ISO 10845-5:2011

Construction procurement — Part 5: Participation of targeted enterprises in contracts

ISO 10845-5:2011 establishes a key performance indicator, in the form of a contract participation goal (CPG), relating to the engagement of targeted enterprises on a contract for the provision of goods, services or engineering and construction works. A CPG may be used to measure the outcomes of a contract in relation to the engagement of targeted enterprises or to establish a target level of performance for the contractor to achieve or exceed in the performance of a contract. ISO 10845-5:2011 sets out the methods by which the key performance indicator is measured, quantified and verified in the performance of the contract in respect to two different targeting strategies: targeting strategy A and targeting strategy B.

Marchés de construction — Partie 5: Participation des entreprises cibles aux contrats

General Information

• Status: Published
• Publication Date: 12-Jan-2011
• ICS: 91.010.20 - Contractual aspects
• Technical Committee: ISO/TC 59/SC 18 - Construction procurement
• Drafting Committee: ISO/TC 59/SC 18 - Construction procurement
• Current Stage: 9093 - International Standard confirmed
• Completion Date: 19-Apr-2022

Standards Content (Sample)

INTERNATIONAL ISO
STANDARD 10845-5
First edition
2011-01-15

Construction procurement —
Part 5:
Participation of targeted enterprises in
contracts
Marchés de construction —
Partie 5: Participation des entreprises cibles aux contrats




Reference number
ISO 10845-5:2011(E)
©
ISO 2011

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ISO 10845-5:2011(E)
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ISO 10845-5:2011(E)
Contents Page
Foreword .iv
Introduction.v
1 Scope.1
2 Terms and definitions .1
3 Requirements.4
3.1 Contract participation goal.4
3.2 Achieving the contract participation goal.4
3.2.1 General .4
3.2.2 Verification of the status of targeted enterprises .4
3.2.3 Joint ventures .5
3.3 Contract participation goal credits.6
3.3.1 Granting of credits .6
3.3.2 Denial of credits.6
4 Compliance with requirements .7
4.1 General .7
4.2 Substitutions.7
4.3 Bona fides of targeted enterprises.8
5 Records .8
5.1 Submission of documentation.8
5.2 Monthly submission of supporting documentation .8
5.3 Certification of credits .8
5.4 Actions required upon completion of a targeted enterprises's contract with the contractor.9
6 Sanctions .9
Annex A (informative) Commentary.10
Annex B (informative) Preparation of targeting data associated with this part of ISO 10845 for
inclusion in the scope of work.19
Annex C (normative) Contract participation goal implementation plan (targeting strategy A).22
Annex D (normative) Letter of undertaking from a targeted enterprise to act as a subcontractor,
supplier, manufacturer or service provider.27
Annex E (normative) Joint venture disclosure form .28
Annex F (informative) Examples of how contractors can fulfil their contract participation goal
obligations .36
Annex G (informative) Tendered contract participation goal (targeting strategy A) .38
Annex H (informative) Sample tender evaluation schedule where use is made of this part of
ISO 10845 .42
Annex I (informative) Contract schedule for targeted enterprises .44
Bibliography.48

