Public Procurement 2024

Last Updated April 09, 2024

Indonesia

Law and Practice

Authors



Assegaf Hamzah & Partners (AHP) has established itself as a major force locally and regionally. Established in 2001, it is a full-service law firm and one of the largest in Indonesia, based in Jakarta and Surabaya. Its competition and antitrust practice group comprises trained economists and qualified lawyers offering comprehensive legal advice from a cutting-edge economic perspective. The team advises on a wide range of competition and antitrust work, encompassing general competition advice, compliance, cartel investigations, abuse of dominance, price-fixing cases, merger notifications, consumer protection, procurement, and international trade-related matters. Beyond the firm’s comprehensive portfolio of competition-related services, some of its team members have served at senior levels on the Indonesian Competition Commission (Komisi Pengawas Persaingan Usaha, or KPPU). As part of the Rajah & Tann Asia network, AHP is supported by experts and legal resources in nine Asian jurisdictions, all with an intimate knowledge of their own domestic commercial and legal landscapes.

Government procurement in Indonesia comes under Presidential Regulation No 16 of 2018, as partially amended by Presidential Regulation No 12 of 2021 on Government Procurement of Goods and Services (“PR 16/2018”).

PR 16/2018 sets out the rules of the procurement process for government institutions applicable to goods and services. It mandates the National Public Procurement Agency (Lembaga Kebijakan Pengadaan Barang/Jasa Pemerintah, or LKPP) to issue the implementing regulations of PR 16/2018, which cover procurement planning, procurement methods, qualification, bidding documents, the form of contracts, and other matters.

One of the LKPP regulations is Regulation No 12 of 2021 on the Guideline for Procurement of Goods/Services through Providers (“LKPP Regulation 12/2021”). This Regulation contains a detailed framework for the government procurement process, including guidance on necessary procedures and requirements, including a model procurement document that can be used as a basis to carry out procurement activities effectively. It also sets out instructions on how to proceed and evaluate procurement in a manner that is compliant with relevant regulations and promotes fairness, transparency, and efficiency.

Based on Article 2 of PR 16/2018, entities that are subject to PR 16/2018 and LKPP Regulation 12/2021 are ministries, institutions, or regional bodies that use funding for procurement from any of the sources below:

  • the state budget or regional budget;
  • the state or regional budget that is partially or wholly financed by domestic loans and/or grants received by the government, and/or local government; and/or
  • the state or regional budget that is partially or wholly financed by offshore loans or grants.

Under PR 16/2018, government procurement of goods/services is split into different forms of contracts based on the object of procurement. Article 3 of PR 16/2018 regulates the objects of government procurement, namely:

  • goods;
  • consultancy services for construction and non-construction works;
  • construction work; and
  • other services.

The type of contracts used for government procurement are as follows.

  • Lump-sum contract – This is used for procurement of goods, construction works, other services, or consultancy services (both construction and non-construction) when the scope of work, total price, and time limit are definite, and the risks are borne by the provider.
  • Unit-pricecontract – This is used for procurement of goods, construction works, or other services. The unit price contract contains a fixed price for each unit or element of work with certain technical specifications within a prescribed time limit. This contract is used if the volume or quantity of work is still predictable when the contract is signed.
  • Combination of lump-sum and unit-price contract – This is used for procurement of goods, construction works, or other services.
  • Framework contract – These are used for a certain period in which the volume and/or time of delivery has not yet been determined when the contract was signed; and for procurement of goods, construction works, other services, or consultancy services of non-construction.
  • Cost-plus-feecontract – This type of contract is used when handling an emergency, with a value calculation of the actual cost plus a fee based on a fixed percentage or fixed amount. This contract is for procurement of goods, construction work, or other services.
  • Turnkey contract – A turnkey contract is used for construction where completion includes installation and is ready to be operated or occupied, and for procurement of construction work.
  • Time-basedcontract – This is a consultancy service contract of undefinable scope and on which completion time cannot be assured. It is used for construction and non-construction consultancy services.

Furthermore, the type of contract form to be used will depend on the value and thresholds of the procurement object:

  • receipts – these are used for the procurement of goods or other services with a maximum value of IDR10 million;
  • invoice – these are used for the procurement of goods or other services with a maximum value of IDR50 million;
  • work order – this can be used for the procurement of goods, construction work, or other services and consultancy services. The value thresholds are as follows:
    1. for consultancy services, the maximum value is IDR100 million;
    2. for the procurement of goods or other services, the minimum value is IDR50 million, and the maximum value is IDR200 million; and
    3. for the procurement of construction work, the maximum value is IDR200 million.
  • agreement – an agreement is used for the procurement of goods, construction work, or other services with a value of more than IDR200 million; for the procurement of consultancy services, the value of the object of procurement must be more than IDR100 million; and
  • purchase order – a purchase order is used for procurement through e-purchasing.

Article 1 (23) of Presidential Regulation No. 16 of 2018 (“PR 16/2018”) on international tender and LKPP Regulation No. 1 of 2022 on the Guidelines for the Implementation of International Procurement of Goods and Services regulate the participation of foreign entities in government tenders.

International tender/selection is defined as the process of selecting goods and/or service providers from both foreign and domestic participants. Consequently, irrespective of whether the tender is financed by state/regional budget or foreign loans/grants, it will be categorised as an international tender if the procuring committee opens the tender process up to foreign participants.

International tender/selection is carried out in the following circumstances:

  • procurement of construction work with a value of more than IDR1 trillion;
  • procurement of other goods/other services with a value of more than IDR50 billion;
  • procurement of consultancy services with a value of more than IDR25 billion; and
  • procurement financed by an export credit agency or foreign private creditors.

International tender/selection may still be feasible for procurement having a value less than the thresholds above if there are no eligible and capable domestic businesses.

