ISO TC 59/SC Reference number ISO 10845 6 2011(E) © ISO 2011 INTERNATIONAL STANDARD ISO 10845 6 First edition 2011 01 15 Construction procurement — Part 6 Participation of targeted partners in joint v[.]
Contract participation goal
The contractor must establish a joint venture agreement with one or more targeted partners at the main contract level to meet the project's engagement goals This collaboration is contingent on the total monetary value of these partnerships, excluding applicable taxes, being sufficient to achieve the specified contract participation targets outlined in the targeting strategy Implementing this joint venture approach ensures effective partnership alignment and adherence to project objectives.
The contractor must submit a detailed plan to achieve the contract participation goal using the Contract Participation Goal Implementation Plan form (Annex C) within five working days of instruction, or, if no instruction is given, at least five working days before the first payment claim Additionally, if participating in a joint venture, the contractor is required to provide joint venture details using the Joint Venture Disclosure Form (Annex D) within the same timeframe.
The contract participation goal implementation plan serves as a vital tool for monitoring the contractor's performance concerning their participation obligations It enables effective tracking of progress to ensure contractual commitments are met Additionally, the plan facilitates necessary adjustments, such as addressing quantitative underruns or eliminating items, to maintain compliance and project success (see Clause 6).
Achieving the contract participation goal
General
A contractor shall achieve the contract participation goal by entering into a joint venture agreement with one or more targeted partners as set out in 3.2.3.
Verification of the status of targeted partners
Contractors must submit completed targeted partner declaration affidavits for each targeted partner whose contributions count towards the contract participation goal These affidavits should be submitted to the employer's representative prior to the first payment claim, unless otherwise specified in the targeting data Ensuring timely submission of these documents is essential for compliance with contract requirements and successful project participation.
Joint ventures
Contractors shall develop joint venture agreements with targeted partners in order to fulfil contract participation goal obligations
Credits toward achieving the contract participation goal will only be granted if the targeted partner demonstrates meaningful and appropriate contributions to the joint venture, aligned with reasonable business practices Specifically, the partner must share in key aspects of the joint venture in a manner that reflects their fair and significant involvement, ensuring their participation is substantial and compliant with industry standards Meeting these requirements is essential for qualifying for credits that support the contract participation objectives.
5) profits; b) the targeted partner is responsible for a clearly defined portion of the contract; and c) the targeted partner performs part of the defined portion of the work for which he is responsible, using his own resources or resources hired by him independently of his non-targeted partners
The participation parameter is determined as the lesser of two values: the financial value of the work the targeted partner is responsible for and twice the financial value of the work the partner performs using their own or independently hired resources This parameter is expressed as a fraction of the total contract amount, ensuring fair allocation based on the partner’s direct contributions.
In a joint venture, partners with a combined participation parameter of 0.15 in a USD 10 million contract are responsible for work valued at a minimum of USD 1.5 million (0.15 × USD 10 million) Of this, at least USD 750,000—half of the certified work value—is performed using their own resources or independently hired resources, separate from their non-targeted partners.
All joint ventures formed with targeted partners must be disclosed using the joint venture disclosure form (see Annex D) These disclosures should be submitted at least five working days prior to the submission of the first payment certificate, unless an alternative arrangement is agreed upon in writing with the employer.
Contract participation goal credits
Credits toward the contract participation goal are awarded by calculating the total of each targeted partner’s contribution, which is the product of the contract amount and their specific participation parameter within the joint venture This calculated amount is then expressed as a percentage of the overall contract value, provided that all conditions outlined in section 3.2.3 are met.
In joint ventures where all parties hold targeted partner status, the venture is credited with achieving a 100% contract participation goal This applies provided that each targeted partner maintains a participation parameter of at least 0.10, ensuring equitable contribution and compliance with contractual requirements.
Credits shall be denied should targeted partners not adhere to statutory labour practices or fail to perform commercially useful functions
NOTE Annex E provides illustrative examples as to how a contractor can fulfil his contract participation goal obligations
General
The contractor must establish written contractual agreements with all targeted partners listed in the contract participation goal implementation plan and promptly provide copies to the employer's representative Under targeting strategy A, agreements for work performed by targeted partners must not be reduced in scope or terminated without prior written approval from the employer's representative, which shall not be unreasonably withheld or delayed.
Substitutions
When targeting strategy A is in effect and a targeted partner is found to be unable or unwilling to perform necessary work, or produces unacceptable work, the contractor must notify the employer’s representative The notification should outline the reasons for considering the reduction or termination of the targeted partner’s contract This process applies if the partner cannot perform, performs late, produces substandard work, or is unfit to provide services, ensuring clear communication and proper contract management.