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ISO 10845-5:2011(E)
Foreword
ISO (the International Organization for Standardization) is a worldwide federation of national standards bodies
(ISO member bodies). The work of preparing International Standards is normally carried out through ISO
technical committees. Each member body interested in a subject for which a technical committee has been
established has the right to be represented on that committee. International organizations, governmental and
non-governmental, in liaison with ISO, also take part in the work. ISO collaborates closely with the
International Electrotechnical Commission (IEC) on all matters of electrotechnical standardization.
International Standards are drafted in accordance with the rules given in the ISO/IEC Directives, Part 2.
The main task of technical committees is to prepare International Standards. Draft International Standards
adopted by the technical committees are circulated to the member bodies for voting. Publication as an
International Standard requires approval by at least 75 % of the member bodies casting a vote.
Attention is drawn to the possibility that some of the elements of this document may be the subject of patent
rights. ISO shall not be held responsible for identifying any or all such patent rights.
ISO 10845-5 was prepared by Technical Committee ISO/TC 59, Buildings and civil engineering works.
ISO 10845 consists of the following parts, under the general title Construction procurement:
⎯ Part 1: Processes, methods and procedures
⎯ Part 2: Formatting and compilation of procurement documentation
⎯ Part 3: Standard conditions of tender
⎯ Part 4: Standard conditions for the calling for expressions of interest
⎯ Part 5: Participation of targeted enterprises in contracts
⎯ Part 6: Participation of targeted partners in joint ventures in contracts
⎯ Part 7: Participation of local enterprises and labour in contracts
⎯ Part 8: Participation of targeted labour in contracts
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ISO 10845-5:2011(E)
Introduction
Procurement is the process which creates, manages and fulfils contracts. Procurement can, as such, be
described as a succession of logically related actions occurring or performed in a definite manner and which
culminate in the completion of a major deliverable or the attainment of a milestone. Processes, in turn, are
underpinned by methods (i.e. a documented, systematically-ordered collection of rules or approaches) and
procedures (i.e. the formal steps to be taken in the performance of a specific task), which are informed and
shaped by the policy of an organization. Methods and procedures can, likewise, be documented and linked to
processes.
It is becoming increasingly more important to consider procurement-related deliverables other than those
relating to the primary purpose of the procurement itself, particularly those relating to poverty reduction, job
creation, local economic development and local industry development. Key performance indicators relating to
the engagement of enterprises, joint venture partners, local resources and local labour in contracts are
needed to set targets in contracts or to measure procurement outcomes. Processes, procedures and methods
are required to quantify, measure and verify a contractor's performance in relation to such indicators in an
auditable manner.

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INTERNATIONAL STANDARD ISO 10845-5:2011(E)

