DBE and small business participation requirements, and who is bound
On an investor-owned utility contract, DBE means a diverse business enterprise verified by the CPUC Supplier Clearinghouse under General Order 156, which sets goals of 15, 5, 1.5 and 1.5 percent and a subcontracting program above $500,000. On a federal-aid contract it means a disadvantaged business enterprise under 49 CFR Part 26, where goal setting is suspended.
On September 27, 2024, the words "vegetation management" were written into the statute that governs utility supplier diversity in California. Senate Bill 1177 became Chapter 784, and Public Utilities Code section 8283 now names line clearance work alongside renewable energy and rail. The spend on a patrol and prune contract is in the number an investor-owned utility files with the Commission every March 1.
That is one of two programs sharing the same three letters. The other one is federal, runs through a different agency, and has had its contract goals suspended since October 2025. Which one reaches a contract depends on who is buying.
Two programs answer to the same three letters
A firm verified by the CPUC Supplier Clearinghouse is a diverse business enterprise. A firm certified by the California Unified Certification Program is a disadvantaged business enterprise. Each certificate works inside one program only.
Diverse business enterprise | Disadvantaged business enterprise | |
Authority | GO 156 and Pub. Util. Code 8281 to 8286 | |
Who is bound | Utilities, electric service providers and CCAs over $15 million in California revenue | Recipients of FHWA, FTA and FAA funds |
Who certifies | The Supplier Clearinghouse, and DGS for disabled veterans | Caltrans and its CUCP partners, in California |
What the number is | A percentage of the utility's own procurement dollars | A goal written into an individual contract |
Status in September 2026 | In force | Goal setting suspended |
Most utility vegetation management sits on the left. The right hand column reaches this work only when a transportation agency is buying it with federal highway, transit or airport money, which happens for roadside brush more often than for line clearance.
Vegetation management is named twice, in two documents
Section 8283 requires a covered utility to file an annual plan for increasing procurement from women, minority, disabled veteran and LGBT business enterprises. SB 1177 added the category list that plan has to cover:
renewable energy, energy storage system, wireless telecommunications, broadband, smart grid, vegetation management, and rail projects
General Order 156 got there first. Section 9.1(9), in the text adopted by Decision 22-04-035, requires each utility to summarize its spend with eligible suppliers "in product and service categories that include energy storage systems, vegetation management, renewable and non-renewable energy, wireless communications, broadband, smart grid, rail projects and electronic procurement."
The two documents do not line up on who files what. Section 8283(a) reaches corporations "with gross annual California revenues exceeding twenty-five million dollars ($25,000,000)," while section 1.2 of the General Order reaches those above $15,000,000.
The General Order resolves it by splitting the obligations: section 9 exempts utilities at or below $15 million from the annual report, and section 10 exempts those between $15 million and $25 million from the annual plan. For a contractor working for PG&E, SCE or SDG&E the distinction stays academic, because all three sit two orders of magnitude above either line.
PG&E's own filing shows where the category sits. Its 2025 Supplier Diversity Annual Report lists vegetation management under the heading "Senate Bill 1177," among the underutilized areas the company says it will continue to address.
Four percentages, and a contract counts toward one of them
Section 8.2 of General Order 156 sets the floor every covered utility has to plan against.
Each utility and other covered entity shall establish minimum long-term procurement goals for each major category of products and services purchased from eligible suppliers of not less than the following: 15% for minority business enterprises; 5% for women business enterprises; 1.5% for disabled veteran business enterprises; and 0.5% for 2022, 1.0% for 2023, and 1.5% for 2024 and beyond for LGBT business enterprises.
Those are long-term minimums. Section 8 also requires short-term one-year, mid-term three-year and long-term five-year goals, set annually, for each major product and service category that offers procurement opportunities.
Category | Long-term minimum | Certifying body |
Minority business enterprise | 15% | The Supplier Clearinghouse |
Women business enterprise | 5% | The Supplier Clearinghouse |
Disabled veteran business enterprise | 1.5% | DGS, accepted by the Clearinghouse |
LGBT business enterprise | 1.5% from 2024 | The Supplier Clearinghouse |
Persons with disabilities business enterprise | None adopted | The Clearinghouse, or a streamlined path from DGS or Disability:IN |
One sentence in section 8.2 decides how a dually certified firm is counted: "Contracts or purchases with eligible suppliers under the Commission's Supplier Diversity Program may only count toward one procurement goal." A crew company owned by a minority woman is reported against the minority business enterprise goal or the women business enterprise goal. The utility picks, and it picks once.
