Southern California Gas Fires Up Small Business Supplier Efforts

Four decades of commitment to supplier diversity makes a big difference in small ways.

“Suppliers don’t grow on trees. You have to go out and find them.”

When Joe Chow, supplier diversity manager at Southern California Gas Company (SoCalGas), talks about finding suppliers, he means small suppliers, specifically those with annual revenues of $5 million or less and fewer than 25 employees.

“What makes SoCalGas’ supplier diversity department unique is the focus we have on small businesses,” said Chow, who’s worked for the country’s largest natural gas distribution utility for more than three decades. “It’s about bringing meaningful opportunities to those companies and helping them build capacity. That’s where our Smaller Contractor Opportunity Realization Effort (SCORE) comes in.”

SCORE was launched in 2011 with approximately $1 million in contracts with 20 companies. It’s since grown to over $26 million in contracts with about 30 suppliers in engineering design, construction, transportation, environmental and inspection services. “That $26 million may not seem like a lot, but if you’re a smaller company, a $ 75,000 -$400,000 contract, for example, can be significant,” said Chow. And it can also be a stepping stone. “We’ve had contractors grow their relationship with us from a very small pilot project to as much as $6 million.”

SCORE is among several priorities for Chow’s supplier diversity team, which includes:

■ Yolanda Padilla, supplier diversity project manager for professional services, facilities, fleet operations and customer programs.

■ Rodney Potts, senior supplier diversity advisor supporting gas operations, system integrity, major projects construction, gas distribution/transmission and gas storage.

■ Vaughn Williams, supplier diversity project manager for engineering, gas acquisition, and major projects, as well as finance, human resources, IT and legal.

“We have to know and understand what’s on the horizon, what’s coming down the pipeline, what’s in our distant future and how technology will change that future in the industries we work in…It almost has to be intuitive.

The team has been a driving force behind the utility’s record-setting spend with diverse firms, which surpassed $673 million in 2018, the 26th consecutive year it’s exceeded the California Public Utility Commission’s (CPUC) purchasing benchmark. Overall, 40 percent of SoCalGas’ total spend has been with its more than 580 diverse suppliers.

The utility’s cumulative success reflects efforts predating the 1988 CPUC rule that set minority purchasing goals for the state’s investor-owned utilities. “We’ve been doing [supplier diversity] for 40 years now and we know it works,” said Chow. “Twelve of our 25 largest vendors are diverse suppliers and they’ve helped us achieve our company’s strategic goals and drive our financial and operational results.” However, sustaining that progress will require new strategies and approaches, and an evolving skill set for supplier diversity professionals.

Changing Supplier Diversity Landscape

“Supplier diversity has been changing,” said Chow. “What started with women and minority businesses now includes service-disabled veterans, LGBT and SBA 8(a) companies. Those categories continue to expand as the demographics of the communities in our service territory continue to change.”

The enhancements SoCalGas has made to its supplier diversity programs reflect that evolution. For example:

■ The utility expects its prime contractors to meet a 40-percent sub-contracting goal with women, minorities, service-disabled veteran and LGBT businesses. A new Supplier Diversity Prime Watch List flags prime contractors not meeting that goal.

■ Recognizing the importance of cash flow to its smaller suppliers, SoCalGas created an issues resolution team to more quickly address contractor payment issues. The team includes representatives from supply management, accounts payable, operations and supplier diversity. SoCalGas also pays smaller suppliers within 15 days, with no early-payment discounts.

■ The annual Community-based Organization Forum, launched last year, has spurred improvements to the utility’s technical assistance programs that provide contracting opportunity information, as well as training and education programs more relevant to current and potential suppliers.

■ Launched in 2017, the DBE Business Showcase is an intimate match-making program involving four to 10 select suppliers, as well as SoCalGas front-line managers, supply management and supplier diversity representatives and prime contractors. It’s designed to provide more focus on potential suppliers and an in-depth understanding of what they offer and how they can support the utility’s larger projects.

■ The Supplier Diversity Champions program has more than doubled in size to include employees from throughout the company who advocate on behalf of DBEs and identify new opportunities and projects where diverse suppliers can be contracted.

Ultimately, what makes a diverse supplier program successful is its relevance: how it connects a company’s strategy with potential suppliers and how its supplier diversity professionals successfully identify and source new suppliers and build those connections.

“As supplier diversity professionals, we have to be more business savvy than ever,” said Chow. “We have to know and understand what’s on the horizon, what’s coming down the pipeline, what’s in our distant future and how technology will change that future in the industries we work in…It almost has to be intuitive.”