A new regulation has introduced significant changes to the implementation of Indonesia’s Construction Services Law, which will affect business actors in the country’s construction sector.
The new regulation, Government Regulation Number 22 of 2020 (“GR 22”) regarding Implementing Regulations of Law Number 2 of 2017 regarding Construction Services (January 12, 2017) (the “Construction Services Law”), was promulgated on April 23, 2020. With the enactment of GR 22, the following regulations have been revoked and are no longer applicable:
- Government Regulation No. 28 of 2000 regarding the Business and Role of the Construction Services Community (May 30, 2000), as lastly amended by Government Regulation No. 92 of 2010 (December 29, 2010) (“GR 28/2000, as amended”);
- Government Regulation No. 29 of 2000 regarding the Implementation of Construction Services (May 30, 2000), as lastly amended by Government Regulation No. 54 of 2016 (November 22, 2016) (“GR 29/2000, as amended”); and
- Government Regulation No. 30 of 2000 regarding the Implementation of Construction Services Supervision (May 30, 2000) (“GR 30/2000”).
This article looks at the Business Entity Certificate requirement for construction service providers in Indonesia under GR 22, as well as the appointment of construction service providers for state-financed projects.
Business Entity Certificate (“SBU”)
In providing construction services, construction service companies must obtain an SBU issued through a certification and registration process overseen by the Minister of Public Works and Housing (“MPWH”). It appears that the certification and registration process will be performed by two separate institutions.
GR 22 provides that the certification process will be carried out by a Business Entity Certification Institution (Lembaga Sertfikat Badan Usaha Jasa Konstruksi or “LSBU”) that is established by an accredited business entity association. MPWH Regulation No. 10 of 2020 regarding the Accreditation of Construction Services Business Entity Associations, Construction Services Professional and Construction Supply Chain-Related Associations (April 6, 2020) (“MPWH Reg. 10/2020”) provides that an LSBU is an institution that implements business entity certification activities and is formed by an accredited construction services business entity association and licensed by the Construction Services Development Agency (Lembaga Pengembangan Jasa Konstruksi or “LPJK”). It further provides that an accredited construction services business entity association refers to an association of construction services companies that has been accredited by the LPJK pursuant to MPWH Reg. 10/2020.
GR 22 stipulates that the registration process will be carried out by an institution established by the MPWH. At present, the registration process is still being carried out by the Current LPJK. We expect that the New LPJK will take over this role once it is formed.
Based on an informal consultation with an LPJK official, pre-existing SBUs shall remain valid until their expiry date.
Determination of Service Providers for State-Financed Construction Projects
Pursuant to the Construction Services Law, the appointment of construction service providers is subject to certain rules, which are now elaborated by GR 22. GR 22 stipulates that the appointment of construction service providers that are financed by the state shall be done through one of the following methods:
- tender or selection;
- direct appointment;
- direct procurement; and
- procurement through electronic catalog.
The procurement of construction services is further governed by MPWH Regulation No. 14 of 2020 regarding Standards and Guidelines for Construction Procurement Through Service Providers (May 18, 2020) (“MPWH Reg. 14/2020”). Please note that MPWH Reg. 14/2020 only applies to construction services procured through direct procurement, limited tender, tender/selection in ministerial or state bodies, or regional bodies that are financed by the state.
GR 22 does not address the selection of construction service providers for private construction projects.
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