ISO 10845-6:2011

Construction procurement - Part 6: Participation of targeted partners in joint ventures in contracts

ISO 10845-6:2011 establishes a key performance indicator, in the form of a contract participation goal, relating to the engagement of targeted partners in a joint venture on a contract for the provision of goods, services or engineering and construction works. A contract participation goal may be used to measure the outcomes of a contract in relation to the engagement of targeted partners in a joint venture or to establish a target level of performance for the contractor to achieve or exceed in the performance of a contract. ISO 10845-6:2011 sets out the methods by which the key performance indicator can be measured, quantified and verified in the performance of the contract in respect of two different targeting strategies: targeting strategy A and targeting strategy B.

Marchés de construction — Partie 6: Participation des partenaires cibles en co-entreprise dans les 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
• Start Date: 30-Nov-2022
• Completion Date: 13-Dec-2025

Overview

ISO 10845-6:2011 - "Construction procurement - Part 6: Participation of targeted partners in joint ventures in contracts" defines a measurable key performance indicator (KPI) for procurement: the contract participation goal (CPG). The standard specifies methods to set, measure, quantify and verify contractor performance in engaging targeted partners as joint-venture participants for the provision of goods, services or engineering and construction works. It supports two distinct targeting strategies (A and B) and provides forms, implementation guidance and verification processes to make such social and economic objectives auditable in procurement.

Key topics and technical requirements

• Contract participation goal (CPG): a KPI expressed as the sum of participation parameters multiplied by the contract amount (expressed as a percentage). (See Clause 3 and definition 2.4.)
• Targeting strategies:
  • Targeting strategy A - CPG based on tendered contract amount; can be linked to tender evaluation points or minimum contract performance targets.
  • Targeting strategy B - CPG based on final contract value and can be linked to financial incentives or reporting.
• Joint venture requirements: Contractors must enter into joint ventures with targeted partners and demonstrate meaningful participation in ownership, control and commercially useful functions (Clause 3.2.3).
• Verification and documentation: Contractors submit targeted partner affidavits, joint venture disclosure forms and, for strategy A, an implementation plan (Annexes C and D). Requirements include scheduled submissions, monthly supporting documentation, certification of credits, and record-keeping (Clauses 3–5).
• Compliance and sanctions: Procedures for assessing compliance, substitutions, bona fides and sanctions for non‑fulfilment are included (Clauses 4–6).
• Supporting material: Informative annexes provide commentary, examples, tender schedules and sample contract provisions (Annexes A, E–I).

Practical applications

ISO 10845-6 is designed for procurement processes that incorporate social, local economic or industry development objectives through joint-venture participation. Typical uses:

• Embedding a measurable KPI (CPG) into construction, engineering and service contracts.
• Establishing tender evaluation criteria that reward bidders for including targeted joint-venture partners.
• Structuring contract clauses, disclosure forms and verification workflows to ensure auditable contractor performance.
• Monitoring and reporting contractor performance against agreed participation targets.

Who should use this standard

• Public and private sector employers procuring construction, engineering and related services
• Procurement officers, bid evaluators and contract managers
• Contractors and joint-venture partners preparing tenders and compliance documentation
• Auditors and compliance officers validating targeted partner engagement

Related standards

ISO 10845 series (Construction procurement): Parts 1–8 (e.g., Part 1 Processes; Part 5 Participation of targeted enterprises; Part 7 Local enterprises and labour). Use ISO 10845-6 together with other parts when developing procurement documentation and evaluation procedures.

