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Client Update: Projects and Infrastructure
New Regulation on Public Procurement of Goods/Services
On 16 March 2018, the President of the Republic of Indonesia issued Presidential Regulation No.16 of 2018 on Public Procurement of Goods/Services (Procurement) (PR 16/2018). PR 16/2018 revokes and replaces Presidential Regulation No.54 of 2010 on Public Procurement of Goods/Services, and its amendments (PR 54/2010).1
PR 16/2018, which came into effect upon its promulgation on 22 March 2018, is encouraging a procurement process that can provide “value for money”, not only to procure the lowest prices. To achieve this objective, PR 16/2018 now provides a government e-marketplace.
PR 16/2018 requires relevant government agencies to issue implementing regulations within 90 (ninety days) as of the promulgation.
It should be noted that Procurement activities prepared and carried out prior to 1 July 2018 may still be implemented in accordance with provisions set out under PR 54/2010; furthermore, contracts executed under PR 54/2010 shall remain in effect until their expiry.
Scope of PR 16/2018
PR 16/2018 regulates the procurement of goods/services by government agencies (Ministries/Institutions/Regional Government Agencies) that is wholly or partially financed through the state/regional budget (Anggaran Pendapatan dan Belanja Negara/Anggaran Pendapatan dan Belanja Daerah, APBN/APBD), including the Procurement of goods/services that is wholly or partially financed by domestic or offshore loans or grants that are received by the government/ministries.
Significant Key Changes
PR 16/2018 introduces five key changes, as follows:
1. simplification of procedures previously stipulated under PR 54/2010, as reflected in a reduction from 19 chapters and 139 articles in PR 54/2010 to only 15 chapters and 94 articles in PR 16/2018;
2. harmonisation with other prevailing regulations and adoption of international best practices;
3. supporting government policy in relation to: (i) participation of micro-, small- and medium-scale enterprises, (ii) use of local products, (iii) research practices, (iv) handling of emergency situations, (iv) offshore procurement, (v) international tender/selection, and (vi) sustainable procurement;
4. providing flexibility, as PR 16/2018 only regulates normative provisions that allow detailed provisions to be regulated by the head of the National Public Procurement Agency (Lembaga Kebijakan Pengadaan Barang/Jasa, LKPP); and
5. strengthening institutional and human resources procurement.
1 PR 54/2010 lastly amended by Presidential Regulation No.4 of 2015 on the Fourth Amendment of Presidential Regulation No.54 of 2010 on the Public Procurement of Goods/Services.
Comparisons between PR 54/2010 and PR 16/2018
Set out below are more detailed provisions of PR 54/2010 and PR 16/2018:
Then (PR 54/2010) Now (PR 16/2018) Scope of Public Procurement Included Procurement for the purpose of increasing the assets and/or capacities of the Bank of Indonesia and relevant state/region-owned enterprises.2 Does not specify state/region-owned enterprises as the eligible entity to engage in Procurement under this regulation. However, PR 16/2018 defines “Institution” as non-ministerial governmental agencies and other “budget user” institutions that were established to implement specific tasks under the Constitution or other prevailing regulations. Parties Involved in Procurement The following parties were involved in the Procurement process: a. Budget users (Pengguna Anggaran, PA); b. PA proxies (Kuasa Pengguna Anggaran, KPA); c. Executing officials (Pejabat Pembuatan Komitmen, PPK); d. Procurement Services Units (Unit Layanan Pengadaan, ULP)/Procurement officials; and e. Work Result Evaluation Officials/Committees (Pejabat/Panitia Pemeriksa Hasil Pekerjaan, PjPHP/PPHP). The following parties are involved in the Procurement process: a. PA; b. KPA; c. PPK; d. Procurement officials; e. Selection Working Groups (Kelompok Kerja Pemilihan, Pokja Pemilihan);3 f. Procurement Agents;4 g. PjPHP/PPHP; h. Self-management organisers (Penyelenggara Swakelola); and i. Contractors. Note: The Pokja Pemilihan is appointed by the head of a Goods/Services Procurement Work Unit (Unit Kerja Pengadaan Barang/Jasa, UKPBJ),5 a government agency that acts as the centre of excellence for Procurement.
2 Paragraph (1b) of Article 2 of PR 54/2010.
3 This unit was previously known as the Procurement Service Unit Working Group (Kelompok Kerja ULP,) see Article 15 of PR 54/2010.
4 This institution was not previously regulated under PR 54/2010.
5 This unit is a combination of ULP and Electronic Procurement Service (Layanan Pengadaan secara Electronik, LPSE) source: LKPP Press Release, dated 27 March 2018, accessed on 11 April 2018 http://www.lkpp.go.id/v3/#/read/5169.
