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Supplier Diversity

At PG&E, supplier diversity is a twenty-five-year legacy

Now as then, it increases the supplier base and gives the utility the chance to help small companies that might not otherwise be able to compete


PG&E's Jane S. Jansen goes over the figures with Oscar Ocampo and Dante Esta of tech supplier Ocampo-Esta.

PG&E's Jane S. Jansen goes over the figures with Oscar Ocampo and Dante Esta of tech supplier Ocampo-Esta.

Pacific Gas and Electric (PG&E, San Francisco, CA), one of the largest combination natural gas and electric utilities in the U.S., began its supplier diversity program in 1981. That was six years before it was state-mandated by General Order 156 of the California Public Utility Commission (CPUC), says Jane Jansen, PG&E's manager of supplier excellence.

General Order 156 requires utilities to develop a plan to reach goals set at 21.5 percent with diverse businesses: 15 percent with MBEs, 5 percent with WBEs and 1.5 percent with service- disabled veterans.

In line with the language of the day, PG&E's earlier plan was called the "equal opportunity purchasing program." "It increased purchases of goods and services from diverse suppliers and also gave us a chance to help some of the small suppliers that might not have had an opportunity to compete," Jansen says.

These reasons are still valid. And in addition, Jansen notes, "Our program also supports business opportunities and development with the communities we serve. PG&E values diversity in all aspects of our business: in our workforce, with our customers, and with our supplier base."

Targeting 21.5 percent
The year PG&E's equal opportunity program started up, the company's purchasing folks awarded 3 percent of total spend, about $26 million, to diverse suppliers. In 2004 the amount was 18.5 percent, or $296.2 million; and in 2005 diversity spending will exceed $350 million. The target for spending with diverse suppliers is 21.5 percent for 2006.

Historically, the company has achieved as high as 27.7 percent, Jansen explains. But in 2003 certain requirements of General Order 156 were changed, and PG&E has had to work up to its target again.

Communications to construction
Jansen says PG&E does "a significant amount of business" with diverse suppliers in areas as varied as communications and construction. "We do a lot of active outreach. We attend conferences and trade shows run by organizations like NMSDC as well as the Edison Electric Institute, and we post our contract opportunities on our public website, pge.com."

PG&E also passes on contract opportunities to some of its community organization partners, like the California Asian Business Association and the California Black Chamber of Commerce.

Tita Gray, one of Jansen's four supplier diversity team members, is on the board of NMSDC and works in an advisory capacity with the Native American Council.

In addition to Jansen's people, "We have excellent senior management support." A supplier diversity champion is identified for each line of business to make sure supplier diversity is supported throughout the company, Jansen discloses. Her group also works on communications and training within the company's procurement groups.

When diverse suppliers use the pge.com website to introduce their company to PG&E, "We have them state their qualifications, and we refer that data to the buyer responsible for sourcing that area," Jansen explains.

PG&E primarily looks for certification through the CPUC supplier clearinghouse, as well as comparable agencies including WBENC, NMSDC and others that the CPUC has identified. Suppliers certified through other organizations are asked to also get certified through the clearinghouse, Jansen notes.

She realizes the certification process "can be somewhat daunting. So we invite representatives from the clearinghouse and other certification agencies to our workshops to explain how to get certified."

PG&E provides mentoring for diverse suppliers in the form of training and workshops on how to do business with PG&E. It will sometimes offer a likely company a small project as a training ground.

The utility also helps suppliers learn new skills while running their businesses. PG&E sponsors the Price Center for Entrepreneurial Studies at the Anderson School of the University of California-Los Angeles. "We host the program at our San Ramon, CA conference center and we sponsor suppliers to attend it," Jansen notes.

"We also encourage our prime contractors to mentor diverse subcontractors. We place a heavy emphasis on subcontracting, which helps provide additional opportunities for supplier development."

Ocampo-Esta: electrical distribution and more
Oscar Ocampo is president and Dante Esta VP of Ocampo-Esta (Vallejo, CA), an MBE that grew up with PG&E and is now a moderately sized engineering company and part of the PG&E consulting alliance.

Ocampo and Esta both earned their EE degrees in their native Philippines. When they met, they were both working for Bechtel (San Francisco, CA), the huge engineering/construction firm.

In the early 1980s, while they were at Bechtel, PG&E agreed to train a small group of Bechtel engineers to do some of the utility's specific design and engineering work. Ocampo and Esta were part of the group, "So that was the start of our engineering association with PG&E," Ocampo says.

Most of that early work was associated with electrical distribution, and the conversion of overhead to underground lines.

Starting up
In 1986 Ocampo and Esta decided to form their own company. It was a good time to do it, because work at Bechtel was slowing down and manpower was being reduced.

Of course, after their training and work at PG&E, they thought of the utility as a potential client. The first job they bid was in Grass Valley, CA, north of Sacramento. It involved converting two miles of PG&E overhead lines to underground distribution, and it had to be done in a month.

The new partners figured the job was worth about $30,000, so they bid $3,000. "It was no mistake. We did it to get the low bid and to prove we could do the work," Ocampo explains. The PG&E project engineers were dubious, but "We worked hard, finished the job ahead of schedule and billed them for $3,000."

That enormous price cut, says Esta, was "the only big marketing we ever did. Once we completed that and they were happy, the project engineers called the other district offices and did the marketing for us and it blossomed from there. We worked in PG&E's different regions and they all liked us."

Branching out
Soon they branched out to PG&E's power generating plants group. They were asked to design variable-speed drives for the circulating water pump units at the Antioch and Contra Costa power plants on San Francisco Bay. That was an important job in a big rush, the partners recall. They had the low bid, and won the work in competition with some of the major engineering companies.

"The project engineer called me in and I convinced him that we had the capability and resources to do the job," Ocampo recalls. "He even visited our office personally and met the people who would be working on the projects."

Those power plant projects became "projects of the year" at PG&E because they helped preserve the migration route of fish going up the delta every summer. Ocampo-Esta won commendations, were given more work, and kept on growing.

PG&E has remained the firm's prime customer, but Ocampo-Esta is also doing business with Southern California Edison, and some work with companies like AT&T;, SBC, Comcast and Cingular. The firm is certified through the CPUC supplier clearing house.

One of the best
In 1992, Ocampo says proudly, the firm was nominated for the Southern California Regional Purchasing Council's Minority Supplier of the Year award through SoCalEd. In 1993 it was nominated for the same award by the Northern California Regional Purchasing Council for its work with Bechtel.

"When we did the Grass Valley job for PG&E there were only three of us, me, Mr Esta and Mr Gulan, our CAD operator, in a very small room," Ocampo says. "After we were introduced to the other regions we got more work doing overhead to underground and substation projects in San Francisco, Bay City, South San Francisco and more. By then we were around ten people, plus, of course, the work crews."

Today the company has about forty people in its Vallejo HQ, another twenty in its Los Angeles office, and a small office near PG&E HQ where three project engineers concentrate on PG&E work.

Part of the family
More than a year ago PG&E formed its consulting alliance. "They call us if they have rush work that needs to be completed right away," Esta says. Right now Ocampo-Esta does design and engineering work in the PG&E alliance.

"I tell people we're really like part of the PG&E family," Ocampo says comfortably.


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