Michigan’s largest utilities are giving a substantial boost to an economic development program launched by former Gov. Rick Snyder, committing to spend billions of additional dollars with in-state suppliers over the next five years.
Launched in 2011, the Michigan Economic Development Corp.’s Pure Michigan Business Connect program links major purchasers with Michigan-based suppliers. For years, state officials heard from large companies that were having difficulty connecting with local suppliers, as well as smaller companies seeking to do business with major purchasers.
Under the program, the state acts as a facilitator between the two and “doesn’t have to put much resources” into it, said Brian Calley, president of the Small Business Association of Michigan and former lieutenant governor under Snyder.
“Pound for pound, Pure Michigan Business Connect is arguably the most successful economic development tool the state has ever launched,” he said.
DTE Energy and Consumers Energy are founding members of the program whose involvement “changed everything,” Calley said. Some Michigan companies have transformed their business models by supplying the utilities as a result.
Within four years of launching the program, Consumers had invested $1 billion in Michigan companies, contracting for various engineering and construction services. DTE set similar annual goals.
In late May, Consumers and DTE announced another $15 billion commitment over the next five years, or $1.5 billion annually for each company. To date, the program has topped $11 billion invested, more than a year ahead of schedule in reaching the milestone.
“That type of impact rivals any commitment a company has made in our state,” Calley said. “The impact is so diversified and spread across the state from companies of all sizes.”
The program doesn’t provide incentives or hiring preferences, but larger companies benefit from the MEDC’s vetting process and matching suppliers with buyers, Calley said. A series of buyer/seller events helps to connect the companies.
“It really does provide a lot of value to the companies,” he said.
Energy a key player
To date, Pure Michigan Business Connect has connected suppliers and purchasers across 76 industries, according to the MEDC.
The energy sector in particular is proving to be a major source of investment in Michigan as utilities build new generation powered with natural gas, wind, solar and — for Consumers and DTE — a hydroelectric pumped storage power plant upgrade in Ludington. Energy efficiency and grid modernization programs are also key utility investments.
Combined, DTE and Consumers have multi-billion-dollar natural gas and electric infrastructure upgrades planned in the coming years. The utilities also use contractors for services like tree trimming, engineering and power plant maintenance.
In some cases, the utilities contracts have proven transformative for Michigan companies.
Muskegon-based Newkirk Electric Associates Inc. has done business with Consumers since 1961. The company was recognized in 2015 as helping Consumers pass the $1 billion mark in in-state investments.
“It’s not an exaggeration to say we’ve built our company around servicing Consumers Energy,” said Tom Anton, Newkirk Electric’s vice president of operations. He added that Consumers is among Newkirk Electric’s top clients each year.
Newkirk Electric served as a contractor at the Ludington Pumped Storage Plant, which is co-owned by DTE and Consumers and is nearing the end of an $800 million upgrade. Newkirk Electric does work at other Consumers power plants, builds substations and provides engineering expertise. The contractor works with DTE to a lesser extent, Anton said.
Newkirk Electric’s example helps to demonstrate the vastness of the utilities’ supply chain, as well as their reliance on contractors and subcontractors throughout the state.
“Those companies are really woven into the fabric of the communities they service,” Anton said. Of Newkirk’s 700 employees, more than 200 of them work directly with DTE and Consumers, he added.
The Livingston Daily Press & Argus recently profiled Commercial Construction Inc., a family-owned industrial millwright and rigging company based near Brighton. The company reportedly worked for companies in the automotive sector when it was founded in the 1990s. Company officials say Pure Michigan Business Connect was a “catalyst” that helped it expand into the energy sector, tripling Commercial Construction’s business.
Other West Michigan companies previously involved in Pure Michigan Business Connect with Consumers include Northern Boiler and Mechanical Contractors Inc. in Muskegon and The CSM Group Inc. in Kalamazoo.
For some communities, the utilities’ clean energy transition has meant closing coal plants, raising concerns about declining local tax revenues and jobs, many of which were transferred to other locations within the companies. Even so, the energy infrastructure investments elsewhere are proving to be a boon for the state, according to Anton.
“How is it playing out in Michigan? Jobs is what it means — real jobs to produce infrastructure that adds to the productivity and quality of life in the state,” he said. “It’s a huge positive for Michigan. We feel good about it.”
As part of the $15 billion investment in Michigan companies over five years, DTE and Consumers also pledged to focus on diversity among their suppliers. This includes companies that are more than half-owned by minorities, women, military veterans or members of the LGBTQ community.
“Whether we are talking about small businesses or skilled trades and training, it is critical that we create equitable opportunities to succeed here in Michigan,” Lt. Gov. Garlin Gilchrist said in a statement.
DTE spokesperson Lisa Bolla said the company only works with “certified diverse vendors,” which requires a third-party certification process. The company is on track to spend $500 million — or 20 percent of its external spending — with diverse suppliers in 2019.
Bolla said challenges moving forward are growing the in-state purchases every year.
“To meet this challenge, we require at least two Michigan suppliers on new DTE contracts and we ensure our existing and new suppliers understand we prefer business partners that are physically located in our state,” Bolla said.
Opening state doors
Calley hopes the Pure Michigan Business Connect program could be extended to the public sector.
Prior to Gov. Gretchen Whitmer’s taking office, SBAM’s policy priorities included boosting the number of Michigan businesses involved in the state’s procurement process.
Previously, any state contract over $10,000 had to go through a formal request-for-proposal process, which Calley called “unrealistic” and expensive for many companies. The state Legislature has expanded that cap to $50,000, meaning anything below could be done through a three-quote competitive bidding process. In her budget proposal, Whitmer seeks to expand that cap to $500,000.
“We think that will open the door for a lot of smaller companies,” Calley said. “Ideally, the state itself would become a Pure Michigan Business Connect purchaser.”