Supplier Diversity

In 2009, we achieved our best performance to date for diverse spending. For the fourth year in a row, we exceeded the CPUC's target, which aims to ensure that business with diverse frms represents 21.5 percent of total spending. We also exceeded our own stretch goal of 25 percent, for an all-time high of 25.6 percent, or more than $928 million in WMDVBE spending. This caps a seven-year upward trend starting at 18 percent in 2003. For 2010, we have raised the bar further by setting a goal of 30 percent.

PG&E's quarterly newsletter, Powered by Diversity, showcases the company's commitment to integrating diverse suppliers into our supply chain.

We increased our spending in all three WMDVBE categories. Spending increased by $54 million with minority business enterprises, $330 million with women business enterprises and $21 million with service-disabled-veteran business enterprises. In particular, our spending with women business enterprises reached a record 9.1 percent, a 43 percent increase over 2008.

The table below summarizes our recent supplier diversity performance. It also captures our work with non-diverse small businesses. As with diverse companies, small businesses are a vital source of jobs and economic activity in the communities we serve.

These results are particularly signifcant in light of ongoing challenges. The difficult economic climate in 2009 brought new challenges to PG&E's efforts to expand its supplier diversity results. Additionally, substantial required investments in infrastructure projects pose a challenge because few small or diverse suppliers are large enough to independently handle major projects in energy generation.

PG&E responded by renewing our commitment to expand opportunities for qualifed small and diverse suppliers to compete for PG&E business, leveraging their innovation and focus on customer solutions.

PG&E continued to work closely with our largest prime contractors to engage qualified diverse suppliers in subcontracting opportunities and we reached a high of $288 million in spending on diverse subcontractors in 2009. We ask these prime contractors to set goals and develop their own programs to develop diverse business solution partners who can help them optimize the goods and services provided to PG&E. We also monitor their performance, provide education and coaching and facilitate networking opportunities with diverse firms.

A growing number of prime suppliers are subcontracting with small and diverse suppliers to optimize the products and services they provide to PG&E. Bass and Company, a large management consulting firm, worked with ProMark Solutions, Inc., a smaller woman-owned business, on the PG&E consulting contract they had won. As a result of this collaboration, not only did PG&E benefit from ProMark Solutions' consulting services, but Bass’s diverse subcontracting results went from 0 to 36 percent in one year.

All American Logistics is a woman-owned transportation company that provides services to PG&E and is committed to developing new diverse suppliers. For example, the company mentored two sub-contractors, Ken Sanders Trucking and Carillo Trucking, to help provide hauling for PG&E's local distribution centers.

We also reached out to prospective small businesses and WMDVBEs at more than 30 outreach events and continued to collaborate with key organizations, such as ethnic chambers of commerce and various veteran business organizations, to educate suppliers on how to successfully compete for utility business. Our network of Supplier Diversity Champions also continued to drive improvements within their respective lines of business.

As another measure of continued improvement, PG&E gave half of the awards at our 4th Annual Supplier Conference to diverse suppliers, underscoring the high-quality service PG&E continues to receive from these firms. The top award, "Supplier of the Year," was won by a diverse supplier.

Continuing to develop and mentor new suppliers, including small and diverse suppliers, is a top priority for 2010. As PG&E moves its business plans to focus increasingly on the smart grid, renewable energy and other innovative initiatives, we are also focused on ensuring that the next generation supply chain includes qualifed small and diverse suppliers who are ready to succeed in this new environment.