Construction procurement —
Part 5:
Participation of targeted enterprises in contracts
1 Scope
This part of ISO 10845 establishes a key performance indicator, in the form of a contract participation goal
(CPG), relating to the engagement of targeted enterprises on a contract for the provision of goods, services or
engineering and construction works. A CPG may be used to measure the outcomes of a contract in relation to
the engagement of targeted enterprises or to establish a target level of performance for the contractor to
achieve or exceed in the performance of a contract.
This part of ISO 10845 sets out the methods by which the key performance indicator is measured, quantified
and verified in the performance of the contract with respect to two different targeting strategies: targeting
strategy A and targeting strategy B (defined in Clause 2).
NOTE Annex A contains a commentary on the clauses in this part of ISO 10845. Annex B provides guidance on how
to develop the targeting data for a procurement document using this part of ISO 10845.
2 Terms and definitions
For the purposes of this document, the following terms and definitions apply.
2.1
allowance
amount provided for in the contract by the employer relating to one or more of the following:
a) the performance by the contractor of work or services that are foreseen but cannot be accurately specified
at the time that the contract was entered into;
b) work or services to be performed, or goods provided, by a subcontractor who is either nominated by the
employer or is selected by the employer in consultation with the contractor after the award of the contract;
c) provision for price adjustment for inflation; or
d) other budgetary provisions intended to cover employer risks.
2.2
commercially useful function
performance of real and actual work, or the provision of services, in the discharge of any contractual obligation
which includes, but is not limited to, the performance of a distinct element of work which the enterprise has the
skills and expertise to undertake and the responsibility for management and supervision
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ISO 10845-5:2011(E)
2.3
contract amount
financial value of the contract
a) at the time of the award of the contract, exclusive of all allowances and any value added tax or sales tax
which the law requires the employer to pay to the contractor (targeting strategy A); or
b) upon completion of all contractual obligations, exclusive of any value added tax or sales tax which the law
requires the employer to pay to the contractor (targeting strategy B)
2.4
contract participation goal
CPG
value of goods, services and works for which the contractor contracts targeted enterprises exclusive of any
value added tax or sales tax which the law requires the employer to pay to the contractor, expressed as a
percentage of the contract amount associated with the targeting strategy that is identified in the targeting data
2.5
contractor
person or organization that contracts to provide the goods, services or engineering and construction works
covered by the contract
2.6
control
possession and exercise of legal authority and power to manage the assets, goodwill and daily operations of
an enterprise, and the active and continuous exercise of appropriate managerial and financial authority and
power in determining the policies and directing the operations of the said enterprise
2.7
employer
person or organization entering into the contract with the contractor for the provision of goods, services, or
engineering and construction works
2.8
employer's representative
person authorized to represent the employer and named as such in the contract data or targeting data
2.9
joint venture
grouping of two or more contractors acting as one legal entity, where each is liable for the actions of the other
[ISO 6707-2:1993, definition 3.4.22]
2.10
manufacturer
sole trader, partnership or legal entity that operates or maintains a factory or establishment that produces on
its premises, goods required in terms of the contract
2.11
main contractor
contractor who subcontracts part of his contract
[ISO 6707-2:1993, definition 3.8.13]
2.12
ownership
legal right of possession, including the right of disposition, and sharing in all the risks and profits
commensurate with the degree of ownership interest or shareholding, as demonstrated by an examination of
the substance, rather than the form, of ownership arrangements
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ISO 10845-5:2011(E)
2.13
participation parameter
fraction of the contract or subcontract which may be used to represent the value of the contribution and value
of the commercially useful function performed by targeted partners in a joint venture
2.14
supplier
sole trader, partnership or legal entity that owns, operates or maintains a store, warehouse or other
establishment in which goods are bought, kept in stock and regularly sold to wholesalers, retailers or the
public (or all three) in the usual course of business
2.15
targeted enterprise
sole trader, partnership or legal entity which is engaged in the performance of the contract and defined as the
target group in the targeting data
2.16
targeted enterprise declaration affidavit
affidavit, of the format provided for in the procurement documents, which confirms the bona fides of a targeted
enterprise
2.17
targeted partner
targeted enterprise functioning as a partner in a joint venture
2.18
targeting data
data, provisions and variations that make this part of ISO 10845 applicable to a particular contract
(see Annex B)
2.19
targeting strategy
an approach which is pursued to make a contract participation goal an obligation of contract
2.19.1
targeting strategy A
targeting strategy which
a) involves the granting of tender evaluation points by the employer in the evaluation of tender offers in
return for the tendering of a contract participation goal or an undertaking to attain a specified contract
participation goal at the time that tenders are evaluated, or
b) requires a contractor to achieve a minimum specified goal in the performance of a contract, or
