Implementing Regulation on the Utilization of Domestic Goods and Services in Government Procurement

Minister of Industry Regulation No. 15/M-IND/PER/2/2011 on Guidelines on Utilizing Domestic Goods and Services in Government Procurement (‘Regulation’) has been issued in order to implement Presidential Regulation No. 54 of 2010, which obligates the utilization of domestic goods and services in government procurement. Article 96 (1) (a) of the Presidential Regulation obliges the maximization of utilization of domestic goods and services (including design and engineering) in government procurement.

The Regulation applies to any procurement of goods/services conducted by ministries, institutions, regional working units, or other institutions that utilize the State or Regional Revenue and Expenditure Budget (APBN/APBD), including Bank Indonesia, state owned legal entities, state/regional owned enterprises, and cooperation contract contractors financed by cooperation between the government and a business entity (Article 2).

In procurement, the domestic goods and services utilization is measured by Domestic Component Level Rate (Tingkat Komponen Dalam Negeri or TKDN), which is calculated by referring to the inventory list issued by Minister of Industry, for each good, service, or their combination. Further, besides the utilization of domestic goods and services, government procurement also has to maximize work opportunities for micro and small businesses and small cooperatives. In procurement, this is recognized as the Company Utilization Point (Bobot Manfaat Perusahaan or BMP), awarded to a company that utilizes micro and small businesses and small cooperatives (through partnership or community development) in its investment activities.

If there is any objection to the calculation of TKDN, it can be verified and evaluated by an independent surveyor institution appointed by the government (Articles 13 (1) and 15). Such verification can be conducted either during or after the project is completed.

In addition to the government’s efforts in maximizing domestic goods and services utilization, the government is also establishing a utilization domestic goods and services development team, whose duty is to, among others, to coordinate, supervise, and evaluate the procurement implementation guidelines in each of the government institutions (Article 18). This team will serve for a period of 1 year, which could be further extended (Article 27). Every year the Minister of Industry will evaluate and rank the heads of government institutions, Bank Indonesia, state owned legal entities, state/regional owned enterprises, and cooperation contract contractors.

The Regulation has been in force since 21 February 2011.