Furthermore, the selection of providers for international tender/selection can be carried out through international tender, international selection, or direct appointment. Generally, the decision process for international tender/selection is similar to domestic tender/selection. It is to be noted that, before the end of the contract period of an international tender/selection, transfer of knowledge is the obligation of the provider.

Normatively, foreign entities from any countries can apply to participate in an international tender process. However, there are exceptions. The following foreign businesses are prohibited from participating in an international tender process:

  • those originating from countries where there are statutory barriers limiting/prohibiting trade relations with Indonesia; and
  • those that have been blacklisted by a development partner organisation operating in Indonesia, including those bound by agreement for mutual enforcement of debarment decisions that are generally signed by multilateral banks.

Moreover, foreign businesses that participate in international tenders are required to co-operate with domestic businesses or with domestic industries in the manufacture of spare parts and the performance of after-sales service for goods or construction work. Other than procurement regulations, sectoral law may apply in international tenders. For instance, in the procurement of construction work, foreign businesses are required to collaborate with a domestic business by way of, for example, entering into a joint operation by establishing a representative office upfront in Indonesia.

PR 16/2018 outlines the key obligations of the awarding authority concerning adherence to procurement ethics. These obligations include:

  • performing tasks in an orderly manner, working professionally and independently;
  • maintaining the confidentiality of sensitive information;
  • promoting fair business competition by not influencing one other directly or indirectly, which could create conflicts of interest;
  • avoiding and/or preventing abuse of power and/or collusion; and
  • refraining from any bribery related to procurement.

Additionally, the regulation mandates that all government procurement of goods and services should adhere to the principles of efficiency, effectiveness, transparency, openness, competitiveness, fairness, and accountability.

LKPP Regulation 12/2021 requires the government procuring committee disclose its procurement process on the Electronic Procurement System (Sistem Pengadaan Secara Elektronik, or SPSE), which can be accessed here. The website is often referred to as SPSE, which stands for Aplikasi Sistem Pengadaan Secara Elektronik or the Electronic Procurement System Application. Disclosure should also be made on the official websites of ministries, institutions, or local government, official public announcement boards, newspapers and/or other media.

Generally, the minimum of information that must be disclosed is as follows:

  • the name and address of the contracting authority;
  • a description of the procurement;
  • the budget ceiling and estimated cost of procurement;
  • the qualification requirements;
  • the registration schedule and the schedule to download the selection documents or qualification documents; and
  • the schedule for submission of the documents.

In accordance with LKPP Regulation 12/2021, guidelines are set down to regulate the activities of the awarding authority, in this case the Commitment Making Officer (Pejabat Pembuat Komitmen, or PPK) and the Selection Committee (Pokja Pemilihan) for a preliminary market consultation in the procurement process. The consultation is conducted in preparation for the procurement stage as follows.

Market Consultation by PPK

LKPP regulation 12/2021 requires the PPK to conduct a preliminary market consultation to determine the technical specification of goods and services, and to prepare and establish the owner’s estimate. The technical specification/scope of work document is reviewed based on the latest market data/information to determine the availability of goods/services, prices, market players, and alternative similar goods/services. In determining the owner’s estimate, the PPK will use local market prices, publications of ministries/agencies/local governments and associations. The PPK may engage a team of experts to assist in the preparation of technical specifications and the owner’s estimate.

Market Consultation by Selection Committee

The Selection Committee is required to conduct a preliminary market consultation as part of the selection preparatory stage. In this stage, the Selection Committee will review procurement preparation documents prepared by the PPK to align the owner’s estimate with technical specifications and scope of work based on the latest market data.

The market analysis carried out by the Selection Committee will determine the availability of goods/services and domestic businesses capable and qualified to carry out the work. However, if this analysis reveals that there are no domestic businesses that meet the necessary requirements, the Selection Committee can propose and request approval from the PPK to put the contract through an international tender/selection. The market consultation results will determine the best qualification and/or provider selection method for the contract award procedure.

Tender Procedures

Article 50 of PR 16/2018 regulates several selection methods to award a contract. Each method involves different processes, as follows.

  • Tender/selection – This is the most commonly used process for awarding contracts, and includes qualification, announcement and/or invitation, registration and collection of selection documents, a pre-bid meeting, submission of proposals, evaluation of proposals, determination and announcement of winners, and refutation.
  • Quick tender – This is a rapid and simplified procurement method. Participants who are qualified in the Provider Performance Information System submit a price proposal, which is evaluated through an application. The winner will be determined based on the lowest price proposal.
  • Direct appointment – A procurement method inviting one selected provider to participate in the bidding process. The process consists of qualification, a pre-bid meeting, submission of a proposal, evaluation of the proposal, and award of the contract. Please see 2.5 Direct Contract Awards for circumstances that would allow direct appointment.
  • E-purchasing – This is a modern procurement method that involves the purchase of goods or services through an electronic catalogue system or online store.
  • Direct procurement – This can be carried out in two ways. The first method involves the direct purchase/payment for the provider for the procurement of goods/other services using evidence of purchase or receipts. The second method entails a request for a proposal along with clarification, technical and price negotiation from the undertaking for direct procurement based on a work order.

Negotiation

Based on LKPP Regulation 12/2021, technical and price negotiation is permissible as follows.

  • Before a decision to award is announced, for procurement of goods, other services, and consultancy services for non-construction works:
        • Technical and price negotiation when there is only one participant that satisfies the administrative, technical, and qualification requirements.
        • Technical and price negotiation between the Selection Committee and the first-rank winner candidate to verify the substance of the technical and price proposal. If the verification result produces an unsatisfactory result, the negotiation will be moved to the second-rank winner candidate and so on.
  • After a contract award decision has been announced, for procurement of consultancy services for construction and non-construction works:
        • Between the PPK and the party awarded the contract when there are discrepancies between the technical specifications/TOR and the implementation of the work in the field.