c) involves both (a) and (b)
2.19.2
targeting strategy B
targeting strategy which
a) involves the payment of a financial incentive to a contractor for the attainment of a specified contract
participation goal, or
b) requires the contractor to record and report on the quantum of work generated for targeted labour
NOTE Targeting strategy A bases the contract participation goal on the tendered amount minus allowances, i.e. on
the expenditure which the contractor can commit to at tender stage. This strategy allows the employer to adjust the
contract participation goal to take account of any failure to achieve such goal in the performance of the contract due to
factors which are beyond the contractor's control or are unforeseen at tender stage. Targeting strategy B measures the
contract participation goal based on the final contract value. Targeting strategy A accordingly measures the performance
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ISO 10845-5:2011(E)
of contractors in the engagement of targeted labour in relation to that which can be committed to at tender stage, whereas
targeting strategy B does so in relation to that which is finally achieved.
3 Requirements
3.1 Contract participation goal
The contractor shall engage targeted enterprises directly or indirectly in the performance of the contract to the
extent that the total monetary value of such engagements, exclusive of any value added tax or sales tax
required by law, is sufficient to achieve the contract participation goal for the targeting strategy specified in the
targeting data.
The contractor shall, in the case of targeting strategy A, submit to the employer's representative details of his
plan to achieve the contract participation goal, on the contract participation goal implementation plan form
contained in Annex C, within five working days of being instructed to do so. If no such instructions are given,
these plans shall be submitted before the submission of the first claim for payment.
NOTE The information contained in the contract participation goal implementation plan facilitates, in the first instance,
the monitoring of the performance of the contractor in terms of his contract participation goal obligations and, in the
second instance, the making of any adjustments to compensate for quantitative underruns, the elimination of items, etc.
(see Clause 6).
3.2 Achieving the contract participation goal
3.2.1 General
A contractor shall achieve the contract participation goal by any of the following means, unless otherwise
specified in the targeting data
a) Method 1: by virtue of his targeted enterprise status,
b) Method 2: by entering into a joint venture agreement with one or more targeted partners as set out in
3.2.3,
c) Method 3: by engaging one or more targeted enterprises to perform commercially useful functions in the
performance of the contract,
d) Method 4: by engaging non-targeted enterprises who, in turn, engage one or more targeted enterprises
to perform commercially useful functions in the performance of the contract,
e) Method 5: by engaging non-targeted enterprises who, in turn, enter into joint venture agreements with
one or more targeted partners as set out in 3.2.3 to perform commercially useful functions in the
performance of the contract, or
by any combination of Methods 1 to 5.
3.2.2 Verification of the status of targeted enterprises
Contractors shall submit completed targeted enterprise declaration affidavits and, where targeting strategy A
applies, letters of undertaking to act as subconsultants, subcontractors, suppliers, manufacturers or service
providers (see Annex D), with respect to each and every targeted enterprise and targeted partner whose
contribution shall be counted towards the contract participation goal. These documents shall, unless otherwise
specified in the targeting data, be submitted to the employer's representative before the submission of the first
claim for payment.
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ISO 10845-5:2011(E)
3.2.3 Joint ventures
3.2.3.1 General
Contractors shall develop joint venture agreements with targeted partners in order to fulfil contract
participation goal obligations.
Credits towards the achievement of the contract participation goal shall only be granted subject to compliance
with the following requirements:
a) the targeted partner shares in the following aspects of the joint venture in an appropriate and meaningful
manner, consistent with reasonable business practices:
1) ownership,
2) control,
3) management responsibilities,
4) risks, and
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 contract for which he is responsible, using
his own resources or resources hired by him independently of his non-targeted partners.
3.2.3.2 Participation parameter
The participation parameter shall be equated to the lesser of
a) the financial value of the contract for which the targeted partner is responsible, and
b) twice the financial value of the contract which the targeted partner performs using his own resources or
resources hired by him independently of his non-targeted partners,
expressed as a fraction of the contract amount or value of the work performed by the joint venture.
EXAMPLE If targeted partners within a joint venture have, in total, a participation parameter of 0,15 in a contract with
a contract amount of USD 10 million, the targeted partners are responsible for work to the certified value of at least
USD 1,5 million (0,15 × USD 10 million). Work to the value of at least USD 750 000 (50 % of USD 1,5 million) is carried
out using their own resources or resources hired by them independently of their non-targeted partners.
3.2.3.3 Joint venture disclosure forms
Details of any joint ventures developed with targeted partners shall be disclosed on the joint venture
disclosure form (see Annex E) and shall be submitted before the submission of the first payment certificate or
as otherwise agreed, in writing, with the employer.
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ISO 10845-5:2011(E)
3.3 Contract participation goal credits
3.3.1 Granting of credits