Standards Content (Sample)

INTERNATIONAL ISO
STANDARD 10845-6
First edition
2011-01-15
Construction procurement —
Part 6:
Participation of targeted partners in joint
ventures in contracts
Marchés de construction —
Partie 6: Participation des partenaires cibles en co-entreprise dans les
contrats
Reference number
©
ISO 2011
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ii © ISO 2011 – All rights reserved

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 partners .4
3.2.3 Joint ventures .4
3.3 Contract participation goal credits.5
4 Compliance with requirements .5
4.1 General .5
4.2 Substitutions.6
4.3 Bona fides of targeted partners .6
5 Records .6
5.1 Submission of documentation.6
5.2 Monthly submission of supporting documentation .7
5.3 Certification of credits .7
6 Sanctions .7
Annex A (informative) Commentary.8
Annex B (informative) Preparation of targeting data associated with this part of ISO 10845 for
inclusion in the scope of work.17
Annex C (normative) Contract participation goal implementation plan (targeting strategy A).20
Annex D (normative) Joint venture disclosure form.22
Annex E (informative) Examples of how contractors can fulfil their contract participation goal
obligations .30
Annex F (informative) Tendered contract participation goal (targeting strategy A).31
Annex G (informative) Sample tender evaluation schedule where use is made of this part of
ISO 10845 .33
Annex H (informative) Contract schedule for targeted enterprises.35
Annex I (informative) Third-party management support.38
Bibliography.42

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 10845-6 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
iv © ISO 2011 – All rights reserved

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 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.
INTERNATIONAL STANDARD ISO 10845-6:2011(E)

Construction procurement —
Part 6:
Participation of targeted partners in joint ventures in contracts
1 Scope
This part of ISO 10845 establishes a key performance indicator, in the form of a contract participation goal,
relating to the engagement of targeted partners in a joint venture on a contract for the provision of goods,
services or engineering and construction works. A contract participation goal may be used to measure the
outcomes of a contract in relation to the engagement of targeted partners in a joint venture 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 can be measured,
quantified and verified in the performance of the contract in respect of two different targeting strategies:
targeting strategy A and targeting strategy B (defined below).
NOTE Annex A contains 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 the contract is entered into;
b) work or services to be performed, or goods provided, by a subcontractor who is either nominated by the
employer or 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
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
amount equal to the sum of the participation parameters in respect of each targeted partner multiplied by the
contract amount of the contract, 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
[ISO 10845-1:2010, definition 3.12]
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 intending to or entering into the contract with the contractor for the provision of goods,
services, or engineering and construction works
[ISO 10845-1:2010, definition 3.17]
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
association or consortium of enterprises in which expertise, property, capital, efforts, resources, skills and
knowledge are combined in order to perform the contract or a portion thereof
2.10
main contractor
contractor who subcontracts part of his contract
[ISO 6707-2:1993, definition 3.8.13]
2.11
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
2 © ISO 2011 – All rights reserved

2.12
participation parameter
fraction of the contract which may be used to represent the value of the contribution and the value of the
commercially useful function performed by the targeted partners
2.13
targeted partner
person or organization engaged in the performance of the contract at main contract level as a joint venture
partner and defined as the target group in the targeting data
2.14
targeted partner declaration affidavit
affidavit, of the format provided for in the procurement documents, which confirms the bona fides of a targeted
partner
2.15
targeting data
data, provisions and variations applicable to a particular contract
NOTE See A.2.15 and Annex B.
2.16
targeting strategy
an approach which is pursued to make a contract participation goal an obligation of contract
2.16.1
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)
2.16.2
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
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 enter into a joint venture agreement at a main contract level with one or more targeted
partners 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 details of his plan to achieve the contract
participation goal, on the contract participation goal implementation plan form contained in Annex C, and
details of the joint venture on the joint venture disclosure form contained in Annex D within five working days
of being instructed to do so. If no instructions are given, these plans shall be submitted five working days
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 entering into a joint venture agreement with one or
more targeted partners as set out in 3.2.3.
3.2.2 Verification of the status of targeted partners
Contractors shall submit completed targeted partner declaration affidavits in respect of each and every
targeted partner whose contribution shall be counted towards the contract participation goal. These
documents shall, unless otherwise stated in the targeting data, be submitted to the employer's representative
before the submission of the first claim for payment.
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;
4 © ISO 2011 – All rights reserved