Additionally, LKPP Regulation 12/2021 regulates that technical and price negotiations cannot be conducted if the validity period of the participant’s proposal letter has expired. During negotiations, no criteria or requirements within the bidding documents or proposal may be changed, as this could influence the result of the evaluation process. Otherwise, the PPK/Selection Committee and the provider run the risk of a post-bidding violation, as set out in Article 22 of the ICL on bid-rigging prohibitions. The PPK/Selection Committee and the provider may not change the contract value or the contract type. However, they may negotiate the value of direct personnel and non-personnel cost, whether lump sum, unit price, or at cost. Furthermore, they may negotiate expert personnel cost when it is lower than the minimum remuneration standard based on statutory regulations regarding the expert remuneration standard.

The tender procedure is one of the provider selection methods. PR 16/2018 stipulates that the procedure for selecting a provider is subject to the fulfilment of certain conditions and thresholds, as follows.

  • E-purchasing – This is a procurement method that involves purchasing goods and services through an electronic catalogue system or online store managed by the LKPP or relevant ministries for sectoral government procurement. There are no minimum values for goods/service obtained through e-purchasing, so government buyers can purchase goods/services according to their needs with no value limit.
  • Direct procurement – This is for goods, construction work, or other services with a maximum value of IDR200 million. Consultancy services and non-construction consultancy services with a maximum value of IDR100 million can also be obtained through this method.
  • Direct appointment – This method is for procuring goods, construction work or other services, as well as consultancy services, under certain circumstances. Please see 2.5 Direct Contract Awards concerning circumstances which would allow direct appointment.
  • Quick tender – This is another procurement method for goods and services and is available for qualified businesses in the Provider Performance Information System (Sistem Informasi Kinerja Penyedia Barang/Jasa, or SIKaP). Quick tender can be used when the specifications and volume of work are already determined or can be specified.
  • Tender – This is used for procuring goods/construction work/other services when the first four methods in this list are not eligible.
  • Selection of a consultant – This is only applicable for procuring consultation services with a value of more than IDR100 million.

To sum up, PR No. 16/2018 and LKPP Regulation 12/2021 regulate the criteria and requirements of each tender procedure based on the type of goods or services, value amount and complexity, among other factors. This ensures that the awarding authority cannot select tender procedures based on its own preference and is obliged to conduct the procurement process fairly and transparently. Furthermore, certain conditions may allow for an international tender (please see 1.4 Openness and International Competition).

PR 16/2018 permits direct appointment for procuring goods, construction work, or other services, as well as consultancy services, under certain circumstances, as follows.

Direct appointment for the procurement of goods, construction work, or other services can be made for:

  • rapid measures as follow-up in the event of an international commitment attended by the President/Vice President;
  • objects of procurement that are confidential in nature in the interest of the state;
  • construction work on structures that form an integral part of the construction system and on which responsibility for risks of failure cannot be planned/calculated as a whole;
  • situations where there is only one available undertaking whether based on the law or capability (eg, a patent holder);
  • procurement for the purpose of enhancing food security;
  • public infrastructure, facility, and utility works;
  • situations where only one participant passes the re-qualification stage;
  • a failure of re-tender; or
  • situations where there is a selection of providers that can be chosen to resume work in the event of a previously terminated contract.

Meanwhile, for consultancy services, circumstances that permit direct appointment include:

  • situations where there is only one capable undertaking;
  • those where there is only one available undertaking whether based on the law or capability (eg, a patent holder);
  • those where there is an unforeseeable urgently needed legal service, eg, defending a lawsuit;
  • the repeat order for a service from a certain consultant (maximum limit of two times);
  • those where only one participant has passed the re-qualification stage;
  • a failed re-tender;
  • those where there is a selection of providers that can be chosen to resume work in the event of a previously terminated contract;
  • consultancy services which are confidential in nature based on the law; and
  • those where there is a need for the expert services of the Construction Dispute Board.

Aside from the above, PR 16/2018 allows direct procurement in emergency conditions, including the following:

  • natural disasters;
  • search-and-rescue operations;
  • damage to infrastructure that could interfere with public-service activities;
  • safety of Indonesian citizens abroad; and
  • humanitarian assistance to other affected countries.

In the case of emergency conditions such as those set out above, the PPK, authorised by the Budget User (Pengguna Anggaran, or PA) to make decisions and/or take action using the state budget/regional budget, may appoint the nearest provider performing a similar procurement or another undertaking deemed capable of and qualified to carry out a similar procurement service.

PR 16/2018 does not specify a timetable for publishing the procurement documents. However, LKPP Regulation 12/2021 sets out a model timeline for procurement from providers of:

  • goods, other services, or consultancy services for non-construction work (Section 3.9 of Attachment I);
  • construction services (Section 3.7 of Attachment II); and
  • design-and-build integrated construction work (Section 3.7 of Attachment III).

Based on the above, the general timeline for the procurement process is as follows.

Pre-qualification Selection

The pre-qualification stage involves the following:

  • pre-qualification announcement – around seven calendar days;
  • registration and qualification documents download – until the end of qualification documents submission;
  • pre-qualification meeting (if required) – at the earliest, three calendar days after the announcement of the pre-qualification stage;
  • qualification documents submission – up to a minimum of three calendar days until the end of the pre-qualification announcement date;
  • qualification evaluation and verification – no following timeline as it must be adjusted based on the procuring committee’s needs; however, it must end on business days; and
  • qualification refutation time/standstill period – for five calendar days after the qualification evaluation result announcement and must end during business days; the procuring committee must provide a response to the refutation at least three calendar days after the end of the refutation period; all responses must be given on business days.