Credits towards the contract participation goal shall be granted by converting the value of the following
(exclusive of any value added tax or sales tax required by law) to a percentage of the contract amount, as
relevant:
a) the total monetary value of the contributions made by targeted enterprises, other than targeted
enterprises who are suppliers, in fulfilling contractual obligations, subject to such targeted enterprises not
subcontracting more than 15 % of the value of their contribution to non-targeted enterprises;
b) 50 % of the expenditure on goods required for the contract, which are obtained from suppliers who are
targeted enterprises, subject to such enterprises not subcontracting more than 15 % of the value of their
contribution to non-targeted enterprises;
c) the total monetary value of expenditures made to manufacturers who are targeted enterprises;
d) the total monetary value with respect to fees or commissions charged by targeted enterprises, which in
the opinion of the employer are reasonable, justifiable, and not excessive when compared with fees or
commissions normally allowed for similar services, with respect to:
1) the provision of professional, technical or managerial services, including those required for the
acquisition of essential personnel, facilities, equipment and goods necessary for the performance of
the contract,
2) the delivery of goods required in the performance of the contract (but not the cost of the goods
themselves) when the transporter or delivery service is not also the manufacturer or supplier (or
both), and
3) the provision of any bonds or insurance policies specifically required for the performance of the
contract;
e) the total monetary value of the contributions made by joint ventures with targeted partners multiplied by
the associated participation parameter with respect to each targeted partner, subject to compliance with
the requirements of 3.2.3, and the total monetary value of such contributions being halved where such
joint venture is a supplier who is not a main contractor; and
f) in the case of a contractor who is a targeted enterprise, the monetary value of the work performed using
his own employees and resources and 10 percent of the value of the subcontracts to non-targeted
enterprises.
NOTE 1 The credits calculated in terms of (a) to (e) apply also with respect to non-targeted enterprises engaged by the
contractor in the performance of the contract, should such enterprises comply with the relevant requirements. Annex F
provides illustrative examples as to how a contractor can fulfil his contract participation goal obligations.
NOTE 2 Where targeted enterprises subcontract more than 15 % of the value of the contribution to non-targeted
enterprises, the credits are limited to the actual value of the contributions made by targeted enterprises.
3.3.2 Denial of credits
3.3.2.1 Case 1
No credits shall be granted should the contractor make a direct payment to a supplier, manufacturer or plant
hire or lease company on behalf of a targeted enterprise when such payment is recovered by making
deductions from payments to the targeted enterprise in connection with the contract; or should the contractor
fail to enter into written contractual agreements with the relevant targeted enterprises.
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ISO 10845-5:2011(E)
3.3.2.2 Case 2
Credits claimed towards the contract participation goal shall be denied where written contractual agreements
contain any of the following:
a) a right to set off in favour of the employing contractor not provided for by law;
b) authoritarian rights given to the employing contractor or his agent, with no recourse to independent
adjudication in the event of a dispute arising;
c) payment procedures based on a pay-when-paid system;
d) a dispute resolution process which does not include inexpensive alternative dispute resolution procedures,
such as mediation or adjudication, but which only makes use of formal proceedings such as arbitration or
litigation; or
e) conditions which are more onerous than those which exist in the main contract.
Credits shall be denied should targeted enterprises not adhere to statutory labour practices or fail to perform
commercially useful functions.
4 Compliance with requirements
4.1 General
The contractor shall enter into written contractual agreements with all the targeted enterprises and targeted
partners cited in the contract participation goal implementation plan and shall, as soon as is practicable,
furnish the employer's representative with copies of such agreements and the written acceptances thereof.
The contract to be performed by the targeted enterprises and targeted partners shall, in the case of targeting
strategy A, thereafter neither be reduced in scope, nor terminated without the prior written approval of the
employer's representative, which shall not be unreasonably withheld or delayed.
4.2 Substitutions
Where targeting strategy A applies and in the event that, through no fault of the contractor, a contracted
targeted enterprise is found to be
a) unable to perform,
b) unable to perform on time,
c) unable to produce acceptable work,
d) unwilling to perform work required, or
e) not fit to perform the service;
the contractor shall notify the employer's representative of the apparent necessity to reduce or terminate such
a targeted enterprise's contract, citing the reasons therefor.
In the event that the employer approves the contractor's request to be relieved of his obligation to make use of
a contracted targeted enterprise, the contractor shall either provide a substitute targeted enterprise to take
over the contract, or engage a targeted enterprise on another aspect of the contract so as to secure the
required credits to achieve the contract participation goal. The contractor shall, in such circumstances, submit
to the employer a targeted enterprise declaration affidavit with respect to the proposed substitute targeted
enterprise, and supply details of the nature and value of the contract which shall be performed by such an
enterprise.
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