The energy industry relies on diverse suppliers to fulfill its vision of the future
"It takes companies knowing companies to work together successfully."
– Sherrie Duncan, Progress Energy
"Supplier diversity has become the fabric of our company. We don't think of it as just a program." – Rick Hobbs, SoCalGas and SDG&E
By Dan Margherita
This past February, execs of the Edison Electric Institute (EEI, Washington, DC), which represents some 70 percent of the U.S. electric power industry, outlined the challenges and opportunities that will face the electric utility sector in 2011 and beyond. This was what has become the group's annual "state of the industry" presentation.
The execs talked about energy efficiency, smart grids, modernization of transmission and distribution systems and more, all to help customers better manage their energy use. More efficient customers, they noted, help the industry run its systems more effectively.
Their vision can only be realized through efficient and effective relationships with good suppliers, diverse and non-diverse alike.
Entergy seeks minority-owned suppliers
Entergy Corp (New Orleans, LA) provides electric power production and retail distribution to almost three million customers in the Mississippi River Delta, including Arkansas, Louisiana, Mississippi and Texas, states which include some of the poorest areas in the nation. Walter Loyd, Jr is director of supplier diversity and development at Entergy.
Loyd has been with Entergy since 1974 and in his current position since 1997, always at the forefront of Entergy's supplier diversity initiatives. But if you tell him that people say good things about him he'll probably reply, "Oh, they're just being nice to an old man!" Of course the real reason is very different.
First into Fair Share
In 1987 Entergy became the first electric utility to enter into a Fair Share agreement with the NAACP to seek out minority-owned businesses. Since then, Loyd says, Entergy has spent billions of dollars with diverse businesses. "Currently we spend 22 to 28 percent with diverse suppliers," he reports. "It adds up to about $200 million annually.
"Many of these are fledgling companies," Loyd continues. "We needed to build their skills and competencies in order to grow their businesses and satisfy Entergy's requirements." One of the ways they accomplished this was to create "Mentors and Protégés," a group of Entergy employees who assist diverse suppliers at local, regional and national levels.
Loyd notes that Entergy meets minority businesses through an array of networking opportunities including trade shows. He specially cites the National Minority Supplier Diversity Council (NMSDC, New York, NY), the United States Small Business Administration (SBA, Washington, DC) and the Women's Business Enterprise National Council (WBENC, Washington, DC).
Entergy's commitment to diversity is system wide, but Loyd praises the team of Entergy supply-chain professionals who "work to ensure a level playing field for diverse suppliers." And he singles out chair and CEO J. Wayne Leonard for special recognition. "Our CEO endorses and supports our diversity culture," Loyd reports. "I think our suppliers consider it an honor as well as a benefit to be endorsed by Entergy and a strong team dedicated to this issue."
Working with the primes
Entergy also works with its prime suppliers to create a strong second-tier supplier diversity program. "Not every contract offers an opportunity to do subcontracting," Loyd admits. "Our challenge is to create synergy that brings a number of smaller companies together, including women- and minority-owned suppliers, vets, disabled veterans and HUB-zone suppliers, allowing them all to benefit from greater sourcing."
Progress Energy: articulating the diversity message
"It takes companies knowing companies to work together successfully," Sherrie Duncan believes. Duncan is manager of supplier diversity and business development at Progress Energy (Raleigh, NC). Supplier diversity is one of four parts of Progress Energy's overall diversity efforts, along with workforce, workplace and community customers. "We want to be sure that the diversity message is articulated to all parts of the company," Duncan explains.
Duncan has been with Progress Energy for eleven years and in her current role since 2005. Before joining Progress she held jobs related to financial management with the federal government and Department of Defense consulting agencies.
Progress Energy's diversity program isn't just something that looks good on paper, Duncan says. "We make the case to all our business units that diverse suppliers are critical to our operations, aligning the diversity focus with specific business initiatives."
For example, the company has found itself in situations where its needs were not completely met by supplier candidates. "We want to support local contractors," Duncan explains, "in some instances, awareness of our needs wasn't what it should be." So they took company project managers out to work with the contractors and "found that it improved the bids tremendously."
