Setting the Record Straight on California's Supplier Diversity Program
The reality is very different.
A Nearly 40-Year-Old Voluntary Economic Development Program
California’s Supplier Diversity Program was established following the passage of Assembly Bill 3678 in 1986. The legislation directed certain California utilities to develop plans for increasing opportunities for businesses that historically faced barriers to participation in major procurement markets. The California Public Utilities Commission (CPUC) subsequently implemented General Order 156 (GO 156), creating what is now known as the Supplier Diversity Program.
For nearly four decades, the program has operated with a consistent objective: expanding competition and ensuring that qualified businesses have access to procurement opportunities within California’s utility sector.
Far from being a new political initiative, the program has been supported across multiple gubernatorial administrations, regardless of political party, and has become an established component of California’s economic development strategy.
The program fosters a competitive marketplace by encouraging investor-owned utilities, community choice aggregators, energy service providers, and prime contractors to include diverse firms in their procurement. This includes businesses owned by:
- Disabled Veterans
- Persons with disabilities
- Women
- Minorities
- Lesbian, gay, bisexual, and transgender
The Program Is About Expanding the Procurement Marketplace
One of the most significant inaccuracies repeated by critics is the suggestion that utilities are required to award contracts based on ownership characteristics.
This is 100 percent wrong. The Supplier Diversity Program forbids utilities from using set-asides, preferences, or quotas. It does not mandate contracts or guarantee procurement awards to any business.
Instead, GO 156 establishes voluntary procurement goals and reporting intended to encourage long-term outreach and inclusion of diverse suppliers in competitive bidding processes.
Utilities remain responsible for selecting each vendor based on business needs, technical qualifications, pricing, reliability, safety, and performance. Participation in the program does not exempt any supplier from meeting procurement standards.
In other words, a company holding a diverse supplier certification gives no advantage in obtaining a contract. It simply provides visibility and access to opportunities that might otherwise be difficult for smaller businesses to discover. And any other vendor can request the same outreach assistance.
Diversity Certification Is About Business Ownership, Not Personal Preference
Critics often attempt to trivialize certification processes by characterizing them as government officials ”verifying sexual preferences.”
This misrepresents how supplier certification works.
Supplier diversity certification verifies ownership and control of a business by individuals who belong to designated categories established by California law and policy. Similar certification processes exist nationwide for women-owned businesses, minority-owned businesses, veteran-owned businesses, and disabled-owned businesses.
Certification programs are not unique to California, nor are they unique to LGBT-owned businesses.
The purpose of certification is to ensure that companies claiming eligibility meet established standards and that procurement reporting remains accurate and transparent.
Expanding Competition Benefits Utilities and Consumers
The Supplier Diversity Program is grounded in a simple economic principle: broader competition can produce better outcomes.
When utilities engage a wider pool of qualified suppliers, they gain access to:
- Additional vendors and service providers
- New technologies and innovative solutions
- Greater supply chain resilience
- Increased competition on price and quality
- Expanded access to emerging markets and communities
For this reason, supplier diversity initiatives have been adopted by many major corporations throughout the U.S, regardless of political affiliation.
The objective is not favoritism. It is to increase participation in competitive procurement processes.
Diverse Suppliers Represent a Small Business Success Story
Many certified suppliers are small- and medium-sized businesses seeking opportunities to compete against larger, more established firms.
The Supplier Diversity Program helps create awareness of procurement opportunities while encouraging utilities to look beyond traditional vendor networks.
Contrary to claims that contracts are awarded based on identity alone, suppliers must still demonstrate expertise, capacity, financial stability, safety compliance, and performance capabilities.
No utility can reliably operate critical infrastructure by ignoring these requirements.
California's essential services depend on qualified vendors delivering high-quality services. Utilities continue to evaluate suppliers on their ability to perform.
Inclusion Is Not Exclusion
Some critics frame supplier diversity as a system that disadvantages other businesses.
This characterization misunderstands the program’s design.
The Supplier Diversity Program does not prohibit utilities from contracting with non-certified businesses. Nor does it allow utilities to advantage certified businesses.
In fact, the overwhelming majority of utility procurement spending continues to flow through a broad marketplace of suppliers.
The program simply encourages utilities to ensure that qualified businesses from historically underrepresented groups are aware of and considered for opportunities.
The Broader Goal: A Stronger Marketplace
The Supplier Diversity Program reflects the belief that California’s economy is strongest when businesses compete on a level playing field and when procurement systems are open, transparent, and accessible.
For nearly 40 years, this voluntary program has sought to foster competition, encourage entrepreneurship, and broaden economic opportunity across California’s utility supply chain.
Advancing competitive procurement opportunities for everyone by having voluntary inclusionary programs assists utilities in reaching new markets, increasing shareholder value, and controlling costs.