R
Rural Procurement in
Indonesia
Asep Sumaryana and Erwin Sondang Siagian
Public Administration Department, Faculty of
Social and Political Sciences, Universitas
Padjadjaran, Bandung, Indonesia
Synonyms
Procurement; Regulation; Rural budget
Definition
Rural procurement is defined as activities to
obtain goods/services by the rural government,
either through self-management or through pro-
viders of goods/services whose budgets are
sourced from the rural budget and revenue.
Introduction
Indonesia has many regulations related to its pro-
curement policy. They include the following:
(1) regulation for the government public procure-
ment (regulated by Presidential Regulation
No. 16 of 2018 concerning government procure-
ment); (2) regulation for procurement of public-
private partnership (regulated by Regulation of
the Head of National Public Procurement Agency
© Springer Nature Switzerland AG 2021
A. Farazmand (ed.), Global Encyclopedia of Public Administration, Public Policy, and Governance,
https://doi.org/10.1007/978-3-319-31816-5_4311-1
(NPPA) No. 19 of 2015 concerning procurement
of business entities in cooperation with the gov-
ernment and business entities); (3) regulation for
procurement of legal entity institutions (regulated
by Government Regulation No. 26 of 2015
concerning forms and mechanisms for funding
legal entities); (4) procurement regulation for
state-owned enterprises (regulated by Regulation
of the Minister of State-Owned Enterprises
No. 15 SOE Minister Regulation PER-15/MBU/
2012); (5) regulation for procurement of regional-
owned enterprises (regulated by Government
Regulation No. 54 of 2017 concerning regional-
owned enterprises); (6) regulation for procure-
ment of goods/services in public service bodies
(regulated by Government Regulation No. 23 of
2005 concerning financial management of public
service bodies); and (7) rural procurement regula-
tion (regulated by Regulation of the Head of
NPPA No. 12 of 2019 concerning guidelines for
preparation of procedures for rural procurement as
the latest regulation). The new government policy
aimed at regulating rural procurement in Indone-
sia gives a new hope for its implementation. The
new policy for rural procurement is highly strate-
gic for two reasons: First, the number of villages
in Indonesia has reached nearly 75,000. Second,
the rural budget and revenue (APBDes) have con-
tinued to rise every year. The regulation mandates
that 70% of the APBDes is allocated for develop-
ment. The implementation of development poli-
cies relates to procurement of goods/services in
rural administrative in Indonesia.
2 Rural Procurement in Indonesia
Before the introduction of the Regulation of
the Head of NPPA No. 12 of 2019 (Perka), rural
procurement was managed through the regulation
of the Head of NPPA No. 13 of 2013 and Head of
NPPA No. 22 of 2015. There are several short-
comings in Perka No. 13 and Perka No. 22, as
there is no procurement document model such as
the agreement/contract document model, and the
model provided an example/negotiation docu-
ment model. In addition, the old regulation did
not allow the use of electronic goods/services
procurement facilities. The other shortcoming
relates to the potential conflict of interest among
rural government officials in implementation of
rural procurement. This is because the rural gov-
ernment apparatus, in addition to being a party
performing the selection of providers of goods/
services can simultaneously also play the role of
overseeing implementation of work. Some of the
shortcomings of the old regulation have been
corrected in the new regulation on rural
procurement.
General Controls
Perka No. 12 of 2019 has corrected some of the
shortcomings of the earlier regulations on rural
procurement of goods/services. As a new rule,
Perka No. 12 of 2019 defines several things,
which include the following: (1) A village is a
legal community unit that has the authority to
control and manage government affairs, interests
of the local community based on community ini-
tiatives, original rights, and/or traditional rights
recognized and respected in the government sys-
tem of the Unitary Republic of Indonesia. (2) The
rural government is the Village Head or can be
referred to by another name assisted by Village
Apparatus as an element of the rural government
organizer. (3) Rural procurement is defined as
activities to obtain goods/services by the rural
government, either through self-management or
through providers of goods/services whose bud-
gets are sourced from the rural budget and
revenue.
Furthermore, self-management is a method of
obtaining goods/services independently by the
Activity Administrator Team (Tim Pengelola
Kegiatan/TPK) and/or the local community.
Activities through goods/services providers can
be done through a direct purchase scheme
(procurement method implemented by buying/
paying directly to one provider without a written
bid request made by the Head of Section, Head of
Affairs, or TPK). The other scheme for procure-
ment of goods/services can be implemented
through a bid request (procurement method
performed by the TPK by buying/paying directly
with a request for a written offer to at least two
providers) or an auction (provider selection
method for all jobs that can be participated in by
all qualified providers).
Administrative Elements of Rural
Procurement on Goods/Services
There are two elements in the implementation of
rural procurement of goods/services: from the ele-
ments of the rural government or goods/services
providers. The elements of the rural government
include the Village Head, Head of Affairs,
Section Head, and TPK. The Village Head is a
rural government official who has the authority,
duties, and obligations to conduct the village’s
household tasks and perform duties on behalf of
the central government and regional government.
The Head of Affairs is a Village Apparatus who as
an element of the Village Secretariat staff per-
forms the tasks of the Village Financial Manage-
ment Administrator (PPKD). Furthermore, the
Section Head is a Village Apparatus who as a
technical administrator manages the Village
Financial Management (PPKD). Finally, the
TPK is a team that assists the Section Head or
Head of Affairs in performing procurement of
goods/services which, due to their nature and
type, cannot be performed alone by the
Section Head or Head of Affairs. Meanwhile, the
goods/services provider can take the form of a
business entity or individual that provides rural
needs on goods/services.
