12. CBO Minimum Participation Requirements and Current Contractor Preferences

As discussed in Section 6.1, PG&E's RFP filing contains language that requires the winning bidder to strive to "ensure that CBOs perform energy efficiency services on a minimum of 30% of all homes to be weatherized." PG&E defines the term "CBO" as "community action agencies or other non-profit organizations."⁵⁵ In addition to meeting this requirement, the winning bidder is required to meet the WMDVBE goal of 21.5%, with the following breakdown: 15% of all subcontracts must be minority-owned business enterprises; 5% of all subcontracts must be women-owned business enterprises; and 1.5% of all subcontracts must be disabled veterans-owned business enterprises. PG&E has established WMDVBE goals pursuant to the Commission's direction in General Order 156.

Prior to executing the contract, the winning bidder must provide a "firm plan, including signed letters of intent from all CBO and WMDVBE subcontractors indicating their willingness to work with Contractor in the Energy Partners Program." If the winning bidder cannot meet both the CBO and WMDVBE goals described above, the RFP states that PG&E may (in its sole discretion) limit the number of homes assigned to any one subcontractor to a maximum of 5,000 homes. (Exh. 19.)

To be eligible to bid in SDG&E's program, the bidder must have no less than two years of providing weatherization services to low-income communities within southern California. (RT at 560-565.) SoCal and SCE require a minimum of three years experience providing weatherization services to low-income communities within southern California. (Exh. 14, p. 27.) In addition, for SDG&E's program, a bidder must present a marketing plan that includes detail on the major market barriers facing the low-income communities in SDG&E's service territory, lists local laws, codes and ordinances that apply to weatherization work done in the targeted communities, includes detail on how many homes have been served by similar state programs in the past, and provides the overall percentage of the target market that is available to be served by the program today. The bidder must also demonstrate experience providing non-energy services to targeted low-income communities. (Exh. 41, pp. 9-10.)

12.1 Positions of the Parties

PG&E contends that its 30% CBO participation goal was set as a "stretch" goal to ensure that the winning bidder demonstrates decisive plans to ensure that community knowledge and local participation are effectively employed in the program and are not sacrificed in the interest of the lowest-cost provider. PG&E believes that its CBO goal is entirely consistent with the intent of AB 1393. (Exh. 4, p. 7; Exh. 5, p. 8.)

A minimum CBO participation goal is supported by the Greenlining Institute, Latino Issues Forum and LIAB. They argue that establishing minimum participation levels for CBOs establishes the necessary benchmarks against which to measure progress in achieving program goals, encourages utilities to link communities with organizations that have the knowledge and trust of the community and can help ensure that leveraging will be achieved. Greenlining Institute and Latino Issues Forum view PG&E's requirement as a goal, not a quota, which would have no adverse consequences to the winning bidder if it cannot be met. RHA also supports PG&E's efforts to strengthen the network of CBOs by establishing such a goal, but requests Commission guidance on its implementation, e.g., whether there would be adverse consequences to the prime contractor if CBO participation falls below 30%.⁵⁶

ORA contends that PG&E's CBO goal is, in effect, a bid set-aside for CBOs and opposes any such set-asides. Instead, ORA argues that CBOs, local private contractors and other non-profits should compete on an equal footing in a competitive bid process. ORA argues that California can secure maximum leveraging without setting a minimum participation goal for CBOs.

Similarly, Contractors' Coalition opposes PG&E's 30% goal, along with any other provisions that limit participation to specific entities, whether they be CBOs, existing contractors, or other entities. In Contractors' Coalition's view, this approach is contrary to open, objective competitive bidding. Moreover, Contractors' Coalition contends that PG&E's RFP, as written, would enable CBOs to determine which private contractors are eligible to win the bid, simply by boycotting any private contractor they wish to eliminate. In addition, Contractors' Coalition argues that implementing PG&E's CBO minimum participation level would inappropriately take work away from WMDVBE-certified contractors in PG&E's program. (Exh. 14, pp. 15-19.)

SDG&E is also opposed to establishing a minimum CBO participation goal. SDG&E prefers that the Commission continue to allow it discretion to determine how much work subcontractors can handle each year, and to allocate the work accordingly, so that both nonprofit CBOs and private contractors are given a chance to win business under the RFP process. If a minimum CBO requirement is established, SDG&E requests that the Commission clearly define the term "CBO" in order to avoid potential gaming of definitions by potential bidders to get around this requirements. (Exh. 44, pp. 17-18.)

With respect to other bid requirements, Contractors' Coalition contends that the three southern California utilities have included significant restrictions and preferences that discriminate against contractors that have not been recently and directly involved in their low-income programs. LIAB also expresses concerns that SDG&E's bidding requirements may limit the bidding pool to current program providers or unduly restrict the bidding pool. The utilities respond that these criteria are needed to ensure the participation of qualified bidders, and do not restrict bidding to current providers.

