up mode, and looking for the kinds of help that would be 

given by the SBDC, those are referred to the SBDC. 

Many times a company doesn’t understand how to create a marketing plan, or a business plan, because they are looking to start 

out in business. Since they cannot afford to pay us for those services, they are referred over to the SBDC. 

So the types of work that we do, in fact, do not overlap, because 

we are working for the most part with going concerns that have an 

ability to pay. The SBDC will typically work with smaller companies, or companies perhaps that are looking for some help in packaging financing, or training type needs that we don’t typically become involved with. 

Chairman TOOMEY. So the SBDC would be dealing with startups 

that don’t have the ability to pay any fees, and you are dealing 

with companies that are more established? 

Mr. LODERSTEDT. That is a general rule, yes. I mean, they will 

work with larger companies, they will do things in the area of 

training that we might not necessarily work with. And as I mentioned to you earlier, there is a referral of leads where we feel the 

other organization can better serve that needs. 

Chairman TOOMEY. Mr. Rashkow. 

Mr. RASHKOW. Whenever a technology issue arises we generally 

refer them over to the MEP. We don’t deal with technology issues, 

we deal primarily with the managerial issues, and the training 

needs within the company. We facilitate training. 

Furthermore the service of matching a mentor and a prote ́ge ́ is 

something that is done on an consultative basis between the two 

companies. We are facilitators. 

Chairman TOOMEY. Mr. Loderstedt, how do you determine what 

fees your clients—well, let me back up one second and just say, as 

an overall picture, what percentage of your budget comes from federal funds versus funds paid by clients in the form of fees? 

Mr. LODERSTEDT. Our total budget is about 40 percent right now 

from the Federal Government. We are basically matching the federal contribution. As you may know the ideal model is a third federal, a third fees, and a third state. 

We are pretty much together at the federal level in terms of fees. 

Unfortunately the state is not going to come up to match, your contribution and ours at a percentage in the state. 

Chairman TOOMEY. And how do you determine what is the appropriate fee to charge a client? 

24

Mr. LODERSTEDT. It is based on value added, and the type of 

project. We break projects into three types of projects, a tactical 

project, an intermediate type project, or a strategic project. 

A tactical project typically takes anywhere from two days to a 

week. It typically would be priced somewhere less than $3,000. In 

that particular situation we recover our direct costs, and a markup 

to provide that service. 

There is a very defined scope of work, client needing help for developing job descriptions. We have our third party resources, we 

have a defined scope of work, we have the markup to be put on 

that. And then we sell cost justified, and macro project manage 

that project for the client.

Chairman TOOMEY. But is it with no regard of the profitability 

of the client? 

Mr. LODERSTEDT. Well, we always cost justify it. I mean, in 26 

years, 30 years now counting my time here, I’ve never had a client 

give us money unless we’ve been able to cost justify a proposal. 

So we do have the advantage in the sense that the way the federal and state money is used, it allows us to deploy the types of 

experienced resources that we have, working with clients to establish the relationship, spend the time at the facility, get to understand the business, unlike most consulting companies where the 

clock starts right away. 

So that is really what the investment allows us to do. 

Chairman TOOMEY. And I understand that, and I understand 

that, from hearing from many of my own constituents, that the program is very popular, and well-regarded. I’m raising the question 

which is, really, should we provide equally subsidized services to 

companies that are struggling, as well as those that are extremely 

profitable? 

Mr. LODERSTEDT. The answer is, in the case where a company is 

extremely profitable, we typically will make more markup on those. 

It is their ability to pay. On a struggling company we give that individual, and that company, an opportunity to pay less, simply because they cannot afford the service at a full markup. 

They need that service, but the longer term strategy with the account is basically we are investing with them on those early 

projects, knowing that if we can help them become more profitable 

we can now start to gain additional——

Chairman TOOMEY. So there is a means test? 

Mr. LODERSTEDT. Yes, sir. 

Chairman TOOMEY. Thank you. 

Mr. LODERSTEDT. You are welcome. 

Chairman TOOMEY. I yield to Mr. Pascrell. 

Mr. PASCRELL. Yes, I think Mr. Chairman, that both panels have 

been extremely helpful today, and I hope the folks have been listening, because we are geared, mentally, to think about General 

Electric. And yet 90 to 95 percent of the folks work for the companies you do. Strange? Not so strange. 

Let me ask you this question. Would it be esoteric to ask that 

each state and the federal government come up with a manufacturing policy which we don’t have right now? Would that be a 

waste of time if we had a manufacturing policy? 

25

Mr. LODERSTEDT. As I said in my remarks, I think if you look 

at any economic downturn we’ve had, if you look at any wars we’ve 

had, it has been manufacturing that has led us out of that economic downturn, it has led us to any victory in wars that we’ve 

had. 

It is the backbone of this country. You make things, you mine 

things, you grow things, that is how you create wealth. And in my 

opinion, Bob Loderstedt’s opinion, I do not see a national manufacturing strategy on what is probably the most important sector in 

this country. I do not see one in the state of New Jersey. 

And I believe if nothing else comes out of this hearing, somebody 

needs to stand up and say manufacturing is important. Somebody 

needs to say to these manufacturers, you know, you are important 

to the state of New Jersey, you put a lot of money in the state of 

New Jersey, and we care about you. And there are programs available which do not overlap that can help you to become more profitable and grow in the state. Somebody’s got to do it. 

Mr. PASCRELL. Let me ask you this. You said that—you mentioned that, when you talked about manufacturing jobs, you said 

something about competitive service jobs which I found the figures 

you used very difficult to believe. Not that you are difficult to believe. 

But could you just crystallize that idea? 67 percent higher in 

terms of what we get out of every dollar we invest? 