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.
3.2.3.2 Participation parameter
The participation parameter shall be equated to the lesser of
a) the financial value of the work for which the targeted partner is responsible, and
b) twice the financial value of the work which the targeted partner carries out using his own resources or
resources hired by him independently of his non-targeted partners,
expressed as a fraction of the contract amount.
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 × $ 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 D) and shall be submitted five working days before the submission of the first
payment certificate or as otherwise agreed, in writing, with the employer.
3.3 Contract participation goal credits
Credits towards the contract participation goal shall be granted by summating the products of the contract
amount and the participation parameters of targeted partners within the joint venture and reducing this amount
to a percentage of the contract amount subject to compliance with the requirements of 3.2.3.
Where all joint venture parties enjoy targeted partner status, such joint ventures shall be credited with a
contract participation goal of 100 %, provided that each targeted partner has a participation parameter of 0,10
or more.
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.
4 Compliance with requirements
4.1 General
The contractor shall enter into written contractual agreements with all the 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. The contract to be performed by the 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 targeted partner
is found to be
a) unable to perform,
b) unable to perform on time, or
c) unable to produce acceptable work, or
d) unwilling to perform the 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 partner's contract, citing the reasons therefor.
In the event that the employer approves the contractor's request to restructure the joint venture formation, the
contractor shall either provide a substitute targeted partner to take over the contract, or engage a targeted
partner within the joint venture 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
details of the nature and value of the contract which shall be performed by such a targeted partner.
The contractor may only restructure the joint venture and enter into agreements with substitute targeted
partners for the purpose of securing credits towards the contract participation goal, with the employer's
approval, which will not be unreasonably withheld.
The employer may, at his sole discretion and upon the basis of evidence submitted by the contractor in
support of fruitless efforts made in good faith to secure substitute targeted partner participation, grant a waiver
in respect of contract participation goal obligations.
NOTE Subclause 4.2 is only applicable where targeting strategy A applies.
4.3 Bona fides of targeted partners
Where, in the case of targeting strategy A, an enterprise under contract was initially considered to be a
targeted partner but is later discovered not to be so, or is found not to be creditable towards contract
participation goals, the employer may consider a partial waiver of the contractor's obligations towards the
achievement of contract participation goals in respect of such a targeted partner, should the contractor
satisfactorily demonstrate that he was justified in believing the enterprise to be a targeted partner and that
eligibility standards were not violated.
5 Records
5.1 Submission of documentation
The contractor shall submit all the documentation required in terms of 3.1, 3.2.2, 3.2.3, 4.1 and 5.2 in a timely
manner and, together with a programme of activities, a schedule which indicates clearly the expected delivery
dates of goods provided by targeted partners or the commencement and completion dates of work and
services to be performed by all the targeted partners engaged on the contract. This schedule shall be updated
by the contractor whenever a change in programme occurs.
6 © ISO 2011 – All rights reserved

