SoCalGas sets a standard for recruiting diverse suppliers and supporting small companies.
The real game-changer for supplier diversity professionals in California began in 1986 with goals set by the California Public Utility Commission. Southern California Gas Company (SoCalGas) has not only met the 21.5 percent goal but has exceeded it for the past 25 years. “It is also important to note that our organization continues to increase our spend with diverse suppliers every year. And we consistently strive to enhance the overall quality of our program,” says Joseph Chow, manager of supplier diversity for the utility.
A total of 42 percent of SoCalGas’s procurement spend last year went to diverse suppliers—exceeding the company’s goal of 38 percent.
“Reaching and exceeding the company’s supplier diversity goal each year is the result of teamwork,” says Chow.
“There are five members on the supplier diversity team, and our success is the result of the commitment by SoCalGas employees in every department working to meet the organization’s commitment to supplier diversity.”
The utility company’s leadership believes that its supplier base should reflect the community it serves, and that commitment goes beyond a statement on a website. In fact, management compensation is tied to key performance indicators (KPIs)—one of which is successful achievement of supplier diversity goals, says Michelle Chieks, project manager. “These KPIs apply to every department throughout the organization.”
This commitment has resulted in significant growth in the use of diverse suppliers, says Chow. In 2017, 638 diverse suppliers worked with SoCalGas, and of those, 370 diverse suppliers were prime suppliers. “We are proud that 12 of SoCalGas’ top 25 suppliers are diverse.”
The utility reaches out to diverse companies through involvement in community organizations and attendance at trade shows. Chow’s department is also responsible for providing information to help new diverse suppliers transition smoothly—making sure the company owners understand SoCalGas’ expectations, culture and processes.
A key program targeted to smaller companies is the Smaller Contractor Opportunity Realization Effort (SCORE), which focuses on suppliers with under $5 million in revenue and fewer than 25 employees. SCORE participants have access to technical assistance and support as they move through the procurement process, and they receive training in areas that are beneficial to their company, such as disaster recovery, how to write a winning request for proposal, marketing through social media and adapting to change.
“SCORE is seven years old and has grown from five participants who handled contracts worth $1 million the first year to 25 participants this year who have contracts worth $25 million,” Chow says proudly. “Contractors do graduate from the program as they grow, in fact, one of our graduates started with a $75,000 contract and is now handling $7 million worth of contracts for SoCalGas.”
Members of the supplier diversity team are part of the request for proposal process from the beginning, says Yolanda Padilla, project manager. “Our job is to serve as the suppliers’ advocate,” she says. Because all five supplier diversity team members know the capabilities and expertise of their supplier group, they are positioned well to represent them.
While the educational and technical assistance as well as the advocacy among internal teams is beneficial to smaller suppliers in our SCORE program, SoCalGas has also instituted policies that address the needs of smaller companies, says Chieks. “We recognize that cash flow is a critical need for small companies, so we offer them payment through our Supplier Quick Pay Program which pays them in net-15 days,” she says.
Chow says his team and the organization’s commitment are the secret to SoCalGas’ success with supplier diversity. “My entire team is passionate about advocating for our diverse suppliers, finding ways to eliminate the hurdles that diverse companies face when pursuing contracts with a utility and ensuring their success,” he says.
One way to boost diverse suppliers’ success is to carefully match them to projects for which they can meet expectations, he says. “We not only ensure that the supplier is ready for the contract, but also that suppliers understand that many of our contracts—for construction or other projects—may be three- to five-year commitments. It’s important to manage expectations to build a good relationship.”
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