Mr. LODERSTEDT. Well, it is the economics. The more money that 

people are able to make, the more people can make in terms of 

earning a wage—— Mr. PASCRELL. But you said manufacturing jobs was producing 

higher income than service jobs? 

Mr. LODERSTEDT. Yes, sir. 

Mr. PASCRELL. I think I heard you say that? 

Mr. LODERSTEDT. That is correct. 

Mr. PASCRELL. And you are pretty sure about that? 

Mr. LODERSTEDT. Yes, sir. 

Mr. PASCRELL. Could you just repeat that? 

Mr. LODERSTEDT. Yes. Manufacturing wages in New Jersey are 

26 percent higher than the state-wide average, and 67 percent 

higher than wages in the service sector. 

Mr. PASCRELL. Why, in God’s name, do we as a government, and 

a society, think that service jobs are the direction the nation should 

be going? 

Mr. LODERSTEDT. Well, you need a balanced economy. I guess my 

opinion is that there is a tremendous need for skilled workers, and 

workers going into the manufacturing arena. There is a lot of high 

paying jobs from the factory floor up through different levels of 

management, and it is not my place to talk about the education 

system, but I coached high school hockey. 

And I have to tell you, those rides in school buses where kids 

would come up to me and say, hey coach, my parents want me to 

go to college, I’m not sure I want to go to college. I mean, there 

are other jobs I think I would like to do. 

And that is a whole other discussion. Maybe not for this Committee, but we have this thing about everybody has to go to college, 

and I’m not so sure that is the answer. There is a ton of opporVerDate Sep 04 2002 04:35 Sep 17, 2002 Jkt 081520 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 E:\HR\OC\C520A.XXX C520A
26

tunity in manufacturing, there is a ton of opportunities to be 

plumbers. 

My company repaired and reconditioned forklift trucks. At the 

top union scale I was paying $28 an hour. I couldn’t get kids to 

come into the business, because there was this thing about working 

in manufacturing, or not having a college education. 

And I don’t mean to lecture. 

Chairman TOOMEY. And I want to get into the subject, trade, 

that is part of our many responsibilities. But we were sold a bill 

of goods that for every manufacturing job that we lost to Beijing, 

or Honduras, that we would create two service-related jobs of higher pay. 

Where, I mean, this cuts to the chase here. Do you agree with 

that, and have we been misled, or maybe I determined that they 

did, concurrently——

Mr. RASHKOW. I personally think, Congressman, that the general 

public has not been misled so much as been less informed than 

they should be. The most important thing is that every manufacturing job has behind it at least one, if not more than one supply 

job, as a trickle down effect. 

When you lose a customer, as many of the people in this room 

have, from the state of New Jersey, they’ve not only lost the job 

there, but they’ve lost the customer, and they’ve lost business. 

For every $50,000 of business that they lose they lost another 

job. And that has happened to every manufacturing company. I will 

wager that every manufacturing company in this room who is in 

the manufacturing business has lost customers and jobs in the 

state of New Jersey. 

Mr. PASCRELL. I want to thank you.

Chairman TOOMEY. Let me just say that this has been extremely 

helpful, the previous panel, as well as this panel. And if any of the 

current panelists have any point they would like to make in conclusion, I would like you to do so now. 

Mr. PASCRELL. I have one other question. 

Chairman TOOMEY. I yield to Mr. Pascrell. 

Mr. PASCRELL. I meant to ask this question, one of you touched 

on it, and I forget who it was, vocational technical entrepreneurship, there is a piece of legislation and it went to us, and was 

passed in the House, H.R. 2666 was passed in October of last year. 

The Senate hasn’t acted on it. 

It would establish a grant program for the development and implementation of curriculum designed to promote vocational and 

technical entrepreneurship, God forbid. And that was a primary 

sponsor by Congressman Brady, of the State of Pennsylvania. 

What do you think of that idea? 

Mr. LODERSTEDT. You guys want to comment on that? 

Mr. PASCRELL. And then grants would be offered to the SBDCs, 

or post-secondary vocational and technical schools. 

Ms. HOPPER. We would really like that Congressman, if it is 

given to the SBDCS. There is a need for additional training, customized training, and we have the infrastructure where we need to 

continue to do the things that we do. 

Mr. PASCRELL. Burt. 

27

Mr. RASHKOW. Yes. The idea of providing some assistance has 

enormous potential. Some of our experience with the customized 

training, 190 and some odd thousand of training hours that we 

brought into the state, through the customized training grants provided by the New Jersey Department of Labor, has shown the results on the factory floor to be enormous. 

For example, just to give you a rough idea as to how well it was 

received, some people actually came in from vacation, in violation 

of the Fair Labor Standards Act, to hear some of the consultants 

who were delivering the training. 

They, themselves, have become the greatest carrier for the message about its being a great place to work. Believe it or not, such 

simple things as training in English as a second language, has 

been able to create a communications medium for management and 

personnel, has improved the morale. 

The ultimate benefit is that it improved thru-put, cycle time, getting things done in a given period of time. And it gave the people 

on the production line the feeling that management cares, management cares. 

So the overall morale increased, and it was a great thing that 

they hadn’t anticipated. They had taken jobs, for the most part, because that was the only one that they could get. But in reality it 

turned out to be a carrier for some wonderful things. 

Mr. PASCRELL. Can you, gentlemen, hang around after the meeting, so if people have questions of you, which I’m sure we’ll have, 

it has been a great help. 

Chairman TOOMEY. Absolutely, they very much, and the hearing 

is adjourned. 

[Whereupon, at 2:28 p.m., the above-entitled matter was adjourned.]

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