Selection stages with a two-phase mechanism are as follows:

  • invitation to shortlisted participants: (i) one calendar day after the end of the prequalification refutation time if there is no refutation from the participant; or (ii) one calendar day after all prequalification refutations have been responded to by the procuring committee;
  • selection documents download (by the participants) – at the end of the proposal submission deadline;
  • pre-bid meeting – at the earliest three calendar days from the date of the invitation to the shortlisted participants;
  • submission of administrative and technical proposal (Stage I) – to be adjusted based on needs, but at least three business days after the official report of the pre-bid meeting has been issued, and it must always end on a business day;
  • administrative proposal evaluation – to be adjusted based on needs;
  • technical proposal evaluation and technical negotiation for participants that pass the technical evaluation – to be adjusted based on needs;
  • announcement of participants that pass administrative and technical evaluation (Stage I) – one calendar day after the administrative and technical proposal evaluation;
  • submission of technical proposal (revision) and price proposal (Stage II) – to be adjusted based on needs, but must end on a business day;
  • evaluation of price proposal – to be adjusted based on needs;
  • decision and contract award announcement – at the latest one calendar day after financial proposal evaluation; and
  • refutation time/standstill period – lasts for five calendar days after the contract recipient has been announced, and must end on a business day; the procuring committee must provide a response to the refutation at least three calendar days after the end of the refutation period. In all cases, responses must be given on a business day.

Selection stages with a two-file submission method are as follows:

  • invitation to shortlisted participants: (i) one calendar day after the end of the pre-qualification refutation time if there is refutation from the participant; or (ii) one calendar day after all pre-qualification refutations have been responded to by the procuring committee;
  • selection documents download (by the participants) – at the end of the proposal submission deadline;
  • pre-bid meeting – at the earliest three calendar days from the date of the invitation to the shortlisted participants;
  • submission of administrative and technical proposal – to be adjusted based on needs, but at least three business days after the official report of the pre-bid meeting has been issued, and this must always end on a business day;
  • administrative proposal evaluation – to be adjusted based on needs;
  • technical proposal evaluation for participants that pass the administrative assessment – to be adjusted based on needs;
  • Announcement of participants that pass administrative and technical assessment (File I) – at the latest one calendar day after the end of administrative and technical assessment phase; must be carried out during business days;
  • Financial proposal evaluation – to be adjusted based on needs;
  • decision and contract award announcement – at the latest one calendar day after the end of financial-evaluation stage; and
  • Refutation time/standstill period – lasts for five calendar days after the contract recipient has been announced, and must end on a business day; the procuring committee must provide a response to the refutation at least three calendar days after the end of the refutation period and all responses must be given on a business day.

Post-qualification Selection

Selection stages with a two-file submission method are as follows:

  • tender announcement/request for proposal – at least five calendar days;
  • selection documents download (by the participants) – at the end of the proposal submission deadline;
  • pre-bid meeting – at the earliest three calendar days from the date of the tender announcement, and must take place during business days;
  • submission of proposal document – to be adjusted based on needs, but at least three business days after the official report of the pre-bid meeting has been issued, and must be on a business day;
  • evaluation of administrative, technical, and qualification proposal from bidders (File I) – immediately after the submission of proposal documents ends;
  • the opening for financial proposal (File II) for participants that pass File I evaluation – one calendar day;
  • qualification verification of the potential winner – this is not regulated, and can be adjusted based on need;
  • decision and contract-allocation announcement – at the latest one calendar day after qualification verification period;
  • refutation/standstill period – lasts for five calendar days after the contract recipient has been announced, and must end on a business day; the procuring committee must provide a response to the refutation at least three calendar days after the end of the refutation period and all responses must be given on a business day; and
  • selection committee report to the PPK – adjusted based on needs.

Selection stages with a one-file submission method are as follows:

  • tender announcement/request for proposal – at least five calendar days;
  • selection documents download (by the participants) – at the end of the proposal submission deadline;
  • pre-bid meeting – at the earliest three calendar days from the date of the tender announcement, and must take place during business days;
  • submission of proposal document – to be adjusted based on needs, but at least three business days after the official report of the pre-bid meeting has been issued, and must be on a business day;
  • evaluation of administrative, technical, and qualification proposal from bidders – immediately after the submission of proposal documents ends;
  • qualification verification of the successful candidate – adjusted based on needs;
  • decision and contract-allocation announcement – at the latest one calendar day after qualification verification period;
  • refutation/standstill period – lasts for five calendar days after the contract recipient has been announced, and must end on a business day; the procuring committee must provide a response to the refutation at least three calendar days after the end of the refutation period and all responses must be given on a business day; and
  • selection committee report to the PPK – adjusted based on needs.

Quick Tender

The quick tender process is as follows:

  • invitation for quick tender – not regulated and can be adjusted based on needs;
  • selection documents download (by the participants) – at the end of the proposal submission deadline;
  • submission of proposal document – at least three calendar days after tender invitations, but must be on a business day;
  • proposal document evaluation – immediately after the submission period for proposal document comes to an end, the length of which can be adjusted based on needs;
  • evaluation result announcement – adjusted based on needs immediately after the end of the evaluation period;
  • qualification verification of the potential contract recipient– not regulated, and can be adjusted based on needs; and
  • determination of contract recipient and final announcement – at the latest one calendar day after the qualification verification.

LKPP Regulation 12/2021 sets out certain minimum time limits for the Selection Committee for receipt of expressions of interest in a contract award procedure or the submission of tenders. These prescribed time limits apply to all categories of respective selection mechanisms, except for a quick tender. As indicated in 2.6 Timing for Publication of Documents, LKPP Regulation 12/2021 offers flexibility in time limits for the Selection Committee based on its needs. However, the minimum time limit is set at three business days after the official report of the pre-bid meeting is issued. For a quick tender, the minimum is three calendar days after the tender invitations for the receipt of expressions of interest or the submission of tenders. Additionally, the submission of tender proposals must conclude on business days.