Progress Energy is also working on its second-tier program, helping prime suppliers identify diverse firms to be their own suppliers. Overall, in 2010 Progress Energy placed more than 11 percent of its spend with eligible diverse firms, exceeding its stated goal of 10 percent.
Bunty LLC works with Progress Energy
"Bunty LLC has had the pleasure of working with Progress Energy for five years," says Rajeev Jindal, the company's founder. Bunty provides galvanized steel foundations for utility poles.
Rather than pouring concrete, Progress uses screw-in foundations to support its poles. "We handle ten-foot poles in most residential areas and also support twenty-five- and even forty-foot poles that are used mainly in Florida because the ground is so much softer," Jindal explains. Bunty LLC also stocks inventory for Progress Energy.
Jindal, born in New Delhi, India, came to the U.S. with his parents when he was eight years old. He earned a BSEE from Clemson University (Clemson, SC) in 1992 and worked for International Paper, Milliken & Co and Owens Corning. In 2000 he started Bunty LLC (Greenville, SC).
"It's a four-year sales cycle," Jindal estimates. Bunty's first large contract for a major tire company didn't happen until 2004 and it was another two years before his relationship with Progress Energy was established.
Bunty works as both a first- and second-tier supplier in some industries, with its total revenue approximately equal between the two. "We are a tier-one supplier to companies like Progress Energy," Jindal says, "but a tier-two supplier to some large automotive companies for which we provide under-hood and suspension-system components." Bunty also has clients in Europe, Asia and, most recently, Brazil.
Jindal completed an MBA from the University of South Carolina in 2002. He explains that he had the technical background to effectively run the company, but "needed to know more about business aspects like marketing, finance and economics." Bunty currently employs about ten people. "We're very lean," Jindal says with pride. "It gives us a competitive edge."
Ameren: matching needs with capabilities
"We handle supplier diversity from the inside out," says Adriene K. Bruce, manager of supplier diversity at Ameren (St. Louis, MO). Bruce reports that Ameren works to find internal needs that match the capabilities of its outside suppliers, diverse and non-diverse alike. "We have a team of three supplier-diversity executives representing different business segments who handle all our outsourcing and procurement. They're linked with internal strategic sourcing and procurement groups," she explains.
"One person handles items like legal services, accounting services and other services within Ameren. Someone else handles products and services for our power generation business, including Ameren Missouri's nuclear energy plant. Those are related to generation and upkeep. Finally we have someone responsible for sourcing and transmission distribution, including support for our energy-delivery systems."
Bruce and her team have increased Ameren's spending with diverse suppliers significantly since she started there five years ago. In 2010 nearly 8 percent of total supplier spend was placed with minority-owned, women-owned, and veteran- and service-disabled veteran-owned businesses. Chair, president and CEO Thomas R. Voss has mandated that this spending reach 10 percent by 2014.
Diverse suppliers can go to Ameren's website, click on the "supplier diversity" link and register themselves. Ameren also reaches out through business fairs and other events put on by NMSDC, WBENC and their local affiliates.
Since 2008 the utility has hosted its own annual supplier diversity symposium. This March Ameren partnered with Commonwealth Edison to hold a joint supplier diversity symposium, "navigating your way to success in a challenging economy." More than 400 companies attended. Guest speakers included David Steward, chair and founder of World Wide Technology, (St. Louis, MO); Loretta Rosenmayer, CEO of Intren (Union, IL), a woman-owned construction company; and Jose Mas, CEO and vice chair of MasTec, Inc (Coral Gables, FL), an Hispanic-owned infrastructure services provider.
Intren supplies utility services
Loretta Rosenmayer founded Intren in 1988 as an underground trenching company, but today only about 5 percent of its business involves trenching. Its capabilities have expanded to overhead and underground electric transmission lines, gas distribution work, directional borings and maintenance services, mostly for electric and natural-gas utilities. The company started as "Trench-It" but the name became outdated as its other activities expanded. Today's Intren employs some 450 people.