5.2 Monthly submission of supporting documentation
The contractor shall prepare and submit monthly to the employer's representative, on or before the date
specified in the targeting data, in a form approved by the employer's representative, the following:
a) a brief report which describes the commercially useful functions performed by the targeted partners in the
performance of the contract, both over the interim period and on a cumulative basis; and
b) a schedule reflecting the estimated total value of the goods to be provided and work and services to be
performed, the cumulative value of the goods provided or work and services performed (or both) and the
value of goods provided or work and services performed (or both) over the period for which payment is
claimed in respect of each and every targeted partner.
Should random inspections conducted by the employer's representative on targeted partner activities indicate
that such partners are not performing in accordance with the requirements of this part of ISO 10845, the
contractor shall provide, in addition to the monthly reporting requirements, separate weekly resource returns
and any other relevant information in respect of such targeted partners in a format approved by the employer's
representative.
5.3 Certification of credits
The employer's representative shall certify the value of the credits counted towards the contract participation
goal whenever a claim for payment is issued to the employer, and shall notify the contractor of this amount.
6 Sanctions
In the event that, and where targeting strategy A applies, the contractor fails to substantiate that any failure to
achieve the contract participation goal was due to
a) quantitative underruns,
b) the elimination by the employer of items included in the contract participation goal, or
c) any other reason beyond the contractor's control which may be acceptable to the employer,
the sanctions provided for in the contract shall apply.
NOTE 1 The contract establishes the sanctions that apply. These can be set out in a tender evaluation schedule, the
scope of work or contract data. Sanctions where tender evaluation points are granted in respect of a tendered CPG or
where a minimum CPG is specified (i.e. targeting strategy A) are usually applied in the form of
a) financial penalties, typically formulated on the difference between the contracted contract participation goal and the
contract participation goal achieved in the performance of the contract;
b) the rejection of claims for payments as being incomplete, should the appropriate supporting documentation not be
provided; and
c) the issuing of completion certificates only after the certificates described in 5.3 are received.
NOTE 2 No sanctions in the form of financial penalties are applied where the CPGs are only used to measure and
report on the quantum of economic activity generated by a contract for targeted enterprises (i.e. targeting strategy B). The
sanction where financial incentives are applied is simply that the incentive is not paid if the target is not attained.
Annex A
(informative)
Commentary
NOTE 1 This annex includes background information on this part of ISO 10845, guidance on its use and suggestions
on good practice. The clauses in the commentary refer directly to the respective clauses in this part of ISO 10845, e.g. A.1
refers to Clause 1.
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).
A.1 Commentary on scope
The purpose of this part of ISO 10845 is to standardize the manner in which targets (contract participation
goals) are set and measured in relation to the participation of targeted partners in joint ventures at the main
contract level in goods, engineering and construction works or service contracts. These targets, in addition to
measuring and reporting on a key performance indicator which reflects the quantum of involvement in the
workings of the joint venture by targeted partners through the performance of the contract, can, depending
upon prevailing legislation, be used to
a) reserve a portion of the contract work for specified target groups through the setting of minimum contract
participation goals,
b) establish the basis for the awarding of preferences in proportion to the quantum of the CPG that is
tendered, or
c) establish performance targets for the payment of financial incentives relating to the attainment of key
performance indicators.
It should be noted that (a) and (b) above can be used in combination with each other should tender evaluation
points be granted for tendering a contract participation goal which exceeds a minimum value.
Public sector procurement is frequently governed by local and international laws. Employers should be aware
that they are responsible for the correct application of this part of ISO 10845 and ensuring that such
application is consistent with prevailing legislation. Compliance with this part of ISO 10845 cannot confer
immunity from legal obligations. If doubt exists, legal advice should be sought.
NOTE Annex F provides an example of a tendered contract participation goal calculation. Annex G provides an
example of a tender evaluation schedule which enables this part of ISO 10845 to be used for tender evaluation purposes.
Annex I provides information on the use of this part of ISO 10845 to provide third-party management support to fledgling
contractors.
A.2 Commentary on terms and definitions
A.2.13 Targeted partner
A.2.13.1 General considerations
Targeted partners can be targeted upon the basis of
a) locality (domicile),
8 © ISO 2011 – All rights reserved

