4. Post en banc Technical Assistance Proposals and Comments

Section 6.2 of GO 156 provides that each utility shall implement their own unique outreach program to "inform and recruit" WMDVBEs and non-WMDVBEs to enhance the pool of utility suppliers. The central theme of nearly all parties throughout the proceeding and at the en banc hearing was that utilities will have many more procurement choices and WMDVBEs will win more contracts when small and diverse businesses have better access to more technical assistance and capacity building.

For purposes of this proceeding and decision, the general definition of these terms is as follows:

· Technical Assistance (TA) - addresses getting certification as a WMDVBE and technically informed about the industry and RFP process in order to become competitive; includes basic financial, marketing, and business skills.

· Capacity Building (CB) - addresses a qualified, successful business that is poised to expand its capacity through access to larger or unbundled contracts, bid partnerships, etc. upon development of advanced business and management skills, acquisition of ISO 900011 certification, and/or external networking.

The parties' positions have evolved from somewhat entrenched general suspicions at the commencement of the proceeding, to a dialogue that is leading to joint efforts to maximize the use of TA and CB resources. The participating utilities initially took the position that they were effectively providing necessary TA and CB, while CBOs contended they were foolishly ignored, and TA and CB was hard to access despite utility claims to the contrary.

As the utilities began to explicitly identify numerous elements of their available TA and CB, support of local community groups, networking events, prime supplier programs, scholarships, educational partnerships, and other outreach activities, the CBOs acknowledged these efforts and sought to better utilize the benefits for their members and other small and diverse businesses. However, many CBOs also clearly defined what they saw as shortcomings, old habits, and a failure to fully engage their communities by current utility supplier diversity programs. They sought more funds, more involvement of community groups in delivering utility-based TA and CB, grants to conduct their own TA and CB, and measures of program effectiveness. Some utilities seemed surprised at how their programs were perceived by participating CBOs.

The culmination of more than a year of dialogue, comment, contentions, and proposals is found in the post en banc comments provided whereby two fairly comprehensive TA and CB improvement plans were submitted for Commission consideration, and other ideas and comments on this topic were offered.

SCE, PG&E, Sempra, AT&T, Verizon, and CWA (Joint Utilities) developed a consensus supplier diversity proposal touted as a unified and comprehensive approach, based on their collective experience, which addresses all stages of a business's development and could serve as a model to smaller and newly reporting utility companies. The three-year proposal has five key elements:

· Cross-functional team of employees

· A prime supplier subcontracting program (utilities have each targeted development in "second tier"12 spend, mentoring)

· Matchmaking events between prime contractors, small and diverse businesses, and utility managers

· Strategic target initiatives (e.g., AT&T's Women of Color)

· A three-tiered TA and CB with each track suited to a particular level of business development and utility needs

The Joint Utilities plan focuses on contractor & supplier requirements, procurement information, marketing to utilities, expanding capabilities and business development. No additional funding need was projected beyond current supplier diversity program funding.

CHCC and CAPCC submitted a TA and CB program focused on the 1000 most likely to succeed WMDVBEs which would eventually be directed into one of four "academies" located around the state for intensive training. They contend the proposal responds to CBO consensus that intensive TA and CB is needed, and addresses consensus obstacles identified in the proceeding, e.g., shortage of qualified WMDVBEs, lack of industry knowledge, bid sophistication, and inability to deal with large projects. The proposal envisions the Clearinghouse conducting a survey to identify promising WMDVBEs, academies run by winning bidders selected by the utilities with Commission oversight, use of specifically designed curriculum & training modules created to win bids, and graduates placed in one-on-one utility mentoring programs. Other less qualified WMDVBEs would be referred to existing business development programs (e.g., U.S. Small Business Administration).

The Two Chambers plan would begin with one academy in an 18-month pilot program and focus on marketing, fiscal responsibility, bid preparation, advanced business skills, industry knowledge, administration of large projects, and ISO 9000 certification. The total estimated cost for four academies is about $1.0 - $1.5 million, some of which could be offset by a small enrollment fee, California Utilities Diversity Council13 (CUDC) scholarships, and utility contributions.

The Joint Parties submitted comments that emphasized the importance of more TA and CB to ensure WMDVBEs can effectively compete to increase diversity and lower ratepayer costs. The Joint Parties suggested the Commission require all utilities to coordinate TA programs by industry and to develop a five-year TA and CB program annually funded by diversion of ¼ of 1% of total procurement dollars for that utility company.

The comments also included recommendations for increased philanthropy in minority and underserved communities, self-certification for small contracts, admission of failure of voluntary efforts in underutilized areas, placement of customer deposits in minority institutions, increased target goals to aggregate 34.5%, prioritizing WMDVBE growth in wireless, SmartGrid, green energy, and electric procurement, and expansion of GO 156 reporting to include cable and other companies that appear before the Commission. These non-TA recommendations are discussed in more detail in Section 5 below.