Rosenmayer credits her employees and her clients for the company's success. "I've always believed in keeping a low profile," she says. "I keep my nose to the ground and just do the work. If you provide a good product and promote a culture of safety, the work will come to you." Intren's current client list includes Ameren, Alliant Energy, PG&E, Wisconsin Energy, Nicor Gas, Peoples Gas and Mid-America Supply.
"I'm not the company," Rosenmayer says. "The men and women who work here are the ones who built it. They're the real stars and also the real salespeople, and without them at my back I couldn't make any commitments or take on any contracts."
Rosenmayer comes from a Chicago family grounded in the electric industry. "My father came over here from Italy when he was fifteen years old," she says. "He went to work for Commonwealth Edison, working in the field. On weekends we would go on outings to check on manholes. My father's English wasn't very good so I used to help him write his reports."
It was with ComEd that Rosenmayer got her big break. In 1988 the utility was just beginning to outsource underground trenching for electric cable installations.
"We were in the right place at the right time," says Rosenmayer. "We were digging trenches near one of their sites and ComEd saw what we were doing and gave us some work and our reputation grew from there.
"I firmly believe that in working with utilities, you meet some of the finest people in business," Rosenmayer declares. "I consider it my mandate to work hard, work safe and do the job right. If I do a good job all the other minority suppliers will benefit, but if I fail then it's a black eye for everybody."
In 2006, the twentieth anniversary of the Chicagoland Women's Business Development Center (WBDC), Rosenmayer was told she would be given the Entrepreneur of the Year award. She turned it down.
She'd already received the award in 1998, and "I told them this time they should give it to another woman at a company that could use the bump," she says. "I'd already been in business for eighteen years."
Vectren Corporation: SD is embedded in the culture
Vectren Corp (Evansville, IN) distributes electricity and gas to more than a million customers in seventy-four counties between Indiana and Ohio. Mark Sebree, manager of supplier diversity and small business liaison officer, says the company uses diverse suppliers, contractors and consultants in several core areas of the business, including safety consulting and supplies, underground construction, field inspections and engineering and construction management.
"In 2004 we formalized our supplier diversity initiative, making it fully staffed and with a dedicated budget," Sebree explains. "We also created a diversity action council staffed with about thirty people from all business units of the company. We wanted to be sure our diversity efforts would be visible across the board."
Vectren publicizes this visibility in magazine and newspaper advertising as well as attendance at local industrial development council shows in Indiana and Ohio and other networking events and trade seminars.
Scott Johnson directs the supply chain function at Vectren. "Supplier diversity used to report to HR but now it's part of supply chain," he explains. "We think this allows its matchmaking to proceed more effectively."
Vectren estimates that 10 percent of its suppliers are diverse organizations, including firms owned by minorities, women, veterans and small disadvantaged businesses.
Sebree and Johnson agree that supplier diversity is not merely a "program" at Vectren. "It is embedded in the corporate culture of the entire organization," says Johnson.
Quest Environmental: whole new safety processes for Vectren
"In my experience, it's three to five years from the time a vendor first meets a big company until it is asked to submit a bid for something," says Sam Yadav, president of Quest Environmental & Safety Products, Inc (Fishers, IN). "You just have to stay in front of them and keep asking for opportunities to earn their business."
Quest Environmental's customer base includes energy companies as well as pharmaceutical manufacturing firms, general construction and abatement companies and nuclear reactor dismantlement.
Quest started up in 1991. In 1994 Yadav joined the company as sales VP after a career in sales and marketing of medical devices. When Quest's owners offered him the chance to buy them out in 1997, he did. "I liked the mission and vision of the company," he says. "I thought that safety products and technical support would be a good niche."
The company supplies Vectren with safety products and training-support processes that benefit employees ranging from linemen in the field to employees in the generating plants. "Quest provides more than just safety products," Yadav says. "We are a complete technical resource offering solutions to safety challenges. We are problem-solvers.
"You have to convince workers that safety products like gloves, glasses and hats are worth using and then follow up with items that are comfortable but also afford them maximum protection."