12.2 Discussion

We agree with ORA and others that competitive bidding for the outsourcing of LIEE programs should not establish quotas or set-asides for any particular type of organizational entity. To do so would presume that a particular type of organization has a clear superiority in meeting the combination of non-cost and cost criteria established for the bid.

The record does not justify any such presumption for CBOs. All of the indicators of quality, comprehensiveness, customer satisfaction, pass rates, etc., show either that there are no differences between participating CBOs and participating private contractors or, to the extent that any statistical differences have been found, they indicate that private contractors (WMDVBE-certified and non-WMDVBE) may be superior.

Although the pass rate information presented in this proceeding has significant limitations, as discussed above, we note that it does not present any indication of superior performance by CBOs. For example, in the SoCal program, the data shows that the private contractor and the CBOs maintain very similar pass rates. The SDG&E pass rate data show that the private contractors in that program have maintained consistently higher pass rates than the CBOs. The PG&E data also show that the private contractors over the past three years have a slightly higher pass rate than the CBOs.⁵⁷ Data from SCE for PY1997-PY1999 show that the private contractors in the evaporative cooler program maintain significantly higher pass rates than their CBO counterparts working in that program (96%-98% for non-WMDVBE privates vs. 85%-92% for CBOs). The pass rates for SCE's WMDVBE-certified contractors in the program were the highest over each of the three years.

Nor does the evidence indicate that the CBOs performance is superior to private contractors or private WMDVBE-certified contractors in such areas as outreach, production, comprehensiveness, or customer satisfaction. In Exh. 17, Contractors' Coalition presents a comparison of CBOs, WMDVBEs and private (non-WMDVBE certified) contractor performance for 1998-1999, based on the goals set by PG&E for each county and each region. No type of contractor group excels consistently in comparison with the others when evaluating each of the above attributes.

Even if CBOs had performed as a group better than non-WMDBE or WMDVBE-certified private contractors (which this record does not indicate), it does not necessarily follow that future CBO contractors would be similarly superior in all cases, and therefore set-asides or quotas are warranted. If CBOs best meet the standards of the LIEE program, then they should be selected on that basis. As discussed below, those standards will include non-cost criteria consistent with AB 1393.

Moreover, we are concerned that the imposition of a 30% CBO participation minimum would have perverse impacts with respect to the participation of WMDVBE-certified contractors in PG&E's program. Currently, 75% of all homes in PG&E's program have been treated by WMDVBE contractors, and approximately 10% have been treated by CBOs. To meet PG&E's 30% participation minimum, PG&E would need to take work away from WMDVBE-certified contractors. (Exh. 14, p. 16.)

In sum, we believe that CBO participation minimums should not be established in the competitive bidding process. For similar reasons, we also believe it is inappropriate to restrict the pool of bidders to CBOs or other nonprofit organizations, as SCE and SoCal propose for their energy education workshops. (Exh. 14, p. 27.) This does not mean that goals for CBO participation are inappropriate. However, as currently worded, the language of PG&E's RFP does not simply identify a goal for CBO participation, against which progress will be monitored over time, with no adverse consequences to the bidder if that goal is not achieved.

During the course of this proceeding, PG&E indicated a willingness to modify the RFP language so that it would be clear that the 30% CBO participation language is a "goal." (RT at 99-102.) In our view, the modification proposed in Exh. 19 does not adequately clarify that the 30 percent figure is a goal that requires a good faith effort of the contractor, but is not a mandatory provision that can bring upon the contractor penalties for breach of contract. If PG&E (or any other utility) chooses to articulate a goal for CBO participation in the RFP, then such clarification language should be included.

We will not prohibit a utility from including language in its RFP that would limit the number of homes assigned to any one subcontractor. This is a general practice that PG&E has undertaken in the past, and seems reasonable to ensure that work is spread around among a number of subcontractors. (RT at 123.)

With respect to the bidding requirements of the southern utilities, we find that the concerns expressed by Contractors' Coalition and LIAB have some merit. The requirement that bidders demonstrate a minimum number of years providing weatherization services to low-income communities in southern California would, in our opinion, unduly limit the pool of potential bidders to those contractors currently (or in the recent past) participating in the southern California LIEE programs. These requirements should be eliminated.

However, we do not believe it is unduly restrictive for a utility to ask bidders to demonstrate their ability to provide services in a multitude of languages or to demonstrate knowledge about the local low-income community and local codes and ordinances, as SDG&E requests. Considering these non-cost issues along with cost considerations is entirely consistent with the intent of AB 1393 and our own goals for this program. On the other hand, we find it unreasonable to exclude from consideration the bidders' experience in providing energy efficiency services in other geographic regions, or to non-low income program participants. Should SDG&E issue an RFP in the future, such experience should be listed as relevant evaluation criteria.