Then (PR 54/2010) Now (PR 16/2018) Owner’s Estimated Price (Harga Perkiraan Sendiri, HPS) of Goods/Services
HPS was not determined for a contest or direct appointment.6
HPS is not determined for Procurement having a budget ceiling of Rp10,000,000 (ten million rupiah), e-purchasing, and tenders for integrated work.7 Procurement Methods
Provided several selection methods for Procurement, including contests;8
Contests are not recognised as a selection method for Procurement.
Did not classify a quick tender as a selection method;
Selection methods for the procurement of consultancy services consist of:9
b. Direct Procurement; and
c. Direct Appointment.
Selection methods for the procurement of goods/construction work/other services consist of:10
b. Direct Procurement;
c. Direct Appointment;
d. Quick Tender; and
Introduces a quick tender as a new method of selection for the procurement of goods/construction work/other services, which may be conducted if the specification and work volume has been determined in detail and the contractor is qualified under the provider performance information system (sistem informasi kinerja penyedia).11
6 Paragraph (1) of Article 66 of PR 54/2010.
7 Paragraph (7) of Article 26 of PR 16/2018.
8 Article 35 of PR 54/2010.
9 Paragraph (1) of Article 41 of PR 16/2018.
10 Paragraph (1) of Article 38 of PR 16/2018.
11 Paragraphs (1) and (6) of Article 38 of PR 16/2018.
Then (PR 54/2010) Now (PR 16/2018)
The maximum threshold for direct procurement was Rp50,000,000 (fifty million rupiah) for consultancy services;12
Direct procurement is carried out for the procurement of consultancy services having a maximum value of Rp100,000,000 (one hundred million rupiah).13
Provided that a consultancy service provider may be directly appointed under the following conditions:14
a. emergencies, including national defense, public order and natural disasters;
b. activities related to national defense and state security as stipulated by the Minister of Defense of the Republic of Indonesia and the Chief of the Police of the Republic of Indonesia, respectively;
c. work that may only be carried out by one consultancy service provider;
d. work that may only be conducted by one copyright holder; and
e. work related to legal consultancy services that must be carried out immediately.
In relation to the direct appointment of consultancy service providers, emergencies and activities related to national defense and state security have been removed as qualifications for direct appointment and replaced by consultancy service providers that receive repeat orders.15
Methods for evaluation of offers to select providers of goods/construction work/other services were as follows:16
b. Scoring system; and
c. Life cycle cost.
No longer recognizes disqualification, and instead, provides a lowest bidder system as a method for the offering evaluation on Procurement of goods/construction work/other services. In a lowest bidder system, the price offered by the technically qualified bidder is the basis to determine the winner in a tender.17
12 Paragraph (1) of Article 45 of PR 54/2010.
13 Paragraph (3) of Article 41 of PR 16/2018.
14 Paragraph (2) of Article 44 of PR 54/2010.
15 Paragraph (5) of Article 41 of PR 16/2018.
16 Article 48 of PR 54/2010.
17 Article 39 of PR 16/2018.
Then (PR 54/2010) Now (PR 16/2018) Procurement Contracts
Procurement Contracts, which included:18
contracts based on a payment method;
contracts based on a fiscal year;
contracts based on sources of financing; and
contracts based on types of work.
Contracts for Procurement of Goods/Construction Work/Other Services.19
Contracts for Procurement of consultancy services.
A work order (Surat Perintah Kerja, SPK) was required for Procurement of consultancy services having a maximum value of Rp50,000,000 (fifty million rupiah) or Procurement of goods/construction work/other services having a maximum value of Rp200,000,000 (two hundred million rupiah).20
A SPK is required for Procurement of consultancy services having a maximum value of Rp100,000,000 (one hundred million rupiah) or Procurement of goods/other services having a minimum value of Rp50,000,000 (fifty million rupiah) and a maximum value of Rp200,000,000 (two hundred million rupiah), and Procurement of construction work having a maximum value of Rp200,000,000 (two hundred million rupiah).21
An agreement was required for the Procurement of consultancy services having a minimum value of more than Rp50,000,000 (fifty million rupiah).22
An agreement is required for the Procurement of consultancy services having a minimum value of Rp100,000,000 (one hundred million rupiah).23
Price adjustments were required for multi-year contracts 12 months in duration.24
Price adjustments are required for multi-year contracts 18 months or more in duration.25 Procurement Security
Security for Procurement could be in the form of securities from the Central Bank, a guarantee company, or an insurance company.26
Security for Procurement may be in the form of bank guarantees and surety bonds.27