Article 17 of PR 16/2018 stipulates several conditions that must be satisfied by an interested party to participate in the procurement process. These conditions are set out for, but not limited to, each type of procurement, consisting of administrative and technical qualifications, which are detailed in LKPP Regulation 12/2021.

Administrative requirements for all types of procurements:

  • compliance with the laws and regulations in conducting business;
  • having valid taxpayer identification status;
  • owning or leasing a business premise with a clear address;
  • having the legal capacity to enter into contracts;
  • signing the Integrity Pact Statement and Participant Declaration; and
  • ensuring that operational co-operation involves a maximum of three companies for non-complex projects or a maximum of five companies for complex projects.

Technical qualification requirements for procurement of goods/other services and non-construction consultancy services:

  • experience providing similar goods/services in either the government or private sectors in the years before selection;
  • large businesses must have had experience where the highest value of similar work within the last 10 years was at least equal to 50% of the value of the owner’s estimate/budget for the requested work; and
  • small businesses/co-operatives participating in procurement for non-small businesses must have had experience where the highest value of similar work within the last ten years was at least equal to 50% of the value of the owner’s estimate/budget for the requested work.

The qualification requirements above are not limitative in nature. Therefore, the Selection Committee can add other qualification requirements according to the needs of the work, the type of procurement, the budget ceiling value, and provisions related to business entities set out by the competent authority.

According to PR 16/2018, direct appointment may be utilised to limit participation in a procurement process to a small number of qualified suppliers. The determination of the shortlist of such qualified suppliers is based on the explanation provided in 2.5 Direct Contract Awards. Additionally, the number of qualified suppliers that will be invited to participate in a direct appointment is limited to one business actor.

In addition to direct appointment, the Selection Committee may also limit participation through the direct procurement method. This method is utilised by the Selection Committee for procurement of goods/services with small value, as explained in 2.4 Choice/Conditions of a Tender Procedure. The requirements may be only be selected through the direct procurement method at one participant meeting. 

The criteria for the evaluation of tenders depends on the provider selection method for each type of procurement.

For goods, construction works, or other services, the evaluation methods are as follows.

  • Merit point evaluation method – Procurement is assessed based on technical and financial factors, which means that the winner is selected using a combination of technical and price evaluations. The technical assessment is carried out by evaluating each element and/or the total value of all elements that meet the minimum threshold. On the other hand, the value assessment is set out in the evaluation criteria of the tender document and must be quantitative.
  • Economic life cycle cost evaluation method – Procurement is evaluated based on economic life cycle, price, operational costs, maintenance costs, and residual value within a specified operational period. The administrative and technical assessment utilises a pass or fail system or a threshold system. The price assessment is carried out by considering the total cost of ownership over the operating period, which is then converted into present value. The contract winner is decided based on the lowest cost over economic life value.
  • The lowest price evaluation method – Procurement is evaluated based on the price among bidders passing the technical evaluation. The administrative and technical evaluation uses a pass or fail system or a threshold system. The contract winner is determined among the bids that have met technical requirements. The lowest price assessment method is used when the specifications are clear, technical requirements are easy to fulfil, and price is the main evaluation criterion.

For consultants, the criteria for evaluation are as follows.

  • Quality and cost method – Procurement is evaluated based on the scope of work, type of experts, and work completion period, which are determined in the Terms of Reference (TOR). This method is utilised by assigning weight to each element of the assessment or the total value of all the elements, which must meet the minimum threshold. The contract winner is determined based on the best combination of technical and cost bid quality, followed by clarification, technical, and cost negotiation.
  • Quality method – Procurement is uncertain in nature. Thus, this method is utilised when the scope of work, type of experts and work completion period cannot be determined in the TOR (eg, work of an individual consultant). This method is used for work that prioritises the quality of the technical bid as a decisive factor. The determination of the winner is based on the best technical bid, followed by cost negotiations offering the best value.
  • Budget ceiling – This method is utilised to evaluate procurement for simple-scope work – ie, work that can be described with certainty and cannot exceed a budget ceiling. The winner is determined based on the quality of the best technical offers from participants whose corrected cost offers are smaller or equal to the budget ceiling, followed by clarification and negotiation of technical and cost.
  • Lowest cost – This method is used to evaluate procurement for standard and routine work. This method is carried out by assigning weight to each or all elements that meet the minimum threshold. The determination of the winner is based on the bid with the lowest cost among the bids that passed the technical evaluation, followed by technical and cost clarification and negotiation.

The awarding authority can exclude tenders from the contract award procedure and proceed directly to direct appointment. Please see 2.5 Direct Contract Awards for circumstances that will allow direct appointment.

According to LKPP Regulations 12/2021 and User Guide SPSE V.4.5 for Selection Committee (“User Guide”), the disclosure of evaluation methodology when selecting bidders and evaluating tenders is mandated. LKPP Regulation 12/2021 sets out the minimum information that must be provided, as described in 2.1 Prior Advertisement. In addition, the User Guide specifies that the Selection Committee must provide detailed information on the SPSE system when announcing a tender. The evaluation methodology for selecting tenders and evaluating tenders will be contained in the details of the tender announcement. The tender announcement on the SPSE system must include the following information:

  • tender code;
  • name of tender;
  • current tender stage;
  • the procuring work unit (the ministry, institution or local government);
  • type of procurement (ie, goods, consultancy service, construction work, and other services);
  • procurement system (including the provider selection methods (ie, tender or selection), qualification method pre-qualification or post-qualification) and proposal submission method (ie, one file, two-stage, etc), and evaluation methodology);
  • owner’s estimate;
  • brief work description;
  • type of contract will be awarded (ie, lump sum or unit price);
  • work location; and
  • qualification requirement.