Quest met Vectren at an NMSDC meeting in Indianapolis, IN. Both Quest and Vectren employees were working toward black belts in Six Sigma and attended the same consultant's class. The relationship grew from this. "Mark Sebree was very curious about how we did things," Yadav remembers. "He really grilled us on what we would do in certain situations. He wanted to be sure we do what we say we can do.
"They liked that we were willing to accept challenges. We were able to take best practices we had developed for other companies, tweak them to meet Vectren's needs and create whole new safety processes for them."
From the utility's standpoint, "We were impressed that Quest brought their performance scorecard to the table unsolicited," Sebree adds.
Yadav was born in India and came to the U.S. with his family when he was six years old. He has a 1983 BS in marketing and finance from St. Louis University (St. Louis, MO) and a 1991 MBA from Butler University (Indianapolis, IN).
At SoCalGas and SDG&E, diversity is the fabric of the company
Rick Hobbs is director of diverse business enterprises for Southern California Gas Company (SoCalGas, Los Angeles, CA) and San Diego Gas & Electric (SDG&E). Supplier diversity "has become the fabric of our company," he says. "We don't think of it as just a program.
"We set very clear goals right down to the managers and anyone else with procurement responsibilities," he notes. Interaction between procurement staff and both prime and smaller diverse business enterprises (DBEs) is encouraged.
"We cast a very wide net and go beyond the databases to identify diverse suppliers," Hobbs says. "Both SoCalGas and SDG&E sponsor and participate in dozens of events with business organizations targeting DBEs, including WBEC-West and the Service-Disabled Veteran-Owned Businesses Network right here in Los Angeles and San Diego."
San Diego is, of course, a "big military town," and SDG&E and SoCalGas are particularly proud of their work with veterans. "In 2010 the California Public Utilities Commission (CPUC) set a goal of 1.5 percent of utility spending among SDVOBs. SDG&E spent 3 percent and SoCalGas spent 2.2 percent with service-disabled veterans," Hobbs reports.
The two utilities combined spent more than $600 million with diverse suppliers in 2010, some 37 percent of the year's total spend. This far surpassed the CPUC's stated goal of 21.5 percent and even exceeded the companies' own internal goal of 30 percent. It was the third year in a row that the utilities surpassed their own DBE goal.
Both SoCalGas and SDG&E sponsor their own symposiums and supplier events. "In addition to explaining what it takes to work with us, we also talk about how important it is for diverse suppliers to be certified with the state of California and make sure that they are aware of how to do it," Hobbs says. This fall the two utilities will sponsor their first small-business boot camp to highlight these and other issues facing small businesses.
A.M. Ortega Construction: trench work, replacement work, paving and grading
"The only person who will make you successful is you!" This is what Maurice Ortega tells diverse businesses, and he should know. Ortega is president of A.M. Ortega Construction, Inc in Lakeside, CA.
He cautions new companies not to rely on being certified minority contractors or being on anyone's list. "It's better to have a sharp pencil! And you have to prove you have the safety record, employee training and quality of work the big companies require."
Ortega is a fifth-generation native of San Diego. He started out racing flat-track motorcycles, moved to a job as a backhoe operator, started out for himself and finally got a loan to buy more equipment. "I parked my one and only backhoe, my '71 Datsun pickup, my '56 Ford truck and my wife's '68 Mustang across the street from the bank. Then I walked in and said, 'Look out the window. That is what I have as collateral. I work hard and have a lot of business lined up. What do you think?'"
He got the loan and it paid off. This year A.M. Ortega Construction will earn some $30 million, employing almost 200 people. It has offices in both Lakeside and Fontana, CA and plans to open an office in Phoenix, AZ.
When Ortega started out in 1974 he worked mainly for homeowners and small general contractors. In 1988 he came to the attention of a supervisor from Southern California Edison. "He asked me if I wanted to work for them and of course I said, 'Sure!'
"It took six months of bidding several jobs before we finally landed a contract with the utility," says Ortega, "but then things really picked up. Two years later we started working with San Diego Gas & Electric and in 1999 we were hired by Southern California Gas."
Other large utilities in Ortega's client portfolio include Pacific Gas & Electric and Southwest Gas. The company also works with non-energy clients like AT&T and Verizon.