The Chamber initially stated "the fundamental purpose of the GO 156 is to assist our American Indian businesses in increasing our business opportunities within the utilities...." AICC said it was offended by utility claims that there are not enough qualified American Indian businesses positioned to successfully compete for contracts. The 10-point proposal submitted was focused on growth of American Indian business success in utility procurement programs. The proposal contained recommendations that included raising the aggregate target goal to 35%, development of WMDVBE prime suppliers, prompt pay provisions, a higher minimum for sole-source orders, increased utility diversity staff, development of joint utility funds for credit and bonding, and increased philanthropy to AI organizations. These are non-TA issues that are discussed in more detail in Section 5 below.

Greenlining's comments included favorable review of the OIR which it said paved the way for the sophisticated conversation at the "best ever" 2010 en banc hearing. Greenlining agreed that expanded TA and CB was critical and echoed other requests that utilities consult with CBOs when they design shared and individual TA and CB programs. The group cited Commissioner Ryan's call at the en banc to combine and share TA resources to avoid duplication.

Greenlining also offered several recommendations on other issues, including asking the Commission to enter Memoranda of Understanding on GO 156 voluntary goals with companies not subject to Commission jurisdiction but doing business in California (e.g., cable), to encourage utility use of minority media for mainstream outreach, support placement of customer deposits in minority banks, expand procurement of basic goods and services by wireless companies, and to promote supplier diversity in the "green economy" (e.g., renewables, broadband deployment, SmartGrid deployment, etc.) Non-TA issues are discussed in more detail in Section 5 below, as are the group's suggested amendments to GO 156.

Initially, we underscore that there are limits to what the Commission may order pursuant to its authority in §§8281-8285 and GO 156. For example, final vendor selections by a utility remain within its legitimate business judgment.14 Additionally, each utility voluntarily chooses the specific elements of its own outreach program.

However, we are fortunate in California that the largest utilities have embraced supplier diversity and committed to developing effective outreach programs. We have also benefited greatly in this proceeding from the vigilant participation by CBOs and business groups which brought the pluses and minuses of existing utility outreach programs to light. The conversation prompted by the OIR broke down some barriers between CBOs and many utilities and prompted a thorough airing of concerns and complaints among the parties.

That dialogue has helped the utilities to focus on how to better partner with community groups, to share and maximize use of resources, and to identify where existing TA and CB efforts could be improved in conformity with §6.2.1(2) and (3) of GO 156. It also allowed CBOs to better understand what resources are available from the utilities, what is expected of competitive bidders for supply contracts, and how procurement decisions are made and by whom. This in itself is an achievement for which the parties are congratulated.

The Joint Utilities proposal is most important for its unified expression of the "legitimate business judgment" of the utilities regarding baseline minimum standards for its suppliers. It was developed by a coalition of a large number of utilities, led by the three largest energy companies, the two largest telecommunications companies, and numerous water companies. Their collective position is now in writing for the CBOs when implementing TA & CB and all prospective suppliers to see and follow. For this reason alone, we think it merits broad exposure to the public and attach it to this decision as Attachment A.

It also serves another important function. This is a groundbreaking example of cross-industry consensus on key program elements for any utility's supplier diversity program that can serve as a model to smaller companies and those new to reporting. This is the first time we have seen this level of initiative by utility companies and we applaud their effort. They have shown a better understanding that these programs should be transparent and they should work closely with the CBOs and communities within their respective service territories.

The Joint Utilities proposal has several other good points including a broad focus on all levels of WMDVBEs, a three-year commitment, advanced technology and emerging market components, and incorporation of existing programs and resources at community colleges and universities, local business organizations, and the U.S. Small Business Administration (SBA). On the other hand, it appears to have more emphasis on Tier I (1-3 years experience, <$1 million annual revenue) businesses when many are clamoring for capacity building of established WMDVBEs. It is also unclear how many Tier II (3+ years of experience, > $1 million annual revenues) and Tier III (5+ years, demonstrated readiness to grow) businesses can actually access the few identified academic training programs. Furthermore, it should not be limited to WMDVBE businesses.15 The proposal should be further developed and we encourage the parties to do so.

Attachment of the Joint Utilities proposal does not mean we "adopt" it or that we reject the ideas set forth in the Two Chambers proposal. Both proposals reflect the wisdom gained from the discourse that occurred in this proceeding. Both TA and CB proposals targeted similar training components for small and diverse businesses, but with differing views on which businesses would gain early benefit, who would do the training, and how it would be funded. Some of the challenges of the Two Chambers proposal are that it requires an infusion of funds, a Clearinghouse survey outside the current contract requirements, an RFP process that includes development of training curricula, and an 18-month pilot program. These elements inject uncertainty and would necessarily delay actual benefits to current WMDVBEs.