The tender announcement will disclose the evaluation methodology based on the information provided above. It is important to note that the obligation to disclose the evaluation methodology for selecting bidders and evaluating tenders is not only contained in the tender announcement but is also mandated by LKPP 12/2021 in the selection document. The evaluation method is presented in the selection document in section (a) Submission of Qualification Data and Bidding Document, and (b) Opening and Evaluation of Offering Documents.

The information of evaluation methodology for selecting bidders and evaluating tenders is important for bidders to understand how their proposal will be assessed.

Regulation PR 16/2018 and LKPP regulation 12/2021 are silent on any specific obligation to notify interested parties who have not been selected to participate in the contract award procedure. However, the implementation of the SPSE application for electronic procurement has resulted in a more transparent, accountable and efficient procedure, significantly improving the procurement process. The SPSE application records every stage of the procurement process, including tender announcements, a list of participants who participated in the tender, evaluation results for each stage, winner of the tender, and the provider who is awarded the contract.

Through the SPSE application, the Selection Committee provides detailed information about every stage of evaluation. This includes a checklist of criteria for assessment (ie, qualification, administration, technical, financial, negotiation and proof qualifications), and the result of bidders who pass, fail, or win a tender. The application records the interested parties who have not been selected, and the reasons for the failure of the tender. The application also enables interested parties to track their progress by recording each procurement stage and evaluation. This ensures that all bidders can stay informed about the status of their bid in real time.

Therefore, because the SPSE application has provided a record of the procurement process and kept the bidders up to date with real-time information on the progress of procurement, the Selection Committee does not need to inform interested parties specifically. The electronic procurement process is now more transparent and efficient, showing significant improvement over the conventional procurement process.

As outlined in 3.2 Obligation to Notify Interested Parties Who Have Not Been Selected, the SPSE application has provided a record of the procurement process and informed the bidders with up-to-date and real-time information on the progress of procurement, providing information from the tender announcement to the winner of the contract. The announcement of the winning tender is specifically regulated by LKPP Regulation 12/2021, which mandates the Selection Committee, through SPSE, to publicly declare a winner, a reserve winner 1 (one), and a reserve winner 2 (two), if any, by providing at least the following information:

  • name of the winning bidder;
  • Tax Identification Number (NPWP);
  • address of the winning bidder;
  • winning bid price;
  • negotiated price; and
  • bid evaluation results.

The regulations do not cover time frames for the Selection Committee in issuing the decision of a winning bidder. The time frames will be set out separately by the Selection Committee in bidding documents.

There are no prior hearings in procurement processes in Indonesia. However, losing bidders may submit a refutation after the winner has been announced in the following circumstances:

  • errors in the assessment process;
  • deviations in the qualification documents from the provisions and procedures stipulated in PR 16/2018;
  • collusion/obstruction affecting competition in the tender process; and/or
  • abuse of authority by the Selection Committee, Head of the Procurement Service Unit (Pimpinan Unit Kerja Pengadaan Barang/Jasa or UKPBJ), PPK, PA or Proxy of Budget User (Kuasa Pengguna Anggaran or KPA) and/or regional heads.

If the refutation is deemed correct and accepted, the Selection Committee will proceed with a re-evaluation or re-tender.

The public procurement regulations do not recognise the term “standstill period”. However, LKPP Regulation 12/2021 stipulates a refutation period after notification of the winning bidder. This period allows losing bidders to file a refutation within five calendar days of the announcement of the contract recipient, via the SPSE application, against the evaluation results conducted by the Selection Committee. Losing bidders may submit a refutation if the conditions stated in 3.4 Obligation of a Prior Hearing are fulfilled. During the refutation period, the Selection Committee will temporarily suspend the tender process to await refutation submissions from losing bidders.

If losing bidders file a refutation, the Selection Committee must respond through the SPSE application. If the refutation is deemed valid and accepted, the Selection Committee may proceed with a reassessment or re-tender.

The relevant administrative review body is the Government Internal Oversight Officer (Aparat Pengawas Intern Pemerintah, or APIP). APIP can receive complaints from the public regarding any alleged deviation in a procurement process. Based on its review, it will then issue a procurement audit report containing information regarding assessment results on the conditions of audited procurement of goods/services. This output will then be used as considerations for the ministries/institutions/regional apparatus to improve planning, implementation, and control of goods/services procurement activities. There is a specific mechanism for the auditee to respond to the audit report. If the auditee’s response is deemed correct, the audit report can still be corrected. Conversely, the audit report cannot be corrected if the auditee’s response is deemed incorrect. Subsequently, after follow-up on the outcome of the auditee’s response, the audit report will become final, and there is no appeal mechanism.

Remedies available are as follows:

  • re-evaluation of the submitted proposal by bidders; or
  • re-tender/re-selection.

Upon any findings of a public complaint, the APIP will report to the minister/head of institution/head of region if a violation in the procurement process has been identified. Subsequently, the minister/head of institution/head of region will follow up the APIP’s information by reporting to other authorised institutions, such as: a) the Corruption Eradication Commission (Komisi Pemberantasan Korupsi, or KPK), if allegations of corruption in the procurement process are found; or b) the Indonesia Competition Commission (Komisi Pengawas Persaingan Usaha, or KPPU) if indications of unfair business competition are present.

It is also possible to challenge the validity of the procurement process in a civil court by filing a tort lawsuit, which will be examined based on the Indonesian Civil Code and the Indonesian Civil Procedure. In a civil lawsuit, the losing bidder can claim compensation for damages and/or a re-evaluation or re-tender.