Ortega construction handles varied responsibilities including joint trench work for power and gas lines. It also does new and replacement work for natural gas lines, paving and grading. "Even in a terrible economy we've been busy," says Ortega.
PG&E spends $1.1 billion with diverse suppliers
Last year Pacific Gas and Electric Co (PG&E, San Francisco, CA) enjoyed a total procurement spend of $1.13 billion among 467 diverse suppliers. Joan Kerr, PG&E's director of supplier diversity, notes that "We now have diverse suppliers throughout our core business in areas like transmission and distribution, the work that makes us PG&E!"
This represents 33 percent of the company's total spend, "the first time we have broken the 30 percent barrier," Kerr points out. It represents an eight percentage point jump over the previous year, capping eleven years of progressive increases in PG&E's diverse supplier spend.
"We have a best-in-class process for getting full participation from all our lines of business," Kerr says. In 2007 the utility established a supplier diversity line-of-business champion program for sourcing managers, lead managers and others. Participants learn how to drive accountability, uncover potential areas of diverse spend and support the competitive success of diverse suppliers. Currently PG&E has eleven champions representing all the company's lines of business.
"Our goal is always continuous improvement, sustaining our community and sustaining our world," Kerr states.
This year's internal goal is to reach 34 percent, as PG&E consolidates and looks after "lots of new initiatives that require care and feeding," according to Kerr. And the company will continue encouraging its prime diverse suppliers to work with diverse subcontractors of their own. "Our vision is to have a healthy eco-system of diverse suppliers."
RHA, Inc: green from the beginning
"I've worked in green jobs since the beginning of my career," R. Craig Smith says proudly. In fact he has spent more than thirty years in the electric utility industry, holding management positions with the Snohomish, WA County Public Utility District, PG&E, Pacific Power & Light Company, the Michigan Public Service Commission and the TVA.
Today Smith is CEO of Richard Heath and Associates, Inc (RHA, Fresno, CA), a minority-owned firm that works in design, implementation and administration of small- to large-scale energy-efficiency programs for investor-, state- and public-owned utilities. PG&E is RHA's largest client, but the list also includes Southern California Edison (Rosemead, CA), Southern California Gas Company (Monterey Park, CA), Southern California Public Power Authority (Pasadena, CA) and San Diego Gas & Electric.
RHA works with utilities to service hard-to-reach customers and small businesses. "RHA manages programs and oversees networks of community-based organizations and private contractors," Smith explains. The company provides consumer education on energy efficiency as well as home and business audits and appliance repair, replacement and recycling.
Since 1979 RHA has involved more than two million residential and small business customers in energy-efficiency programs. In addition to its community networks RHA runs an eleven-language call center to engage customers from diverse communities.
For PG&E, RHA manages home weatherization work for 133,000 low-income households in forty-eight counties in northern California. In fact, when Smith was at PG&E in the 1980s, overseeing low-income weatherization programs was one of his assignments.
Although Smith has led RHA for less than a year, he knows the company's core competencies, particularly energy efficiency, through his service on advisory boards for several regional energy-efficiency-focused organizations. Today RHA employs 350 people.
Smith has a BS in urban planning and policy analysis from Antioch College (San Francisco, CA). "I've always been interested in urban infrastructure," he says.
"Growing up as an African American in Oakland, CA in the sixties and seventies involved some challenges. I have always wanted to make an impact on the quality of life in inner cities, and my career connects me to things I am passionate about.
"Utilities are a core part of our communities' infrastructure, of course, but it's more than the technology. We engage communities, people and customers through our work with the utilities. Things like renewable energy and smart grids present big changes to the landscape and therefore big opportunities."
At Alliant Energy supplier diversity is integral to business
"Supplier diversity is integral to how we do business and directly in line with the core values of Alliant Energy," says Laurie Dresen. Dresen is an IT category manager for Alliant Energy (Madison, WI), responsible for its IT purchasing.
She notes that Alliant Energy has "a level playing field when it comes to seeking out M/WBEs, regardless of the commodity needed. We always include many diverse suppliers in the bidding process."
