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6 July 2020 (closed)
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Recently, the Indonesian Government issued Government Regulation number 54 of 2016 (Regulation) which is the third amendment of Government Regulation number 29 of 2000 on Construction Service. The Regulation amends the procedures regarding national strategic projects, aiming to expedite the realization of these projects. In this column, we discuss the amendments made by the new Regulation which relate to the direct appointment of Regional-Government Owned Companies (Badan Usaha Milik Daerah - "BUMD") by the regional government.
National Strategic Projects
A national strategic project must fulfill the following requirements:
- The implementation is performed by the central government, regional governments and/or business entities;
- The project must increase growth and ensure an even distribution of development in order to improve public welfare and regional development; and
- The project has been stipulated through a presidential regulation.
Appointing Construction Service Providers
Construction service providers can be divided into three parties, namely (perencana konstruksi), contractors (pelaksana konstruksi) and supervisors (pengawas konstruksi). These parties can be appointed using one of the following methods:
- General auctions, which are publicly announced through for example news paper or online media;
- Limited auctions, which are publicly announced, however the providers are required to pass a qualification stage;
- Direct procurement, in which case there are at least three bidders and where the provider is appointed after completion of direct negotiations;
- Direct appointment, in which case there is only one bidder which is directly appointed.
The new Regulation now allows local governments to appoint construction providers through direct appointment for any national strategic project.
Sub-Appointment of Other Parties by Appointed BUMDs
After the regional Government appointed a BUMD through direct appointment, a BUMD can sub-appoint the following parties:
- Another BUMD or their subsidiaries; and/or
- State owned companies or their subsidiaries, which are also know as BUMN (Badan Usaha Milik Negara)
Under the previous regulations, direct appointment by the regional government was not allowed.
This column is provided by PNB Law Firm Jakarta