Yes. Interim measures are available during the refutation period. Losing bidders can submit a refutation within five calendar days of the announcement of a winning application. The submission of a refutation will temporarily suspend the tender process. If the refutation is proven to be invalid, the tender process will continue.

A refutation can be submitted in the event that the following conditions have occurred:

  • an error in the evaluation process;
  • deviations in the qualification documents from the provisions and procedures stipulated in PR 16/2018;
  • bid-rigging, which prevented fair competition in the tender process; or
  • abuse of authority by the related officials in the tender process.

Losing bidders have the right to submit a refutation against the result of the tender evaluation or the validity of the entire tender process if the conditions set out in our response to 4.3 Interim Measures have been fulfilled.

The time limit to challenge the awarding authority’s decision is five calendar days from the announcement of the winning bid. This period must end during a business day and business hours.

The length of proceedings relating to a procurement claim is subject to variation based on the type of review system for a particular claim. For refutations, the process lasts for five calendar days after the winner is announced, followed by a three-day deadline for the Selection Committee to respond to the refutation. Meanwhile, proceedings in civil, corruption, and anticompetitive cases will depend on their respective case-handling regulation as well as the complexity of each case.

Not all APIPs in central and regional government institutions publish the average number of procurements claims they audit. However, there are instances where they publish their stand-alone working performance. For instance, the APIP in the Ministry of Law and Human Rights (MOLHR) has published two annual reports for the 2022 and 2023. In 2023, the APIP audited 183 procurement cases, whereas in 2022 it audited 207 cases. Consequently, it audited around 150 procurement cases per year from 2022 to 2023 within the MOLHR.

In a procurement for construction work, losing bidders can submit a refutation against the Selection Committee’s decision within five calendar days from the announcement of the winning bid. Based on Section 4.2.13 of Attachment I of LKPP Regulation 12/2021, a losing bidder wishing to submit a refutation must provide a refutation guarantee amounting to 1% of the total owner’s estimate. The refutation guarantee will be valid for 30 calendar days from the date of the refutation submission.

If the Selection Committee accepts the refutation request, the refutation guarantee will not be disbursed. However, if the Selection Committee rejects the refutation request, the refutation guarantee must be disbursed and distributed to the state/regional treasury by the losing bidders or the Selection Committee directly.

Based on Article 54 of PR 16/2018, changes to a contract can be made when there are discrepancies between the field conditions and the drawings and/or technical specifications detailed in the contract during the contract implementation period. Such changes can be carried out through an amendment/addendum mechanism. In this case, PPK, with the consent of the provider, and vice versa, may make the following changes:

  • increase or decrease the volume contained in the contract;
  • increase and/or reduce the type of activities specified in the contract;
  • alter technical specifications in accordance with field conditions; and/or
  • alter the contract implementation schedule.

Changes to the contract can be followed by an increase in the contract’s value, with a maximum 10% increase from the contract’s original value. Based on Section 5.14 of Attachment I of LKPP Regulation 12/2021, an increase of more than 10% is permissible if: a) the PA has given its approval for the increase; and b) the increase is due to the need for separate tenders or direct appointment in the case of a single construction unit.

Additionally, Section 5.14 of Attachment I of LKPP Regulation 12/2021 also regulates that an amendment/addendum must be technically and professionally justified. Consequently, an amendment/addendum cannot be used as an escape clause to extend the contract period due to delays that occurred after the contract period ends. In this regard, the PPK can establish a team/teams of experts/an expert to verify the legitimacy of a contract amendment/addendum.

Otherwise, PPK and the provider face post-bidding risk. LKPP Regulation 12/2021 defines post-bidding as “any actions of adding, reducing, replacing and/or changing criteria and requirements that have been set out in the bidding documents and/or the substance of bidder’s proposal after the bidder’s proposal submission deadline”. Consequently, this post-bidding prohibition applies after the bidder’s proposal submission deadline until the contract implementation stage.

LKPP Regulation 12/2021 does not specify further criteria/requirements for the bidding documents or what LKPP Regulation 12/2021 means by “the substance of the bidder’s proposal.” Therefore, in our view, post-bidding refers to changes in criteria/requirements or the substance of the bidder’s proposal that would alter the bidder’s evaluation. So, minor changes are acceptable if they do not alter the bidder assessment. Based on this, we consider that post-bidding occurs with any action of adding, reducing, replacing and/or changing a) the criteria or requirements stipulated in the bidding documents; or b) the bidder’s proposal, that may change the bidder’s evaluation after the bidder’s proposal submission deadline.

Post-bidding may trigger the risk of a competition-law violation as it can create unfair advantages to a certain bidder to win a tender among other bidders, eg, bid-rigging. Bid-rigging is prohibited under Indonesian Competition Law.

Other than force majeure events (Article 55 of PR 16/2018), PR 16/2018 is silent on the grounds that parties can apply to terminate a contract. However, Section 5.17 of Attachment I of the LKPP Regulation 12/2021 allows either the PPK or the provider to unilaterally terminate a contract.

Section 5.18.1 of Attachment I of the LKPP Regulation 12/2021 allows the PPK to unilaterally terminate a contract if the provider (note that this list is not exhaustive):

  • is proven to have committed corruption, collusion, nepotism, cheating and/or forgery in the procurement process decided by the competent authority;
  • is negligent/defaults in carrying out its obligations and does not remedy its negligence during the stipulated period;
  • is unable to complete the work after being given a first and second opportunity to complete the work by the PPK; or
  • has stopped working without approval from the work supervisor and such discontinuation is not regulated in the approved project plan.

On the other hand, Section 5.18.2 of Attachment I of the LKPP Regulation 12/2021 allows the provider to unilaterally terminate a contract if:

  • after obtaining the PPK’s approval, the work supervisor orders the provider to postpone their work, or the continuation of their work, and the order is not withdrawn based on the time specified in the contract; or
  • the PPK does not issue a payment request letter for payment instalment as agreed in the contract.

