Discriminatory Biz Certification

October 8, 2014

Michael R. Peevey, President
California Public Utilities Commission
505 Van Ness Avenue, Room 2103
San Francisco, CA 94102

RE: En Banc Hearing on General Order (GO) 156 – Outreach Efficiency

Dear Mr. Peevey:

The Black Business Association (BBA) wishes to thank the California Public Utilities Commission (CPUC) and its investor owned utilities for coordinating and participating in the California Public Utilities Commission (CPUC) 12th Annual Supplier Diversity En Banc on General Order (GO) 156 that serves to encourage, recruit and utilize Women/Minority/Disabled Veteran Business Enterprises (WMDVBE).

The BBA is pleased to offer the following observations and member feedback on “Outreach Efficiency: Clearinghouse Resourcefulness and Database Utilization Relative to Sharing Procurement Opportunities.”  Particularly in the areas of what approach should utilities consider, and should there be a role for the CPUC Clearinghouse to undertake for communicating and facilitating procurement timelines.

Background

The BBA represents the oldest ethnic business organization in California, whereas barriers to entry is a longstanding issue for black entrepreneurs.  Critical to this experience is what partially prompted the need for GO 156 that followed the effective implementation of the Federal Public Law 95-507 pertaining to MBE procurement.  Accordingly, from GO 156’s beginnings, fostering a barrier-free access to California utility procurement opportunities has been its fundamental objective.

The U.S. Census reports 1.9 million black-owned businesses in the United States, with receipts of these businesses totaling $137.4 billion, as California hosts more than 137,000 of these firms.  As of the month-ending September 2014, the CPUC Clearinghouse certified 7,687 WMDVBE, of which 2,341 are certified MBE.  The number of CPUC Clearinghouse certified black enterprises is now 520, or 7% of the total WMDVBE, and 22% of MBE.

Clearinghouse Perceptions

Generally, the CPUC Clearinghouse serves as the first point of contact for newer black-owned firms wanting to gain access to utility contracting opportunities.  Hence, pinpointing accurate business referrals are crucial to the Clearinghouse outreach responsibilities.

  1. The process of business ownership certification is commonly perceived by BBA members as an impediment to doing competitive business with any major buying organization. Thus, acquiring and maintaining a MBE clearinghouse certification has become more of a nuisance to black entrepreneurs than a positive feature of engaging in utility bidding processes.
  2. MBE certification offerings have no value-added elements for Certified MBE’s, since the lowest priced and most responsible bidder is the standard course of action for all procurement contracting engagements.
  3. Black entrepreneurs experience that their respective firm’s capabilities are not routinely perceived as competitive during the preliminary contracting assessment practices.
  4. Black entrepreneurs are sometimes considered to have certification advantages that grant them access to set-aside contracts based on race and contracting quotas.

Clearinghouse Disparities

The CPUC regulated utility firms must follow the rule making in GO-156 for certification and thereby are implementing a double standard for reviewing potential suppliers.  Non-WMDVBE are not given the same entry point, action steps, or instructions for new business inquiries.

  1. Certification completion is in itself a barrier-to-entry for competitive purchasing opportunities, by this means obstructing a barrier-free market place. Federal, state, and local laws prohibit the practice to limit, segregate, or classify business owners in any way which would deprive or tend to deprive any individual of equal opportunities or otherwise adversely affect their status as a prospective bidder, because of such business owner’s race.
  2. The CPUC Clearinghouse certification database is separate and presumably equal from the non-WMDVBE database.
  3. The WMDVBE challenges or investigations concerning front-companies is part of the outreach, however, since its inception the actual number of overturned certifications is barely negligible.
  4. WMDVBE violators risk contracting expulsion by breaking the faith, spirit and intent of the law or attempting to game the procurement system. In view of that, the potential conflict of interest if not outright kickbacks of funds for awarding a front company contracts does not appear to be a problem, in this manner the operating CPUC Clearinghouse Certification processes are exceedingly stringent on MBE contrary to non-MBE.

Recommendations

  1. The CPUC Clearinghouse Certification activity should seamlessly pave the way of the contracting process and not detract from doing business equally with all competitors, and in no form should its work be a restraint of trade.
  2. Certification processing of 45 to 90 days should be zero days, consistent with entry time made available to non-WMDVBE permitted straight away to present business offerings to utility procurement management personnel.
  3. Over the course of CPUC Clearinghouse operating budget projections, greater than before encouragement and recruitment of the 137,000 black businesses operating in California should be addressed, as an equally trustworthy and verifiable form of self-certification is readily available.
  4. Access to investor-owned utility contracting forecasts will provide needed transparency that best supports an increased win-capture rate of potential bidders included to short lists and contracts awarded to black business enterprises.

Again, thank you for inviting the BBA to offer some degree of input to the CPUC’s 2014 Supplier Diversity En Banc Hearing on GO 156 Clearinghouse Certification and Outreach Efficiency.  Should there be any questions, please feel free to contact our offices at (323) 291-9334.

With warm regards,

Earl “Skip” Cooper II

President & CEO

Oral comments represented by: Dean L. Jones, Southland Partnership Corporation