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EDA
Defense Adjustment Program:
Performance Evaluation
SUMMARY OF FINDINGS
DEFENSE ADJUSTMENT PROGRAM PERFORMANCE
EVALUATION
STUDY OVERVIEW
• The purpose of the research
described here is to evaluate
all (190) Economic Development
Administration (EDA) Defense
Adjustment Program grant projects
approved during the period FY
1992 through FY 1995. The primary
objective of this program and
its projects is the restructuring
of local economies to diversify
away from dependence on former
defense bases or defense contractors
impacted by closure or cutback.
•
Direct appropriated funding
to EDA for the Defense Adjustment
Program began in FY 1994. From
1992 to 1994, EDA received transfers
of funds for defense projects
from the Department of Defense's
Office of Economic Adjustment
(OEA). The program, therefore,
is relatively young, and as
of 1997, the defense construction,
capacity building (planning
and technical assistance), and
revolving loan fund (RLF) projects
analyzed here were just taking
hold. While their relative recency
does not allow for an evaluation
of these projects at full maturity,
their accomplishments at this
early phase can certainly be
quantified.
•
As indicated above, the Defense
Adjustment projects, even if
completed, have had only a short
time to mature. With time, the
permanent jobs that they create
will increase and the cost per
job created will decrease. The
present evaluation provides
a snapshot view of the projects'
effects during an early phase
of their existence.
•
A concurrent EDA study of the
Public Works Program and other
similar studies have shown that
the effects (both direct and
indirect) of these projects
will increase substantially
over time.
STUDY
PROCEDURES
•
The study was undertaken from
November 1996 through September
1997 by research teams from
five universities and a major
professional organization. All
principals of the research teams
have extensive experience in
both economic development and
infrastructure studies. Each
prmcipal spent significant time
in the field researching individual
projects and talking to grantees.
Each principal and affiliated
staff participated in some aspect
of research analysis and in
writing the final report. All
concur with the findings presented
below.
•
The research team contacted
by mail and telephone 190 grantees
of defense adjustment projects.
To help the grantees better
understand the purpose and types
of information necessary to
undertake the evaluation, all
grantees were invited to attend
seminars conducted by the research
team at 13 locations nationally.
Forty-two project sites were
visited to conduct in-depth
discussions with grantees to
learn more about their individual
projects' impacts and to validate
the information that they were
providing.
•
The evaluation is undertaken
using performance measures developed
by EDA specifically to assess
the productivity of defense
adjustment projects. Performance
measures for defense construction
and revolving loan fund projects
primarily involve numbers and
types of jobs created or retained
and amounts of private-sector
funds leveraged. For capacity-building
projects, the performance measure
is a grantee self-rating of
the quality and impact of the
EDA capacity-building effort.
PROJECT
TYPE AND CONTEXT
•
From a universe of 190 EDA defense
adjustment projects that were
approved from FY 1992 through
FY 1995, all 190 were contacted.
•
The 187 grant-funded projects
analyzed in this study1 include
162 single-element projects,
twenty double-element projects,
and five triple-element projects.
These sum to 217 total project
elements funded via the 187
EDA grants. Since 1987, approximately
2.5 million defense-dependent
jobs have been lost due to defense
downsizing. EDA's Defense Adjustment
Program is a direct response
to base closures, base downsizing,
and/or reduced defense contracting.
Cutbacks are often sudden and
severe for their host communities.
In addition, projects are in
locations where minority populations
and percents of the population
below the poverty level are
20 percent higher than state
and national averages. These
are also locations where per
capita income is 25 percent
lower than averages at state
and national levels.
PROJECT
COMPLETION
•
Of those 190 defense adjustment
projects contacted by the research
team, 98.5 percent (187) were
initiated as planned.
•
Of those undertaken, about 97
and 98 percent of defense construction
and capacity-building projects,
respectively, moved to completion;
100 percent of the RLFs moved
to completion.
CONTEXT
OF PROJECTS AT TIME OF APPLICATION
(Medians) (187 Initiated Projects)
Median Ratio Ratio
to to
State Nation
Unemployment
Rate(%) 7.0 0.98
Per Capita
Income($) 13,034 0.72
Below Poverty
Level (%)
Minority (%)
•
Of those undertaken and completed,
80 and 81 percent of the defense
construction and RLFs, respectively,
were completed on time. About
56% of the capacity-building
projects were completed on time.
•
Of those undertaken and completed,
about 90 percent of defense
construction projects came in
at or under budget; the figures
for capacity building and RLFs
are 97% and 100%, respectively2.
PROJECT
IMPACTS
Project-Related
Direct Impacts:
Defense
Constructiono On average, completed
defense construction projects
(49) have produced 30,870 permanent
jobs to date, or 124 jobs per
$1 million of EDA funding. These
jobs were produced at an EDA
cost of $8,052 per job and a
total cost (all sources of funding)
of $12,045 per job.
•
Defense construction projects
produced 18.0 FTE4 construction
jobs per $1 million of EDA funding.
•
Completed defense construction
projects (43)5 leveraged $722
million 2 RLFs, by their nature,
cannot come in over budget.
They lend what they have.
• As projects age and
mature, project accomplishments
will likely increase over time.
in private-sector investment,
or $2.2 million per $1 million
of EDA funding.
DEFENSE
CONSTRUCTION AND CAPACITY-BUILDING
PROJECTS- PERMANENT JOBS: (Medians)
(49 Completed Defense Construction
and
31 Completed TA* Capacity-Building
Projects)
Defense Capacity
Construction Building(TA)
Jobs Per $1M EDA 124 63
EDA Cost Per Job $8,052 S 13,633
Construction!