If the employer approves the contractor's request to restructure the joint venture formation, the contractor must provide a substitute targeted partner to assume the contract or involve a targeted partner within the joint venture on a different aspect of the project to meet the contract participation requirements The contractor is also required to submit detailed information to the employer about the nature and value of the contract to be performed by the targeted partner, ensuring transparency and compliance with project goals.
The contractor may restructure the joint venture and enter into agreements with substitute targeted partners to fulfill the contract participation goal, provided they obtain the employer’s approval, which shall not be unreasonably withheld.
Employers may, at their sole discretion, grant a waiver for contract participation goal obligations if the contractor provides sufficient evidence demonstrating that they made good-faith efforts to secure substitute partner participation but were unsuccessful Such waivers are granted based on the submitted proof of fruitless efforts, ensuring fairness in contract performance.
NOTE Subclause 4.2 is only applicable where targeting strategy A applies.
Bona fides of targeted partners
In targeting strategy A, if an enterprise initially considered a targeted partner is later found not to qualify or to be uncreditable toward contract participation goals, the employer may grant a partial waiver of the contractor’s obligations concerning that partner The contractor must satisfactorily demonstrate that they reasonably believed the enterprise to be a targeted partner and that eligibility standards were not violated.
Submission of documentation
The contractor must submit all required documentation according to sections 3.1, 3.2.2, 3.2.3, 4.1, and 5.2 in a timely manner Along with this, they should provide a comprehensive activity program and schedule that clearly specifies expected delivery dates for goods from targeted partners, as well as commencement and completion dates for work and services The schedule must be regularly updated by the contractor whenever there are changes in the project timeline to ensure accurate planning and coordination.
Monthly submission of supporting documentation
The contractor must submit a monthly report to the employer's representative, detailing the commercially useful functions performed by targeted partners during the contract period This report should include both interim and cumulative performance data Additionally, a schedule must be provided, estimating the total value of goods, work, and services to be delivered, along with the cumulative and period-specific values of these outputs These submissions are due on or before the specified date, using an approved format, to ensure transparency and adherence to project milestones.
If inspections by the employer’s representative reveal that targeted partners are not complying with ISO 10845 requirements, the contractor must provide additional weekly resource reports and relevant information about these partners, alongside monthly reports, in an approved format.
Certification of credits
The employer's representative is responsible for certifying the value of credits contributing to the contract participation goal whenever a payment claim is submitted They must also notify the contractor of this certified amount to ensure transparency and compliance with contract requirements.
If the contractor cannot demonstrate that failing to meet the contract participation goal was due to quantitative underruns, removal of contract items by the employer, or other acceptable reasons beyond their control, contractual sanctions will be enforced Targeting strategy A specifies that failure to justify these reasons will result in penalties The contractor must substantiate that any shortfall is due to factors beyond their control; otherwise, sanctions outlined in the contract will be applied.
The contract specifies the sanctions that apply, which are outlined in the tender evaluation schedule, scope of work, or contract data Sanctions are typically applied when tender evaluation points are awarded for a tendered CPG or when a minimum CPG is specified under targeting strategy A These sanctions usually include financial penalties based on the difference between the contracted participation goal and the achieved participation goal, rejection of incomplete payment claims without proper supporting documentation, and issuance of completion certificates only after the required documentation described in section 5.3 is received.
According to NOTE 2, no financial penalties are imposed when CPGs are solely used to measure and report the economic activity generated by a contract for targeted enterprises under targeting strategy B The only sanction related to financial incentives occurs if the target is not achieved, in which case the incentive is simply not paid.
informative) Third-party management support
This annex provides essential background information, practical guidance, and recommendations for best practices related to this part of ISO 10845 It offers valuable insights to ensure effective implementation and adherence to the standard The commentary clauses are directly linked to the specific clauses in ISO 10845, with references such as A.1 corresponding to Clause 1, facilitating clear and precise guidance for users.
NOTE 2 This part of ISO 10845 can be incorporated into procurement documents by reference, usually in the scope of work or a tender evaluation schedule (see ISO 10845-2)
ISO 10845 standardizes how contract participation goals (CPGs) are set and measured to enhance targeted partner involvement in joint ventures for goods, engineering, construction, and services contracts These targets serve as key performance indicators (KPIs) that reflect the level of engagement of targeted partners within the joint venture Depending on legal requirements, CPGs can be used to reserve contract work for specific groups, provide preferences based on tendered participation, or set performance-based incentives related to achieving key performance indicators This framework promotes transparency and fairness in procurement processes while encouraging increased participation of targeted groups.
It is important to note that both options (a) and (b) can be combined when evaluating tenders, especially when additional points are awarded for exceeding the minimum contract participation goal, thereby encouraging more comprehensive bidder engagement and promoting higher participation levels.
Public sector procurement is regulated by both local and international laws, requiring employers to adhere to these legal frameworks diligently Employers are responsible for correctly applying ISO 10845 standards related to procurement, ensuring their practices align with applicable legislation Compliance with ISO 10845 does not exempt organizations from legal obligations, emphasizing the importance of consulting legal experts when uncertainties arise.
