Procurement is one of key aspects in the Government's efforts to improve service delivery and governance. It encompasses every aspect of the service delivery processes from determining the need for goods, works or services to timely procure and delivery.
Procurement reform in Indonesia, which has been initiated since 1999, is one of the critical agenda in reducing state budget leakage. It is intended to enhance public procurement system to achieve openness and transparency. The reform is also intended to improve integrity and accountability through a more efficient and effective procurement process. The TA will support the Country Strategy and Program of good governance, which is a central pillar of ADB?s assistance to the country. This is in line with one of the policy actions proposed under the ADB program Loan in 2009, the Fifth Development Policy Support Program (DPSP-5). In addition, the TA will support the Government's efforts to comply with the Paris Declaration on Aid Effectiveness, in which one of the core improvements is strengthening country procurement system, as a safeguard for the use of country system (USC).
Initially, the significant achievement of the reform efforts was the issuance of Presidential Regulation (PerPres) No. 106 in late December 2007 to establish the National Public Procurement Agency (NPPA). The PerPres mandates NPPA as the only government institution responsible for:
(i) development of a national procurement policy and strategy;
(ii) development of systems to support the delivery of procurement services;
(iii) monitoring and evaluation of the performance and delivery of procurement services;
(iv) development of an adequate supply of qualified human resources and certification of procurement staff;
(v) development of the agency as the principal source of legal, professional and technical advice and support to practitioners on all procurement-related matters, and
(vi) establishment of an independent Procurement Complaints and Disputes Resolution Body.
The NPPA is still in infancy, and the Perpres is not yet mandatory for all government ministries and agencies, and state-owned enterprises. A number of basic policy and procedures for enforceable procurement system are not clearly defined in procurement decrees or regulations. The various applicable laws, decrees and regulations create confusion due to overlapping jurisdictions. There is, thus, a dire need to standardize the procurement system specifying clear basic principles and policies, and enforceable role of NPPA to apply it to all levels of government.
The TA's ultimate goal is development of policies and reforms. The main goal can be achieved if the institution is able to develop an accountable procurement system. An accountable system could be developed if procurement staff are well-equipped with procurement knowledge and best practices.
To respond to the above challenges in meeting the main goal, ADB recommends that the NPPA build its institution, through an effective system with adequate capacity. The intention to build the NPPA as an effective and sound institution, with adequate capacity, is to strengthen the NPPA's role as the only institution responsible to develop and formulate all government procurement policy for a nation-wide implementation. In strengthening its role, the current PerPres for the NPPA needs to be supported by a higher legal framework than the current Perpres itself. This will be achieved through the development of Government Regulation (PP-Peraturan Pemerintah) that will enforce all government administrations nation-wide to use a standardized procurement system established by the NPPA. In enforcing all government administrations nation-wide to use a standardized system, the NPAA needs to establish a procurement system that is accountable and transparent. The enforcement of a standardized procurement system to all government administrations nation-wide aims to improve the fiduciary risk management, which would reduce the opportunities for corruption or collusion between public officials and vendors.