Professional Jobs 18.0 FTE 13.7
FTE
Private-Sector
Investment Per $1M
of EDA Funding $2.2 M N/A
Tcchnical Assistance
Capacity Building
•
Capacity-building projects,
by their definition and design,
are not intended to create jobs
directly, but to increase the
planning, organizational, and
technical skills needed for
local economic development.
Nevertheless, some jobs result
as an indirect by-product of
those project goals. Completed
capacity-building (technical
assistance) projects (31) have
produced 63 permanent jobs per
$1 million of EDA funding at
an EDA cost of $13,633 per job
and a total cost of $19,393
per job6.
•
Permanent jobs coming from capacity-building
technical assistance projects
reflect developments such as
stalled businesses being matched
with new markets, workers being
more employable due to training,
and businesses generating more
money because they have been
made more efficient.
• Forty-three of forty-nine
defense construction projects
have private-sector investment.
Six projects are public sector
and have no private-sector investment.
•
Direct job creation is an incidental
benefit of capacity-building
projects, which generally support
subsequent projects having direct
job
•
Completed capacity-building
(technical assistance) projects
have produced 13.7 FTE professional
consultant jobs for every $1
million of EDA funding.
•
Completed capacity-building
projects have, in addition,
produced adjustment strategies,
heightened community involvement
and planning, created workable
implementation strategies, and
undertaken market/feasibility
studies. EDA capacity-building
efforts have been rated by grantees
as seen in the following table:
GRANTEE
RATING OF CAPACITY-BUILDING
PROJECTS (Means)
(70 Completed Capacity-Building
Projects)* (Scale of 1-10; 10
= best)
Quality of Adjustment Strategy
8.2 Extent of Community/Business!
Government Participation 8.5
Consistency of Implementation
Efforts
and the Adjustment Strategy
7.8
Quality of Technical Assistance
Effort 8.8
Impact of Technical Assistance
Effort 8.9
Quality of Feasibility/Market
Study 9.1
Impact of Feasibility/Market
Study 8.7
*Thesc
include all types of capacity-building
projects, not just technical
assistance.
Grantee
Observations:
•
Across the board, grantees report
that the products they are delivering
with EDA oversight are both
well done and have a significant
impact.
•
Capacity building empowers local
areas to respond in a proactive
and forward-moving way to the
adverse impacts on their economies.
Grantees further report the
following:
•
Capacity-building projects are
responsible for significant
networking among various forms
and levels of economic development
agencies. This enables greater
use and leveraging of public
and nonprofit funds.
•
Capacity-building projects comprise
technology transfer efforts
wherein sophisticated methods
of enhanced productivity are
used to measure business adjustment
to new technology.
Revolving
Loan Funds
•
With regard to revolving loan
funds (RLFs), 304 jobs have
been created per $1 million
of EDA funding for 16 completed
projects (fully loaned); for
those projects in process (21),
there are 247~ jobs created.
EDA cost per job is S3,3 12
for completed RLF projects and
$4,079 for projects that are
in process.
•
Completed RLF projects have
leveraged $115 million in private-sector
investment, or $2.5 million
per $1 million of EDA funding.
In-process RLF projects have
leveraged $42 million in private-sector
investment, or $2.8 million
per $1 million of EDA funding.
•
Other statistics for RLFs include
combined default and write-off
rates for completed projects
of 13% and for RLF projects
in process of 1.9%8. For both
completed and in-process projects,
jobs produced per business assisted
are about 22 and 24, respectively.
In 50% of the cases the RLF
involves a business expansion
(as opposed to start-up or retention),
and in 67% of the cases it involves
the funding of manufacturing
firms (as opposed to commercial
or service firms).
PROJECT
IMPACTS (GENERAL)
•
Due to the recency of defense
adjustment projects, their results
are just beginning to become
evident. Most will likely contribute
significant additional employment
growth in the long term.
•
Defense construction, as well
as RLF projects, are nonetheless
producing permanent jobs at
relatively low costs;
~ In-process RLF projects can
be analyzed in the same fashion
as completed projects because
they behave similarly from the
time of their first loan onward.
~ A 12-15 percent combined default
and write-off rate is well within
industry standards for this
type of loan. The lower rate
for in-process loans reflects
capacity-building technical
assistance projects are producing
smaller numbers of permanent
jobs at somewhat higher costs.
Capacity-building planning efforts
and market/feasibility/reuse
studies are perhaps more importantly
laying the groundwork for both
defense construction and RLF
projects. Capacity-building
projects could easily be given
credit for jobs produced under
these two other types of implementation
activities.
•
Defense adjustment projects
are longer-term, more intricate
and complex, and thus take longer
to complete than traditional
EDA-funded public works projects.
Accordingly, they are somewhat
less likely to be on schedule
or to come in under budget than
EDA public works projects. Nonetheless,
80-90 percent of defense adjustment
projects are on schedule, and
90-100 percent are at or under
budget.
•
EDA defense adjustment projects
are in place in numerous localities
nationally; tangible progress
is in evidence at 97% of the
sites.
CONCLUSIONS
•
As reported by grantees, EDA
defense adjustment projects
are one of the few avenues of
flexible assistance available
to communities faced with base
closures.
•
EDA funding is critical to most
of these types of activities
and is usually the primary source
of initial funding. |
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