Annex F illustrates an example of how to calculate a tendered contract participation goal, aiding bidders in setting clear diversity and inclusion targets Annex G presents a sample tender evaluation schedule, facilitating the effective use of ISO 10845’s criteria for fair and transparent tender assessments Additionally, Annex I offers guidance on leveraging this part of ISO 10845 to support less experienced contractors through third-party management assistance, promoting capacity building and compliance.
A.2 Commentary on terms and definitions
Targeted partners can be targeted upon the basis of a) locality (domicile),
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Targeting can either be on a generic or an area-bound (localized) basis, e.g business enterprises owned by women (generic), or business enterprises within a geographical region (area-bound)
Clear and precise definitions of targeted partners are crucial for the success of secondary procurement policies, as they influence how the business environment responds and adapts Ambiguous or loose definitions risk encouraging practices like fronting, which undermine policy integrity, while overly broad definitions can lead to tokenism by allowing businesses with minimal qualifying features to benefit Conversely, overly narrow definitions may foster elitism, limiting participation and contradicting the goal of business empowerment An inappropriate or poorly constructed definition can reinforce the status quo and create a false impression of inclusive business development.
Definitions for targeted partners should be contractually enforceable and mirror the intent of the secondary procurement policy Poor definitions are often indicative of ill-defined policies
Ownership, encompassing the rights of disposition and shared risks and profits proportional to ownership stake, is a crucial factor in privately-owned companies From a procurement perspective, ownership plays a vital role in economic empowerment initiatives, as it directly influences decision-making, resource control, and sustainable growth Ensuring clear ownership rights can drive investment, foster enterprise development, and support long-term business success.
Ownership of publicly-listed companies is generally not a key factor, except in cases involving concessions, as these companies rarely control share acquisitions In public sector concessions, however, ownership frameworks can facilitate disadvantaged communities in acquiring shares in new ventures, especially in sectors lacking empowerment companies Empowerment consortia often face challenges in raising upfront capital to purchase shares, but innovative mechanisms like “buy back” options and financing arrangements allow them to fund share purchases until dividends and earnings from the concession can repay the loans These strategies enable empowerment organizations to seize opportunities and promote inclusive economic participation.
It is important to clearly define what constitutes ownership for an empowerment company in a given situation
It is also important to examine interlocking ownership between empowerment companies to establish factors such as control and independence
Establishing an empowerment company requires careful consideration of the appropriate ownership level, ensuring it demonstrates meaningful control and stability In small businesses, ownership must be substantial enough to prevent manipulation and guarantee genuine empowerment Effective monitoring of ownership structures is essential to maintain transparency and uphold the integrity of empowerment initiatives.
Control of businesses is central to empowerment initiatives, as ownership by disadvantaged groups fosters true empowerment and influence While ownership often correlates with control, there are scenarios—such as publicly-listed companies or complex consortium arrangements—where direct control may not be feasible or desirable Effective enterprise control from an empowerment perspective ensures that policies promote both business success and employee empowerment, creating sustainable and inclusive growth.
Effective business control revolves around the authority to manage assets, goodwill, and daily operations, as well as the ability to set policies and direct overall business activities Key indicators of control include ownership rights, management responsibilities, and the assumption of risk, which collectively determine decision-making power within the organization Factors such as ownership stake and managerial responsibilities play a crucial role in establishing control over a business.
Unauthorized reproduction or networking is prohibited without an IHS license Demonstrating control involves making major financial decisions, such as large purchases, acquisitions, and securing lines of credit, as well as key management decisions like hiring and firing senior personnel and supervising office operations In larger organizations, control is further evidenced by an absolute majority of voting rights held by specific population groups on the company’s board of directors.
Operational responsibilities within an enterprise can significantly influence empowerment strategies, especially in public companies where clear reporting structures are essential Understanding the levels of reporting to executive directors helps identify who holds operational control, ensuring effective governance In contrast, small companies often have owners directly managing operations, making operational responsibility less complex and less of a concern for organizational structure.
A key issue in empowerment companies is their independence, specifically whether they operate free from direct or indirect control by other entities, especially non-empowerment companies, though some control by financial institutions may be acceptable Over-reliance on external companies often indicates fronting, which compromises the integrity of empowerment initiatives Additionally, the practice of establishing employee-front companies that are manipulated and controlled to secure contracts undermines the core objectives of empowerment efforts.
Interdependence differs from independence, especially in franchise relationships, where the franchiser provides the brand, management systems, and promotional resources, while the franchisee supplies capital and operational resources This partnership exemplifies interdependence, but if the franchisee simply acts as a conduit with limited added value, it shifts toward dependency The key measure of independence in this context is the market value of the franchisee's business, reflecting its true standalone worth.