Dresen relies on Alliant Energy's supplier diversity team, which connects diverse suppliers with the procurement management staff. The group is responsible for evaluating suppliers, assisting in the vendor selection process and keeping track of all certifications. Right now the team is working to improve the supplier registration process on the company's website.
Between 2002 and 2007 Alliant spent more than $133 million on products and services supplied by certified diverse companies. In 2007 alone it spent almost $45 million, some 177 percent of the goal. In 2010 the company spent $70.5 million with diverse companies.
"We have also hosted supplier diversity symposiums," Dresen notes. "We've had people from as far away as Minnesota. And if there are suppliers out there that are not registered, we help them make the connection with the diversity team."
Over the years, more than 400 diverse suppliers and vendors have attended symposiums in Cedar Rapids and Dubuque, IA and Madison, WI.
Alliant Energy also subscribes to the resources of CVM Solutions LLC (Terrance, IL), which has a large diverse supplier database.
Smart Solutions, Inc works for Alliant Energy and others
"IT is a springboard to almost anything you want to do," says Jackie Mortell, co-founder, majority owner and president of Smart Solutions, Inc (Madison, WI). The computer consulting organization provides enterprise resources for IT-related client needs including infrastructure, project management, software development and specialized business intelligence. The company employs about eighty full-time people and another thirty subcontractors.
"Most of our clients are in Wisconsin, Iowa and Illinois," Mortell explains. "We recruit both locally and nationally, trying to hire women and minority employees whenever their technical skills match the needs of our clients.
"I think every middle school should require students to take a class in databases," Mortell says. "IT is a wonderful field with a genuine emphasis on what your abilities are, not your gender, religion, age or ethnicity."
In 1985 Mortell completed an undergraduate degree in CS from the College of St. Thomas (St. Paul, MN). Then she left for a vacation in Hawaii which segued into a job in Honolulu as a programmer with VeriFone (San Jose, CA). She later traveled internationally for the company and was eventually transferred to Atlanta, GA and then back to Minnesota. She left VeriFone in 1996 to be a consultant, and co-founded Smart Solutions.
Alliant Energy was the company's first commercial client and is still one of its largest. Smart Solutions is providing resources for Alliant's PeopleSoft upgrade, as well as working on its automatic meter-reading infrastructure for self-regulating meters. It is also consulting with the utility's business intelligence group on data warehousing and enhancing dashboard reporting for managers.
Other large clients are the State of Wisconsin and American Family Insurance (Madison, WI). "I give all these groups a lot of credit for giving us a chance to work with them," Mortell says. "They took a chance with a small company." She was certified as a WBE in 2005, and today the business is thriving with 2010 revenues of $10 million. "Our company focuses on stability," concludes Mortell. "We view our clients as business partners, and we hire good people and keep them working.
ENERGY COMPANIES WITH ACTIVE SUPPLIER DIVERSITY PROGRAMS
Check out the active programs at these companies' websites.
|Company and location
|Alliant Energy (Madison, WI)
|Electric and natural gas service to customers in Iowa, Wisconsin and Minnesota
|Ameren (St. Louis, MO)
|Electric and gas service to customers in Missouri
|Entergy Corporation (New Orleans, LA)
|Integrated electric power production and retail
|Hess Corporation (New York, NY)
|Oil, gas, electricity, refined petroleum products, food and convenience goods
|PG&E (San Francisco, CA)
|Natural gas and electricity for customers in northern and central California
|Progress Energy (Raleigh, NC)
|Electricity for customers in the Carolinas and Florida
|San Diego Gas & Electric
(SDG&E, San Diego, CA) www.sdge.com
|Electricity and natural gas for customers in San Diego and southern Orange counties, California
|Southern California Gas Company
(SoCalGas, Los Angeles, CA) www.socalgas.com
|Natural gas service for consumers throughout central and southern California
|Southern Company (Atlanta, GA)
|Energy company serving the Southeast
|Vectren Corporation (Evansville, IN)
|Subsidiaries provide gas and/or electricity to customers in Indiana and west central Ohio
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