PR 16/2018 is silent on special prerogatives for the awarding authority. However, based on our understanding of the term in other jurisdictions, special prerogatives refer to the awarding authority’s ability to unilaterally fix the tender value and norms for awarding a contract if it is in the national interest and is not arbitrary. Based on the above, there are no special prerogatives in favour of the awarding authority in Indonesia.

Section 4.2.4 of Attachment I of LKPP Regulation 12/2021 permits the Selection Committee to change the selection documents’ terms and value due to any errors discovered during the pre-bid meeting period. Consequently, changes to the selection documents must be technically justifiable and announced to all participants indiscriminately.

On the other hand, LKPP Regulation 12/2021 is silent on changes to the contract terms and/or value after the winner announcement except in circumstances as described in 5.1 Modification of Contracts After the Award. This is because changing the contract terms without justification may affect the evaluation result of the tender process and run the risk of post-bidding violation, which is prohibited by Article 22 of the ICL.

In 2022, the KPPU imposed an administrative fine of IDR28 billion (about USD1.7 million) in a bid-rigging case (KPPU Decision No 17/KPPU-L/2022 on the Procurement for the Jakarta Taman Ismail Marzuki (TIM) Arts Centre Revitalisation Phase III). In this Decision, the KPPU found that the Procuring Committee had granted an exclusive treatment to a participating consortium (“Reported Consortium”) and violated Article 22 of the ICL on bid-rigging prohibition.

The KPPU discovered that the Procuring Committee had cancelled the initial tender process without valid and justifiable grounds when the evaluation assessment had placed the Reported Consortium in a disadvantaged position. The cancellation was due to intervention from the Reported Consortium’s director, who had requested that the Construction Management Consultant present the assessment result of the initial tender process to the Reported Consortium.

To ensure the Reported Consortium’s victory, the Procuring Committee held a second tender process and changed the tender evaluation criteria, including the technical components of the company’s minimum work experience to facilitate the Reported Consortium. Consequently, the Reported Consortium received a high score during the second evaluation process.

There was a lack of communication evidence between the Procuring Committee and the Reported Consortium in the case. Therefore, the KPPU used indirect evidence by examining the causal connection between changes in the tender documents and the Reported Consortium’s evaluation result to prove the existence of bid-rigging violations. Consequently, this decision marked another precedent where the KPPU had used indirect evidence for bid-rigging cases.

The Indonesian legislative body is currently preparing a new procurement law bill (the “Procurement Bill”) on the public procurement of goods and services. As of the current date, it is still unclear whether the new bill will revoke PR 16/2018.

As background, the current procurement regulatory framework in Indonesia is segmented, based on the business entity that conducts the procurement process. For instance, procurement by state-owned enterprises (SOES) is regulated by the SOE procurement rules, namely SOE Minister Regulation No. PER-2/MBU/03/2023 on Guidelines for Governance and Significant Corporate Activities of SOES. Procurement by regional-owned enterprises (ROES) is regulated in the respective governor’s regulations. Meanwhile, government procurement is regulated by PR 16/2018. To unify these regulations, the Procurement Bill is aimed at providing a one-stop procurement regulation for procurement by government, including SOES, ROES and other business entities that are financed wholly or partially by the state/regional budget.

Based on our latest update in March 2024, the new Procurement Bill has not been included in the 2024 Priority National Legislation Program. Consequently, it is unclear as to when it will be passed. However, some of the notable points that can be expected in the new bill from the existing draft as of 28 July 2023 are as follows.

  • On the scope of the law –The Procurement Bill will be applicable to all business entities that are financed wholly or partly by the state/regional budget, including, but not limited to, ministries, SOES and private companies that have been appointed as special purpose vehicles (SPVs) in a public-private project (PPP). Therefore, if the SPV procures goods/service while carrying out their work in the PPP, the Procurement Bill will apply to them.
  • On Micro, Small, and Medium Enterprises (MSMEs) –the Procurement Bill provides facilities for MSMEs to increase their participation in the public procurement sector. These facilities include, but are not limited to, reserving a certain portion of public procurement in accordance with statutory provisions, ease of access to digital transactions in procurement, and increasing MSMES’ financial capabilities through alternative procurement funding innovations.
  • On standardisation and integration of procurement data – In developing a digital procurement system, the Procurement Bill has introduced a standardisation and integration of, but not limited to, tax data to determine provider criteria related to the provisions of MSMEs’ facilities, and budgeting data to map user spending needs.
Assegaf Hamzah & Partners

Capital Place, Level 36 & 37
Jalan Jenderal Gatot Subroto Kav. 18
Jakarta 12710
Indonesia

+62 21 2555 7800

+62 21 2555 7899

info@ahp.id https://www.ahp.id/
Author Business Card

Law and Practice

Authors



Assegaf Hamzah & Partners (AHP) has established itself as a major force locally and regionally. Established in 2001, it is a full-service law firm and one of the largest in Indonesia, based in Jakarta and Surabaya. Its competition and antitrust practice group comprises trained economists and qualified lawyers offering comprehensive legal advice from a cutting-edge economic perspective. The team advises on a wide range of competition and antitrust work, encompassing general competition advice, compliance, cartel investigations, abuse of dominance, price-fixing cases, merger notifications, consumer protection, procurement, and international trade-related matters. Beyond the firm’s comprehensive portfolio of competition-related services, some of its team members have served at senior levels on the Indonesian Competition Commission (Komisi Pengawas Persaingan Usaha, or KPPU). As part of the Rajah & Tann Asia network, AHP is supported by experts and legal resources in nine Asian jurisdictions, all with an intimate knowledge of their own domestic commercial and legal landscapes.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.