b) status as a small, medium, or micro-enterprise,
c) ownership, operational responsibilities and control (or a combination thereof) by marginalized population
groups, or
d) a combination of (a), (b) and (c).
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).
The formulation of definitions for targeted partners can determine the success, or otherwise, of secondary
procurement policies, as the business environment can respond to, and structure itself around, such policies.
For example, a loose definition can promote fronting (practices which are against the spirit or provisions of this
part of ISO 10845) which can, ultimately, undermine the integrity and intent of a policy. An ambiguous
definition can promote collusion between procurement officers and suppliers (“gatekeeping”), as discretion
invariably needs to be exercised to determine whether or not a business is a targeted partner. Too wide a
definition can promote tokenism, as businesses that have some sort of the desired characteristics are
permitted to derive benefit from the policy. Too tight a definition, on the other hand, can promote a culture of
elitism, as too few businesses qualify. An inappropriate definition can promote the status quo and give a false
impression of business empowerment.
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.
A.2.13.2 Ownership of targeted partners
Ownership, including the right of disposition and sharing in the risks and profits commensurate with the
degree of ownership, is, from a procurement point of view, particularly important in privately-owned companies
as this issue lies at the heart of any programme of economic empowerment.
Ownership of publicly-listed companies is usually not a relevant characteristic, except where concessions are
granted, as such companies are rarely able to exercise control over who acquires shares. In public sector
concessions, however, ownership can be used to allow disadvantaged communities to acquire shares in new
ventures, particularly in fields in which no empowerment companies are operating. This often presents
challenges to empowerment consortia, who have to raise the necessary capital to purchase such shares up
front. Various innovative mechanisms, including “buy back” options and the financing of such share purchases
until such time as dividends and earnings from operating the concession can redeem the loans, are frequently
used to enable empowerment companies to take advantage of the opportunities presented.
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.
The level of ownership necessary to constitute an empowerment company, as such, should also be carefully
considered, as well as how, in practice, it can be monitored. The level of ownership in small businesses
should be such that it is significant and is not readily open to manipulation.
A.2.13.3 Control of targeted partners
Control of businesses lies at the heart of empowerment initiatives. Control of an enterprise by a
disadvantaged group of individuals is fundamental to empowerment. Ownership is often linked to control but
this is not, in all instances, feasible or even desirable. In publicly-listed companies it might not be possible and
in consortia arising from concessions, it might be too onerous. Control over an enterprise, from an
empowerment perspective, should result in the policies implemented being effective, both in terms of business
success and employee empowerment.
Control of a business should centre around the authority and power to manage the assets, goodwill and daily
operations of the business, the determination of policies and the directing of business operations. Indicators of
control include ownership, management responsibilities, and the assumption of risk. Factors such as who
makes major financial decisions (e.g. those pertaining to major purchases and acquisitions and the acquisition
of lines of credit) and major management decisions (e.g. those pertaining to hiring and firing of senior
personnel and supervision of office control) demonstrate control. In larger companies, an absolute majority of
voting rights on boards in the hands of targeted population groups can demonstrate control.
A.2.13.4 Operational responsibilities
The person holding operational responsibilities within an enterprise might also have an impact on the
empowerment issue. In public companies, operational responsibility is important. In such enterprises,
consideration should be given to levels of reporting, particularly to executive directors, in order to understand
in whose hands the operational control of an enterprise lies. In small companies, this is not usually an
important consideration as owners are frequently responsible for the operation of an enterprise.
A.2.13.5 Independence
A critical issue in respect of empowerment companies is whether or not they are independent, i.e. free of
direct or indirect control from another company, particularly by a non-empowerment company (some measure
of control by financial institutions is acceptable). Over-dependency on another company is usually indicative of
fronting. The practice of some companies to set up employees in front companies, which they effectively
manipulate and control in order to access contracts, undermines the objectives of empowerment.
Interdependence should not be confused with independence. In franchises, for example, the franchiser usually
contributes the brand, the management systems and promotional resources, whilst the franchisee puts up the
capital and supplies the operating resources. Such a relationship can be described as interdependence. If,
however, the franchisee were to act merely as a conduit and to add limited value, the relationship would be
one of dependency. The acid test for independence in such instances would be the market value of the
franchisee's business.
A.2.13.6 Size of enterprises
The size of an enterprise might be a consideration in some programmes. Internationally recognized criteria for
the determination of the size of a business typically include
a) the total number of employees,
b) the value of fixed assets,
c) the paid-up capital,
d) the annual turnover, and
e) the annual volume of physical production.
The following factors might have to be taken into account when formulating definitions for the size of a
company:
f) Affiliation: turnover might have to be considered together with the turnovers of the enterprise's affiliates
in order to prevent the enterprise from forming affiliated enterprises in order to maintain its size status.
[Enterprises are affiliates when, either directly or indirectly, one enterprise controls or has the power to
control the other; a third party (or parties) controls or has the power to control both; or an identity of
interests between or among parties exists such that affiliation might be found.]
g) Nature of business: if formal enterprises in the small and micro sectors are to be targeted, requirements
for compliance with tax obligations and statutory labour standards might have to be stipulated.
NOTE ISO 10845-1 provides more information on the empowerment of enterprises.
10 © ISO 2011 – All rights reserved

