Date Published: July 28, 2017, 2:28 p.m.
n order to fight corruption in public procurement processes, the government of Indonesia launched in 2008 a national programme to encourage e-procurement in all public bodies. While it has had important results, generating savings for the public institutions and reducing corruption, the use of e-procurement is still limited.
Corruption is one of the most serious problems facing public institutions in many developing countries, including Indonesia. According to Transparency International, in the year 2015, Indonesia was ranked 107th out of 175 countries comparing how corrupt countries’ public sectors are perceived to be. Many cases of corruption in public institutions in Indonesia take place in the procurement processes of goods and services. An example is collusion between contractors and public officials, resulting in poorly qualified contractors getting contracts, and therefore overpriced contracts and projects of poor quality.
The national policies on e-Government and e-procurement, called INAPROC, were initiated in 2008 with the aim of reducing bureaucracy and improving cost effectiveness and efficiency in public sector spending, as well as increasing transparency and accountability in the fight against corruption. Indonesian’s e-procurement regulations oblige all government institutions to procure goods and services electronically: while central government offices must use 75% of the allocated budget, local government offices must use 40% of their budget. The National Procurement Agency (LKPP) is in charge of formulating and improving the procurement policy; regulating the system to ensure that e-procurement processes are efficient, effective, transparent, competitive, fair, and accountable; and providing mainframe websites for all Indonesian government institutions. All government institution (Ministries, State-Owned Enterprises and local governments) has a Procurement Service Unit (ULP) which is in charge of leading the goods and services purchase digital processes. The web platforms allow local governments to centrally post requests for proposals on all of the projects it plans. Contractors can then bid on multiple projects and check who has won which ones, how much they bid, and the technical details of their proposal. The e-procurement system enables agencies across ministries, provinces and cities to track their expenses, share financial data, compare costs and prices and renegotiate where they find that others have gotten better deals.
Since the initiative begun in 2008, an increasing number of tendering processes in government institutions has been carried out through e-procurement, increasing from 33 to 98,272 tenders in 2008 and 2013 respectively. A total of 222,280 tendering processes were conducted over the period, all together totalling to $21 trillion USD (IDR 275,587 trillion). Digital procurement processes create greater transparency and accountability between government, industry and citizen along the entire contracting process. By improving market access and increasing competition between contractors, digital procurement processes enable government agencies to get lower prices, while also increasing time efficiency on the procurement process and generating cost savings by eliminating office stationery, and cutting expenses of transportation, accommodation, consolidation, and printing. The e-procurement system has had important financial impacts to national and local governments altogether. LKPP reported that from 2008 to 2013, the Indonesian government institutions have saved $26 billion USD (IDR 33.9 trillion), corresponding to 10.89%, of which $10 billion USD (IDR 13.5 trillion) worth of national financial efficiency were saved in 2013 only. In the City of Surabaya, for example, the adoption of an e-procurement system in 2008 has led to a budget saving of $ 107 million USD (IDR 1.392 billion) until September 2012, corresponding to 26.96% of its budget.
Despite the important increase in the use of e-procurement system, as of 2012, only 10.26 % of the central government institutions procurement budget and 10 % of the local governments procurement budget went through the e-procurement system, with wide variations among cities. In fact, although local governments use the system more than national governmental institutions, disparities are still important and depend from the capacity and the size of the administration. Local governments only use e-procurement to procure a small portion of their total budget: for instance, the purchase of goods and services through e-procurement of Provincial governments corresponded to 36.58 % of their budget in 2011, and increased sharply to 62.31 % in 2012. However, the regency and city government procurement in 2008-2013 only reached an average of 8.84 % of their budget. Although the national target is 40 %, it is reported that only 18 local governments are using e-procurement to procure more than 20% of their procurement budgets. Estimates indicate that, if all government agencies were using e-procurement, the government could save up to 30% of its total budget. Disparities are mainly due to the lack of telecommunication infrastructure at the level of the local government, resulting from Indonesia’s archipelagic geography (urban areas on the most-populous islands of Java and Bali have much better information access compared to other areas).
Key issues that ensured the success of e-procurement policies at local level in Indonesia include: a strong political will to fight against corruption; the adoption of basic regulations at local level and having the influential support from legislators and guidance from central government; investing in the necessary resources, mainly human (training and change in management) and infrastructure (systems, bandwidth and electricity); ensuring the autonomy of the municipal procurement service unit, to avoid risks of corruption.
For more information about the national programme on e-procurement in Indonesia: