| Year of assessment | 2023-2024 |
| Date of publication | July 2024 |
| Country procurement volume | 70.8 billion USD (2020) |
| Principal organisation | National Public Procurement Agency (LKPP) |
| Main partners | World Bank, Asian Development Bank (ADB), Islamic Development Bank (IsDB) |
Indonesia
Recognizing the central role that public procurement plays in public service delivery, financial management, and sustainable development, this MAPS assessment for Indonesia resulted in recommendations targeting the harmonization of procurement regulations, strengthening institutional capacity and procurement performance monitoring, enhancing market competition and value-for-money assessments, improving e-procurement systems, and reinforcing anti-corruption and accountability measures.
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Quick facts
Background
Motivation and goal:
- Assess Indonesia's public procurement system after decades of reform and align it with international best practices.
- Address challenges such as regulatory gaps, inefficiencies, and corruption risks.
Initiator: Government of Indonesia (GoI), represented by LKPP, with support from development partners.
Procurement system description:
- Decentralized, governed by Presidential Regulation No. 16/2018 and its 2021 amendments.
- Utilizes SPSE, an electronic procurement system, but lacks integration with financial systems and advanced data analytics.
- Some procurement activities, such as those by State-Owned Enterprises (SOEs) and under self-management (Swakelola), are outside the primary regulatory framework.
Other relevant details:
- This is Indonesia's first MAPS assessment, following years of incremental reforms.
- Conducted during the COVID-19 pandemic, which introduced delays and heightened the importance of emergency procurement measures.
Main results and impact
Fragmented Legal Framework and Gaps in Procurement Regulations
- Issue: There are inconsistencies in the application of procurement laws, particularly in the use of Swakelola (self-managed procurement) and procurement by State-Owned Enterprises (SOEs). These inconsistencies create an uneven playing field.
- Recommendations:
- Conduct a critical review of Swakelola procurement to assess its impact on value-for-money outcomes.
- Introduce clear rules and guidelines for SOE participation to ensure fair competition.
Lack of Accessibility to Procurement Regulations
- Issue: Procurement-related legal documents are not easily accessible, making it difficult for stakeholders to navigate the legal framework.
- Recommendations:
- Improve the organization and accessibility of procurement legal framework documents through an online search platform.
- Centralize procurement regulations, guidelines, and related anti-corruption policies for easy reference.
Weak Procurement Performance Monitoring and KPIs
- Issue: The procurement system lacks a comprehensive performance measurement framework, with only a few Key Performance Indicators (KPIs) currently in use.
- Recommendations:
- Develop a structured performance monitoring system with a robust set of KPIs covering efficiency, competition, and compliance.
- Improve data analytics capabilities to support procurement policy decisions.
Limited Integration of Procurement Planning and Budgeting
- Issue: The procurement planning process operates in silos, leading to inefficiencies in budget execution.
- Recommendations:
- Improve coordination between procurement planning and budget execution to align resources with actual procurement needs.
- Implement integrated monitoring tools to enhance procurement efficiency.
Excessive Use of Non-Competitive Procurement Methods
- Issue: Non-competitive procurement methods, such as direct awards, are frequently used, limiting market competition.
- Recommendations:
- Restrict the use of direct awards and require justification for non-competitive procurement methods.
- Encourage competitive bidding practices through improved procurement planning.
Lack of Standardized Bidding Documents for Complex Projects
- Issue: Indonesia lacks standardized procurement documents for Design-Build, EPC (Engineering, Procurement, and Construction), and Turnkey projects.
- Recommendations:
- Develop and implement standardized bidding documents for large and complex projects to ensure consistency and fairness.
Limited Use of Value-for-Money and Sustainability Criteria in Procurement
- Issue: Procurement decisions are often based on the lowest-price criterion, rather than sustainability and long-term value-for-money assessments.
- Recommendations:
- Expand the use of life-cycle costing and sustainability criteria in procurement evaluations.
- Develop technical guidance for procurement officials on integrating value-for-money considerations.
Weak Oversight and Enforcement of Procurement Audits
- Issue: Procurement audits are not systematically enforced, reducing the effectiveness of oversight mechanisms.
- Recommendations:
- Issue clear standards and procedures for procurement performance audits.
- Strengthen the enforcement of audit recommendations by integrating findings into procurement decision-making.
Lack of Public Awareness and Reporting on Procurement-Related Corruption
- Issue: There is a reluctance to report procurement-related fraud and corruption, and data on procurement-related corruption cases is limited.
- Recommendations:
- Align Indonesia’s corruption definitions with UNCAC (United Nations Convention Against Corruption) to strengthen legal clarity.
- Improve public awareness campaigns and establish better mechanisms for tracking and reporting procurement-related fraud.
Limited Involvement of Civil Society in Procurement Oversight
- Issue: The legal framework does not sufficiently involve Civil Society Organizations (CSOs) in procurement monitoring.
- Recommendations:
- Introduce specific legal provisions to enable CSO participation in procurement oversight.
- Establish mechanisms to incorporate CSO feedback into procurement policy decisions.