PG&E reported 34.50 percent total diverse spend for 2025 against combined Commission goals of 23.00 percent, on net procurement of $12,646,104,562. The same table shows LGBT business enterprise spend at 0.03 percent against a 1.50 percent goal. A utility can clear the overall number by a wide margin and still be short in a category, and the annual report is where it has to say so.
The subcontracting program starts at five hundred thousand dollars
Section 6.3 of General Order 156 is the part of the program a prime contractor actually feels. Subsection (2) fixes when it applies.
The subcontracting program shall apply to the following: (1) Purchases/contracts exceeding $500,000 for products and services; (2) Construction contracts exceeding $1,000,000; and (3) Purchases/contracts which offer subcontracting opportunities, regardless of value, where appropriate.
Utility vegetation management is bought as a service, so the $500,000 line is the one that usually governs. A single release order for a distribution circuit patrol can clear it on its own, and the master agreement it is issued under will have cleared it years earlier. The third trigger carries a judgment call in place of a number, and the utility makes it. Section 6 says as much: the utility "retains authority to use its legitimate business judgment to select the supplier for a particular contract."
What the program asks for is a plan. Section 6.3(4) directs each utility to encourage and assist its prime contractors to develop plans with goals for using eligible suppliers as subcontractors. One sentence then moves those plans out of the brochure and into the file: "These plans may be incorporated into the contract between the utility or other covered entity and the prime contractor."
Section 6.3(5) supplies the clause utilities are encouraged to drop into purchase orders and bid requests. It commits the contractor to two things, and only one of them is about awarding work:
The contractor agrees to use its best efforts to carry out this policy in the award of subcontracts to the fullest extent consistent with the efficient performance of this contract. The contractor agrees to inform all prospective subcontractors of the opportunity to request from the Clearinghouse a verification application to be certified as a diverse supplier.
Then subsection (6) explains where a thin plan costs money. Each utility is encouraged to tell its primes that "good faith efforts to subcontract with eligible suppliers under the Commission's Supplier Diversity Program is a factor that, to the extent permitted by law, will be considered in the bid evaluation process."
A goal is not a quota, and the General Order says it three separate times
Three sections say the same thing in three registers. Section 1.3.16 defines the term:
"Goal" means a target which, when achieved, indicates progress in a preferred direction. A goal is neither a requirement nor a quota.
Section 6 forbids the mechanism outright. "Nothing in GO 156 authorizes or permits a utility or other covered entity to utilize set-asides, preferences, or quotas in the administration of its program in compliance with GO 156." Section 8.13 closes the loop on consequences: "No penalty shall be imposed for failure of any utility or other covered entity to meet or exceed procurement goals."
None of that makes the number decorative. Four things happen to it every year.
Section 9.1(4) requires the annual report to describe progress against the goals and to explain any circumstances that resulted in not meeting them.
Section 9.1(5) requires a summary of prime contractor utilization of eligible subcontractors, so the primes' numbers are in the same filing.
Section 9.1(10) requires Commission staff to audit at least one annual report, randomly selected every two years from a different utility industry, to confirm the reported spend is accurate.
The report goes to the Commission's Executive Director on or before March 1 and is published.
A bid evaluator applying section 6.3(6) scores an effort. The record of that effort is the subcontracting plan and last year's second-tier numbers.
Only the Clearinghouse's certificate counts, and it takes 45 to 90 days
Section 3 of the General Order puts verification in one place. The Clearinghouse audits and verifies status, maintains the shared database, and its work "shall preclude the need for a utility or other covered entity to audit and verify" eligibility. Section 2.2 makes that a limit on the buyer as well as a service to it:
A utility or other covered entity may not require additional information to verify that a business is in fact an eligible supplier under the Commission's Supplier Diversity Program.
Disabled veteran business enterprises come in by a different door. Section 4.2 sends them to the California Department of General Services, under Public Utilities Code section 8284(a)(2), and directs the Clearinghouse to accept a DGS certificate as though it had issued the verification itself.
The ownership test is the same across the categories. Section 1.3.3 is representative: at least 51 percent owned by a woman or women, and "whose management and daily business operations are controlled by one or more of those individuals." Section 1.3.15 defines operate as being actively involved in the day-to-day management, so an officer or director title on its own falls short.
The calendar is the part that catches people. The Clearinghouse states there is no fee, that the process takes "approximately 45 days to 90 days" once all required documents arrive, and that a renewal application should be completed "at least 90 days prior to your certificate's expiration date." Section 2.3 requires verification forms at least once every three years. A certificate that lapses in March takes that firm's spend out of the prime's count for as long as it is out, and the months it was out stay out.
