5715-S

AN ACT Relating to networks for assisting businesses; amending RCW 43.31.440; adding new sections to chapter 43.31 RCW; creating a new section; and making an appropriation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that most net job growth in Washington in the past decade came from small firms which grew rapidly, and the vitality of the state's economy is becoming increasingly dependent on them. Continued success of these firms depends on their ability to quickly adapt to customers' changing needs. Smaller businesses, however, often lack the resources necessary to keep pace with rapid changes in the global marketplace. Linkages between firms can allow groups of firms to work together to accomplish commonly needed tasks, solve common problems, or exploit common opportunities. The formation of flexible networks allows smaller firms to maintain their inherent freedom and flexibility, yet enjoy the economies of scale that are achieved by pooling resources, facilities, and services. Flexible networks can enhance the competitiveness of small businesses in the global marketplace. Flexible networks can also enhance state economic development efforts by allowing agencies to deliver an integrated package of services to entire groups of firms with similar needs and leverage limited economic development resources.

The legislature further finds that many flexible networks which have developed were spontaneous and reflective of the needs of the participating firms. Moreover, the sustainability of a flexible network depends on the commitment of the member firms. However, lack of a cooperative tradition among firms and lack of awareness of the benefits of flexible networks are obstacles to the development of flexible networks.

The legislature further finds that public sector technical assistance and financial support is often needed to overcome obstacles to network formation. The department of community development and the department of trade and economic development have assisted networks in the defense contractor and secondary wood products industries through technical assistance and grants. Additional network support of the same types may be needed in these sectors or other targeted sectors such as biotechnology, software, environmental management, and recycling, and in other sectors of the economy where interest in networks develops.

It is the intent of the legislature that the state fulfill a needed role in stimulating the formation of flexible networks and in assisting firms with overcoming their resistance to cooperating with competitors. It is not the intent of the legislature to encourage or assist in the creation of joint business ventures which engage in anticompetitive behavior.

NEW SECTION. Sec. 2. A new section is added to chapter 43.31 RCW to read as follows:

(1) For the purposes of this section:

(a) "Flexible network" means a group of private sector firms which works cooperatively to manufacture, sell, or market products or services, develop technology, or create or disseminate information.

(b) "Flexible network broker" means a person who is trained to assist private sector firms to form flexible networks and make other similar efforts to provide for joint manufacturing, marketing, technology development, information dissemination, and other activities.

(c) "Industrial service center" means a nonprofit organization providing services to an entire industry or sector in a defined geographic region.

(2) The department, in consultation with the department of community development, shall develop a flexible network broker training program designed to provide brokers with the necessary knowledge, skills, and abilities to assist private firms in the formation of flexible networks. The training program shall be open to associate development organization officials, as defined in RCW 43.31.097, economic development practitioners, and private sector participants. The department may charge a reasonable fee or other appropriate charges for participating in the training program. The department should give consideration to the development of a broker handbook or instructional and reference videotape derived from the broker training program for use by brokers and prospective brokers in the field.

(3) The department shall develop appropriate measures to promote and make more widely known the opportunities that flexible networks offer to improve the competitiveness of small businesses.

(4) Upon the development of a flexible network broker training program, the department shall:

(a) Establish a flexible network resource center. The center shall maintain a list of brokers who have completed the training program, information on flexible networks which have been formed throughout the state, and other relevant resource material which may aid firms in learning about or forming flexible networks. To the extent that resources allow, the resource center shall publish a newsletter on flexible network-related activities and successes around the state.

(b) Direct federal economic development funds and grant awards to directly assist groups of firms to form flexible networks. The department shall:

(i) Provide trained agency employees or private sector consultants to act as flexible network brokers;

(ii) Make competitive grants, not to exceed twenty thousand dollars each, to groups of at least five firms for specific network activities or projects. Grant awards may not exceed seventy-five percent of the entire amount of the actual expenditure on the funded activity or project; and

(iii) Assist in seeking and applying for other sources of funding or in-kind assistance.

The department may also require that, to be eligible for direct assistance, firms that participate in a flexible network collect membership dues or user participation fees to help defray the costs of the project. The department shall continue to pursue funding from federal and private resources to continue the direct assistance necessary to execute this section.

(c) Promote and assist in the formation of flexible networks by associate development organizations, as defined in RCW 43.31.097, and local governments. The department's activity shall include, but not be limited to, the establishment and administration of a competitive grant program for the support of associate development organization and local governmental flexible network activities. The department shall award grants of not greater than seventy-five thousand dollars to associate development organizations and local governments for the purpose of organizing and developing multiple flexible networks or industrial service centers. The department shall also award grants of not greater than twenty thousand dollars to associate development organizations and local governments for the purpose of supporting specific flexible network activities or projects. The department may require that associate development organizations and local governments, to be eligible for grants, require the commitment of resources by the members of the flexible network in the form of user participation fees or membership dues.

(5) The department shall not assist any flexible network that participates in impermissible or illegal activities, including bid rigging and price fixing.

NEW SECTION. Sec. 3. A new section is added to chapter 43.31 RCW to read as follows:

The department shall identify opportunities to work with flexible networks in each sector of its targeted sector programs and develop a strategy to promote the formation of flexible networks among firms in these sectors. The department shall include a summary of the actions taken under this section in its annual report to the legislature required by RCW 43.31.440.

Sec. 4. RCW 43.31.440 and 1989 c 423 s 9 are each amended to read as follows:

By January 10th of each year the department shall report in writing on its targeted sector programs to the trade and economic development committee in the house of representatives and the economic development and labor committee in the senate. The department shall report on each element of the targeted sector program, including: (1) Appraisal of the sector; (2) alternatives for assisting in the growth and development of the sector; (3) the choice of the strategy and the rationale behind that choice; (4) the implementation of the strategy; ((~~and~~)) (5) the evaluation of the targeted sector program; and (6) actions taken to assist in the formation of flexible networks under section 3 of this act. The department shall also make current information available on a regular basis to the legislature and the private sector regarding its targeted sector programs.

((The business assistance center shall report by January 1, 1990, to the senate economic development and labor committee and house of representatives trade and economic development committee on its findings and recommendations on the establishment of an industrial extension program and flexible manufacturing networks or consortia program.))

NEW SECTION. Sec. 5. The sum of six hundred seventy-three thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1995, from the general fund to the department of trade and economic development for the purposes of this act.