A.2.15 Targeting data
This part of ISO 10845 should be referenced in the scope of work or the tender evaluation schedule along with
associated targeting data in accordance with the guidance provided in Annex B (see also ISO 10845-2).
A.3 Commentary on requirements
A.3.1 Contract participation goal
The participation of target groups should, as far as possible, be measured in monetary terms, as monetary
transactions can normally be verified and audited. The participation of targeted enterprises can generally be
measured in terms of receipts for work or services performed or for the provision of goods for a contract. The
participation of a targeted enterprise partner in a structured joint venture can be measured in terms of the
portion of the financial value of the contract for which such enterprise is responsible. There should, however,
be a qualification to this parameter to ensure that such a partner adds value to the venture commensurate
with its level of participation. This qualification should generally be framed around the value of the portion of
the contract that is performed by the targeted partner with resources that are independent of other partners.
Contract participation goals can be used to measure the participation of targeted enterprises, i.e. the flow of
money from the contract to the target group. Procedures as to how such goals can be quantified and verified
in the performance of the contract should be included in the contract. This can be noted in specifications or
other contract information which applies to the contract.
Figure A.1 illustrates a generic four-level performance-based resource specification which specifies and
describes contract participation goals. The objective (Level 1) of this part of ISO 10845 focuses on the
provision of employment opportunities to targeted groups. Subclauses 3.1 and 3.2 establish qualitative
(Level 2) and quantitative (Level 3) requirements in relation to the objective (Level 1).
Provide business and employment opportunities
OBJECTIVE
Level 1
to specified target groups (local enterprises or
local labour or both).
Engage the target groups indirectly or directly in
PERFORMANCE
Level 2
the performance of the contract. Performance
DESCRIPTIONS
requirements
Engage target groups to the extent that a
PERFORMANCE
contract participation goal (a percentage of the
PARAMETERS
value of the contract which represents the inputs
Level 3
of local enterprises or labour or both in the
performance of the contract) established for the
contract is satisfied.
EVALUATION
Level 4
(Means of satisfying contract participation goals)

Figure A.1 — Structure of a performance-based resource specification
The objective (Level 1) and the performance description (Level 2) as set out in Figure A.1 can alternatively be
viewed as key performance indicators, in which case the contract participation goal enables targets to be set
and the performance parameters (Level 3) and the evaluation (Level 4) establish the measurement
arrangements.
When using targeting strategy A, the contractor should complete the contract participation goal
implementation plan (see Annex C) at the commencement of the contract, particularly where a contractor has
tendered a contract participation goal, as this document can be used to determine whether or not the
sanctions provided for in the contract (see Clause 6) should be applied.
NOTE 1 Annex F sets out the manner in which the contract participation goal can be estimated by tenderers and
evaluated by employers at tender stage where targeting strategy A is adopted.
NOTE 2 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). This reduces a contractor's risk exposure.
A.3.2 Achieving the contract participation goal
A.3.2.1 General
This part of ISO 10845 permits the contract participation goal to be achieved only through joint venture
formation. The contract participation goal, as such, measures the flows of monies to targeted enterprises
throughout the supply chain.
A.3.2.2 Verification of the status of targeted partners
Specially designed declarations to verify the bona fides of targeted partners should be used to minimize
fronting or the abuse of secondary procurement policies and to maintain the integrity of the reporting on key
performance indicators and the measurement of procurement outcomes.
Each targeted partner should be required to confirm its bona fides in a targeted partner declaration affidavit.
Such a declarati
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