We do not take a position on whether the utilities, CBOs, or third party vendors are best suited to do such training. All parties seem to agree that such training needs to occur if more small and diverse businesses are to become competitive for contracts. Clearly, the utility companies have already invested time and money in developing the TA and CB portions of their supplier diversity programs and are in the best position to know what business or industry acumen appears to be lacking in would-be suppliers. Avoiding duplication of effort is desirable. However, the existing programs are not perfect and CBOs offered many ideas for improvement that the utilities should carefully consider. In addition, some CBOs already perform needed training in some of the identified categories. What the parties have deemed essential to improvement is that the utilities and CBOs that conduct TA and CB training should share resources, conduct outreach, work together, exchange constructive criticism, share best practices, and assist smaller and newer reporting companies to get their programs up and running.

The question of whether to focus on a few "high quality" WMDVBEs or to reach out to different levels of business development is an important one. Each approach has value. Utilities want to see rapid expansion of the pool of certified and qualified suppliers and their proposal involves a multi-tiered training model for small, medium, and large businesses. In contrast, the CBOs want to see more contracts awarded to qualified small and diverse businesses as soon as possible. The Two Chambers proposal reflects this view by focusing on businesses that already demonstrate a level of sophistication that qualifies them, or shows the potential to qualify, to competitively bid on larger contracts. We encourage the Two Chambers and other CBOs to continue their efforts to identify "high potential" WMDVBEs and assist them directly or by referring them to other existing training programs.

The primary recommendation by the Joint Parties was for the Commission to order the utilities to develop a five-year plan for TA and CB and to fund the program from ¼ of 1% of total procurement dollars. The Joint Utilities proposal is a three-year plan which substantially conforms to their request, and goes beyond in other ways. None of the utilities supported a Commission order to divert procurement dollars. For example, Sempra argued that for the large utilities with billions of dollars in procurement spend, this would amount to many millions of dollars, far in excess of the total spent by many utilities on their programs.

We acknowledge broad agreement among parties as to the necessity of expanding technical assistance, but no record was developed to support that any particular amount of utility funding for TA is sufficient, or appropriate for all utilities. Instead, we find that utilities should be examining how much they spend to determine whether their current funding levels are adequate to meet their own goals of improving supplier diversity. Therefore, we decline to order a specific amount, or percentage, of procurement spend to be directed towards an element of a utility's supplier diversity program. Even if our authority extends to intervention in this internal business decision, it is not a focused response to the stated problem. Not every company or industry has the same lapses in their TA and CB program components, the proposed use of funds lacks guidelines or controls, the Joint Utilities have responded with a specific model of utility commitment contained in their proposal, and there is insufficient documentation in the record to support an order for ratepayer funding of this program element.

However, we agree with the Joint Parties that the amount of money a utility allocates to its supplier diversity programs and specifically for technical assistance is of interest to the Commission and the public. It may illustrate a measure of the utility's commitment and provide a basis for cooperation in future TA initiatives. Therefore, the utilities should include in their annual GO 156 reports, to the extent available, the approximate amount of funds expended on developing and distributing technical assistance, e.g., development and distribution of materials, participation in training events.

Greenlining offered a unique comment which was otherwise undeveloped during the proceeding. It stated that most corporate RFPs now contain "sustainability criteria" for suppliers to reduce their own carbon footprint, and suggested that TA programs include a sustainability component. This is a reasonable suggestion and we agree it merits discussion between the parties.

However, we differ with Greenlining on another matter. The organization echoed a linguistic complaint made by AICC that the participants in this program area should not use the phrase "qualified" businesses because it is a vestige of formerly held assumptions that non-white businesses are presumed not to be qualified in contrast to white-owned businesses. While acknowledging some sensitivity to historical injustice, we decline to wholly abandon the word which was used frequently by some parties without malice or ignorance, and instead was used to describe any business, usually new and/or small, which had not yet acquired either industry experience or the generally accepted business practices to support a competitive bid. The record established that such businesses exist and seek various kinds of technical support.

Accordingly, based on the record, we find that it will advance the goals and policies of GO 156 (1) to include the Joint Utilities proposal as Attachment A to this decision, (2) for utilities and CBOs that conduct TA and CB training to share resources, conduct outreach, work together, exchange constructive criticism, share best practices, and assist smaller and newer reporting companies to get their programs up and running, (3) for CBOs to continue to provide input to utility TA programs and assist WMDVBEs to get the TA they need from whatever available source; and (4) for utilities to include in their annual GO 156 reports the approximate amount of funds, to the extent available, directly expended on developing and distributing technical assistance to WMDVBEs and small businesses.

11 The International Organization for Standardization (ISO), a network of the national standards institutes of some 160 countries, with a central office in Geneva, Switzerland, sets international business standards and guidelines. The 9000 family of standards represents an international consensus on good quality management practices. http://www.iso.org/iso/home.html.

12 "Second tier" generally refers to subcontractors participating in a larger or prime contract.

13 CUDC was created as a resource for utilities, the Commission, and policymakers regarding employee diversity in the regulated utility industry.

14 Section 6 of GO 156 states, in relevant part, that "The utility retains its authority to use its legitimate business judgment to select the supplier for a particular contract."

15 Section 6.2.1(8) provides, "Each utility is directed to offer the same assistance set forth in Section 6.2 to non-WMDVBEs, upon request."

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