18 Article 50 of PR 54 of 2010.
19 Article 27 of PR 16/2018.
20 Article 48 of PR 54/2010.
21 Paragraph (4) of Article 28 of PR 16/2018.
22 Article 48 of PR 54/2010.
23 Paragraph (5) of Article 28 of PR 16/2018.
24 Paragraph (2) of Article 92 of PR 54/2010.
25 Paragraph (2) of Article 37 of PR 16/2018.
26 Article 48 of PR 54/2010.
Then (PR 54/2010) Now (PR 16/2018) Self Management (Swakelola)
Swakelola was divided into three types of categories, in accordance with the relevant implementing bodies.28
Swakelola is divided by the “Swakelola Administrator” into four types, during the procurement planning stage. Each type of Swakelola,29 is divided into swakelola that is:
(i) planned, executed, and supervised by the institution agency responsible for the budget;
(ii) planned and supervised by the institution responsible for the budget and executed by another institution; and
(iii) planned and supervised by the institution responsible for the budget and executed by a community organization, and planned by the institution that is responsible for the budget and/or proposed by a community group, and executed and supervised by a community group.30 Special Procurement and Exceptions
Types of special procurement included:31
Procurement for the Indonesian National Armed Forces and the Police force of the Republic of Indonesia; and
Procurement of goods/services overseas.
Types of special procurement include:32
Procurement for emergencies;
Overseas Procurement of goods/services;
International Tenders/Selections and Offshore Loans and Grants.
The provisions under PR 16/2018 do not apply to the following types of procurement:33
Procurement for Public Service Agencies;
Procurement carried out based on a publicly published tariff;
Procurement carried out in accordance with an established business practice; and/or
Procurement stipulated under other
27 Article 48 of PR 54/2010.
28 Paragraph (4) of Article 26 of PR 54/2010.
29 Paragraph (3) of Article 23 of PR 16/2018.
30 Paragraph (6) of Article 18 of PR 16/2018.
31 Articles 113 and 114 of PR 16/2018.
32 Articles 59, 60, 62, and 63 of PR 16/2018.
33 Paragraph (1) of Article 61 of PR 16/2018.
Then (PR 54/2010) Now (PR 16/2018)
prevailing laws and regulations. Procurement of Imported Products
Imported products could be procured if:34
the product could not be produced locally;
the technical specifications of the local product did not meet the relevant requirements; and
local products did not meet volume requirements.
Imported products may be procured if:35
the product cannot be produced locally; and
local products do not meet volume requirements. The E-marketplace
Was not regulated.
E-marketplaces are recognised as new media for electronic procurement, which provides technical infrastructure and transaction supporting services for the government and goods/services providers in the form of electronic catalogues, online stores, and provider selection.36 Price Offering Method
Did not stipulate e-reverse auction as a price offering method.
Stipulates e-reverse auction, a price offering method that is conducted repeatedly.37 Bid Bonds
Did not stipulate minimum HPS value requirements for bid bonds.
Stipulates that a bid bond is required for a construction project having a minimum HPS value of Rp10,000,000,000.38 Public Service Institute (Badan Layanan Umum)
Procurement conducted by a Public Service Institute was not exempted from this regulation.
Procurement conducted by a Public Service Institute is exempted from this regulation and will be regulated separately under a Public Service Institute Regulation.39 Dispute Settlement
In the event that the parties were unable to reach an amicable
Introduces contract dispute settlement services, established by LKPP, as one of the methods to settle contract-related disputes
34 Paragraph (9) of Article 96 of PR 54/2010.
35 Paragraph (5) of Article 66 of PR 16/2018.
36 Article 70 of PR 16/2018.
37 Paragraph (11) of Article 50 and Point 1 of Article 1 of PR 16/2018.
38 Articles 31 of PR 16/2018.
39 Article 61 of PR 16/2018.
Then (PR 54/2010) Now (PR 16/2018)
settlement, such dispute would need to be settled through:
alternative dispute settlement; or
court proceedings, in accordance with prevailing laws and regulations.40
arising between PPK and the Contractor, in addition to arbitration and court proceedings.41 Implications for contractors PR 16/2018 has significantly amended the procedures and content of PR 54/2010, and introduces new media with which to access price information (i.e. the e-marketplace). The establishment of the e-marketplace will increase public access to such price information, thereby increasing transparency of prices and competitiveness among contractors. However, contractors should also be aware of potential bid rigging collusion. If a contractor engages in bid rigging, it will be black-listed by government agencies and may be subject to prosecution by the police, the public prosecutor’s office, the Corruption Eradication Commission (Komisi Pemberantasan Korupsi, KPK) or the Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha, KPPU).
We will continue to monitor the implementation of PR 16/2018 (and the issuance of the implementing regulations) and issue further updates as more information becomes available.
40 Article 94 of PR 54/2010.
41 Article 85 of PR 16/2018.
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