The other elements involved in rural procure-
ment of goods/services include the people of the
Government Internal Supervisory Apparatus
Rural Procurement in Indonesia
(APIP) and the Regional Head (Regent or Mayor).
The community plays a role in self-management
and oversight of procurement activities. Further-
more, the APIP is an apparatus that conducts
supervision through auditing, reviewing, monitor-
ing, evaluating, and other supervision activities
regarding implementation of duties and functions
of the government (including the rural govern-
ment). Meanwhile, the Regent/Mayor conducts
guidance for rural procurement that includes the
process of establishing Regent/Mayor regula-
tions, consultation, and technical guidance for
rural procurement.
Governance
For a public institution, the implementation of
rural procurement of goods/services must meet
good governance (Komarudin 2011). Therefore,
the principle of procurement and procurement
ethics in the implementation of rural procurement
is crucial for good governance.
The principles in implementation of rural pro-
curement of goods/services include the following
matters: The first principle is efficiency, which
suggests that procurement must be endeavored
using minimum funds and power to achieve qual-
ity and targets within the stipulated time or using
funds that have been determined to achieve results
and targets with maximum quality. The second
principle is effectiveness, which indicates that
procurement must be in accordance with the
needs and targets set while providing maximum
benefits to the community. The third principle is
transparency, which suggests that all provisions
and information regarding procurement are clear
and can be widely known by public and interested
providers. The fourth principle is openness, which
indicates that procurement must enable participa-
tion of all goods/services providers who meet
certain requirements/criteria based on clear rules
and procedures. The fifth principle is community
empowerment, which suggests that procurement
must be used as a vehicle for learning for the
community enabling it to manage the develop-
ment of their village. The sixth principle is mutual
cooperation, which means the provision of labor
3
by the community in implementation of
development activities in the village. The seventh
principle is competitiveness, which suggests that
procurement must be done through fair competi-
tion among as many providers as equal and by
meeting the requirements. The eighth principle is
fairness, which means giving equal treatment to
all prospective providers and does not result in
benefit to certain parties. The last principle is
accountability, which suggests that it must be in
accordance with rules and regulations related to
procurement, so it can be accounted for.
The next issue relates to procurement ethics.
These ethics include the following: (1) performing
tasks in an orderly manner, accompanied by a
sense of responsibility to achieve objectives,
smoothness, and accuracy in procurement of
objectives; (2) working professionally and inde-
pendently and maintaining the confidentiality of
information to prevent procurement deviations;
(3) not influencing each other directly or indi-
rectly that may result in unfair business competi-
tion; (4) accepting and being responsible for all
decisions made in accordance with the written
agreement of concerned parties; (5) avoiding and
preventing conflicting interests of related parties,
both directly and indirectly, that may result in an
unfair business competition in procurement;
(6) avoiding and preventing waste and leakage
of village finances; (7) avoiding and preventing
the abuse of authority and/or collusion; and (8) not
accepting, not offering, or not promising to give or
receive gifts, rewards, commissions, rebates, and
anything from or to anyone known or reasonably
suspected in connection with procurement.
New Control Content
There are three new regulations of rural procure-
ment on goods/services, which include the con-
flict resolution; electronic development,
supervision, and procurement; and stipulation of
land acquisition controls.
For a conflict resolution control, the first choice
that can be taken by the parties involved in a
conflict to resolve the conflict is through a delib-
eration to reach a consensus among parties. The
4 Rural Procurement in Indonesia
deliberation for this consensus is very much in
accordance with the noble values of the constitu-
tion of the Indonesian nation (the 1945 Constitu-
tion). Furthermore, if the deliberation does not
lead to consensus, the Village Head will lead the
deliberation to settle the conflict. If the delibera-
tion for consensus and the deliberation led by the
Village Head fail to achieve the desired objective,
the parties can settle the conflict through the “Pro-
curement Contract Conflict Resolution Service”
or through the legal system.
The next new control is the affirmation of the
regional apparatus organization in charge of gov-
ernance and the empowerment of the rural com-
munity as supervisor for rural procurement of
goods/services. In performing the development
function, the guiding agency concerned can
include the goods/services procurement work
unit in each local government. In addition, the
supervising agency can also consult the LKPP.
The next control is the electronic rural procure-
ment of goods/services.
The next new and significant control relates to
the affirmation that the environmental sphere of
rural procurement of goods/services does not reg-
ulate land acquisition for the benefit of the rural
area. This control also ended the polemic about
which regulations became a reference in land
acquisition for the benefit of the rural area.
Shortcomings of the New Regulation
There is one shortcoming in this new regulation. It
relates to the use of the Regulation of the Minister
of Home Affairs No. 20 of 2018 concerning
the management of village finances in one of the
considerations to establish the Regulation of the
Head of NPPA No. 12 of 2019. If the Minister of
Home Affairs Regulation No. 20 of 2018 is
revised or revoked, the Head of LKPP Regulation
No. 12 of 2019 must also be revised or revoked. In
addition, the legal position of the Minister of
Home Affairs Regulation No. 20 of 2018 and the
Regulation of the Head of LKPP No. 12 of 2019 is
equal, so the Minister of Home Affairs Regulation
No. 20 of 2018 should not be considered in the
Head of LKPP Regulation No. 12 of 2019.
Conclusion
Although there is one shortcoming in the Head of
LKPP Regulation No. 12 of 2019, in general, the
content in this regulation has resolved several
issues that could not be done through previous
rules. Resolving these issues is critical, so the
implementation of rural procurement of goods/
services can be in accordance with good
governance.
Cross-References
▶ Green Procurement Awareness
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The 1945 Constitution