Two more sentences are worth reading before anyone treats the certificate as a selling document. Section 2.5 states that verification "is not an endorsement of its ability to perform and does not guarantee contracts." And Public Utilities Code section 8285 makes a false representation of status punishable by a fine of not more than $5,000, by imprisonment in a county jail for not more than one year or in the state prison, or by both.
What the prime owes the utility, and how often
The reporting obligation on a prime comes from its contract, and it runs on the utility's clock. PG&E operates a Tier 2 subcontracting reporting portal and states that its suppliers "submit monthly reports regarding subcontracting." It accepts General Order 156 certification through the Supplier Clearinghouse and DVBE certification through the DGS portal.
Those monthly files become the line in the March filing. PG&E reported $609,300,028 of 2025 subcontracting spend with diverse suppliers, 4.82 percent of net procurement, and reported that prime spend with diverse subcontractors fell by $38.7 million against 2024. It added 51 new diverse subcontractors and one new diverse prime contractor over the year. At Southern California Edison, 2024 diverse subcontracting totaled $606 million, "or 28.09%, of our total diverse supplier spend."
Section 9.1(8) sets the retention period behind those numbers. Utilities have to keep the documents and data they relied on for the longer of three years or their own retention policy, and produce them to the Commission on request. A prime is expected to reconstruct a subcontractor's certification status as of the month it billed, and a gap there surfaces two years later, in someone else's audit.
A California public agency cannot run the same program
An investor-owned utility is a private corporation. A city, a county, an irrigation district and a municipal utility district are public bodies, and Article I, section 31 of the California Constitution treats them all the same way:
The State shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.
Subdivision (f) defines "State" to include "any city, county, city and county, public university system, including the University of California, community college district, school district, special district, or any other political subdivision or governmental instrumentality of or within the State." Subdivision (e) carves out only what is necessary to keep federal funds, which is why a federal-aid project can carry a program a locally funded one cannot.
So a public agency buying tree work has a narrower set of levers, and every one of them is keyed to something other than race or sex.
Small business status, measured by headcount and revenue.
Headquarters or workforce location.
Disabled veteran status, which falls outside the categories section 31 lists.
Documented outreach, which is a duty the buyer carries.
SMUD's Supplier Education and Economic Development program is the worked example, because it sits on the utility side of the market and the agency side of the law. A SEED vendor registers as a small business with DGS and keeps its headquarters inside SMUD's service area.
The incentive is "up to a 5% price advantage (maximum $250,000)" on open solicitations and up to 10 evaluation points on an RFP. A non-SEED prime reaches the same incentive by subcontracting, and SMUD states that non-SEED primes "can receive SEED incentives toward their bid responses when 20% or more is subcontracted to a seed qualified vendor."
The DGS certification underneath it has its own thresholds. A small business needs "one hundred (100) or fewer employees and annual gross receipts of nineteen million dollars ($19,000,000) or less as averaged for the previous three (3) tax years," biennially adjusted under Government Code section 14837(d)(3). A firm whose gross annual receipts are $6,000,000 or less is automatically designated a micro business, as is a manufacturer with 25 or fewer employees. A vegetation crew company carrying more than 100 climbers and groundmen is out on headcount whatever its revenue.
Two state statutes set the numbers a state department uses, and both reach state agencies only. Government Code section 14838 gives a certified small business a 5 percent preference, capped at $50,000 for any bid and $100,000 combined with other preferences.
Military and Veterans Code section 999.2 sets "statewide participation goals of not less than 3 percent for disabled veteran business enterprises" on state contracts. A local agency that wants either one adopts it by ordinance or policy, and the prequalification questionnaire is usually where a bidder first sees whether it did.
The federal DBE program is paused, and it reaches a short list
49 CFR 26.3 applies the federal program to recipients of Federal-aid highway funds, federal transit funds and airport funds. That is the whole reach. A vegetation contract paid from a utility's own revenue requirement, or from a city's general fund, sits outside that list.
For anyone inside it, the ground moved on October 3, 2025. USDOT published an interim final rule effective that day, at 90 FR 47982, removing the race- and sex-based presumptions of disadvantage. Section 26.67(a) now reads:
All applicants must demonstrate social and economic disadvantage (SED) affirmatively based on their own experiences and circumstances within American society, and without regard to race or sex.
Every existing certification has to be reevaluated against that standard. Caltrans requires previously certified firms to file a Personal Narrative and a Personal Net Worth Statement, and states that "firms that are not certified are not eligible to participate in the DBE program until Caltrans receives and approves their reevaluation materials under the new standards." Caltrans has proposed cutting its overall goal for Federal Fiscal Year 2027 to 2028 from 21.35 percent to 11.80 percent, citing the interim final rule and a significantly smaller pool of recertified firms.
While that runs, Office Bulletin 25-07, announced on the division's Local Assistance Blog on November 14, 2025, tells local agencies that "DBE Contract Goal Setting, and DBE Monitoring and Compliance is suspended."
Two obligations survive the suspension by name: prompt payment for satisfactory performance under 49 CFR 26.29(b), and the rule that a prime cannot terminate a listed DBE without good cause and prior written consent under 49 CFR 26.53(f)(3). Anyone about to advertise or bid a DOT-assisted contract should check the Caltrans page for the current status before assuming either the suspension or the goals are in place, because this one changes faster than the field gets told.
Federal money from any other agency runs on a different and much softer rule. 2 CFR 200.321 says that "when possible, the recipient or subrecipient should ensure that small businesses, minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms are considered," and lists six steps, running from solicitation lists to divided procurements. One of the six reaches a prime directly: "Requiring a contractor under a Federal award to apply this section to subcontracts." That flows an outreach duty down to the subcontract tier, and it stops there.
Where this lands on a contract
The documents that decide whether participation is real are assembled before award.
The certificate, current on the day of the bid and good through the term. Renewal takes 45 to 90 days and the Clearinghouse wants the application 90 days out.
The subcontracting plan, if the release order or agreement clears $500,000 for services or $1,000,000 for construction. Section 6.3(4) allows the utility to write that plan into the contract.
The second-tier reporting mechanism the buyer actually uses, named and staffed. At PG&E that is a monthly file to the Tier 2 portal.
The retention arrangement behind those files, sized to the three years section 9.1(8) puts on the utility.
For a public agency bid, the small business or local vendor certification the solicitation names, plus whatever outreach documentation the agency requires. An agency that asks a bidder for a race- or sex-based commitment is asking for something Article I, section 31 forbids it to grant.
The commonest failure is quieter than any of them. It is a sub whose certificate lapsed in the second year of a five-year agreement, still doing the work, still invoicing, and counting for nothing until the prime's March numbers came back short.
Further reading
How a utility MSA is structured, and what a sub sees of it: Where a supplier diversity subcontracting plan sits in the document stack, and which release order the $500,000 threshold is measured against.
Utility prequalification: what evaluators actually check: The agency-side questionnaire that runs alongside a small business preference, and why none of it reaches an investor-owned utility.
Bonds and insurance limits on a utility vegetation contract: The other set of documents an agency checks before a notice to proceed, and the bidder's security rules that sit beside a local preference.
Frequently asked questions
Does a CPUC Supplier Clearinghouse certificate make my firm a DBE for Caltrans?
No. They are separate programs with separate certifying bodies. The Supplier Clearinghouse verifies diverse business enterprises for CPUC General Order 156, which governs procurement by investor-owned utilities. Caltrans and its partners run the California Unified Certification Program, which certifies disadvantaged business enterprises under 49 CFR Part 26 for federally assisted transportation contracts. A firm that wants to count on both sides applies twice.
What is the dollar threshold that puts a vegetation contract inside the GO 156 subcontracting program?
Section 6.3(2) of General Order 156 sets three triggers: purchases or contracts exceeding $500,000 for products and services, construction contracts exceeding $1,000,000, and purchases or contracts of any value that offer subcontracting opportunities where appropriate. Most utility vegetation work is bought as services, so the $500,000 line is the one that usually decides.
What happens to a utility that misses the 15 percent minority business enterprise goal?
Nothing directly. Section 8.13 of General Order 156 states that no penalty shall be imposed for failure to meet or exceed procurement goals. Section 9.1(4) requires the utility to explain the circumstances in its annual report, that report is filed with the Commission's Executive Director by March 1 and is public, and Commission staff audit at least one utility's annual report every two years under section 9.1(10).
Can a California city require a percentage of minority-owned subcontractors on a tree trimming contract?
No. Article I, section 31 of the California Constitution forbids the State from granting preferential treatment on the basis of race, sex, color, ethnicity or national origin in public contracting, and subdivision (f) defines State to include any city, county, special district or other political subdivision. A local agency can key a preference to small business status, headquarters location or disabled veteran status, and SMUD's SEED program is built on exactly those criteria.
How long does Supplier Clearinghouse verification take, and does it cost anything?
The Clearinghouse states there is no fee for certification and that the process takes approximately 45 to 90 days once all required documents are received. It advises completing a renewal application at least 90 days before the certificate's expiration date. General Order 156 section 2.3 requires eligible suppliers to submit verification forms at least once every three years.
