Questionnaires about national (public) construction bidding

system and construction contract

I. National(Public) construction bidding system

1. Are there (What are) any legislations, administrative order or internal rules regulating
(hereinafter referred to as “Regulations”) construction bidding procedures with which
government authorities, public institutions and/or state-owned companies (“SOC”) shall
comply?

In Indonesia, the Regulations on construction bidding procedures are various depends on: (1) who the
parties are; and (2) which scheme chosen by the parties. If the counterparts are government authorities
and/or public institutions and an SOC, below classifications are applied:

a. Government Authorities and/or Public Institutions (“Government”)

1) General Construction Works

If a procurement held by the Government to choose its contractor in general construction

works for national development purpose, it subjects to Presidential Regulation No. 16 of
2018 on Government Procurement of Goods/Services (“PR 16/2018”). The PR 16/2018 was
issued on March 2018, so it is newly issued and still needs several implementation
regulations supported the procurement procedure by June 2018. The implementation
regulations would have been issued by the National Public Procurement Agency (“NPPA”),
there are several regulations were issued:

a) NKPP Regulation No. 4 of 2018 on Government Procurement of Goods/Services

Training;
b) NKPP Regulation No. 7 of 2018 on Planning Procedures of Government Procurement of
Goods/Services
c) NKPP Regulation No. 8 of 2018 on Procedures of Self-Management;
d) NKPP Regulation No. 9 of 2018 on Implementation Procedures of Procurement of
Goods/Services through Provider;
e) NKPP Regulation No. 10 of 2018 on Implementation Procedures of International
Tender/Selection;
f) NKPP Regulation No. 11 of 2018 on Electronic Catalogue;
g) NKPP Regulation No. 12 of 2018 on Procedures of Excluded Procurement of the
Government Procurement of Goods/Services;
h) NKPP Regulation No. 13 of 2018 on Procurement of Goods/Services in the Event of
Emergency Management;
i) NKPP Regulation No. 14 of 2018 on Working Unit for the Procurement of
Goods/Services;
j) NKPP Regulation No. 15 of 2018 on Performers of Procurement of Goods/Services;
k) NKPP Regulation No. 16 of 2018 on Procurement Agent;
l) NKPP Regulation No. 17 of 2018 on Blacklist Sanction of Government Procurement of
Goods/Services;
m) NKPP Regulation No. 18 of 2018 on Contract Dispute Settlement of Government
Procurement of Goods/Services; and
 n) NKPP Regulation No. 19 of 2018 on System and Policy Development of Government
Procurement of Goods/Services.

If there is any matter that is not regulated in the regulations above, all of prior Government
Procurement of Goods/Services (Presidential Regulation No. 54 of 2010) is remain valid as
long as it is not contradictory and/or has yet to be replaced by PR 16/2018.

2) Public Private Partnership (“PPP”)

In PPP project, there is a procurement process which involves bidding stage. If the project is
an PPP project, then it subjects to Presidential Regulation No. 38 of 2015 on PPP in
Infrastructure Projects (“PR 38/2015”) and its implementation regulations, these are:

a) Presidential Regulation No. 78 of 2010 on Sovereign Guarantee;

b) Ministry of National Development Planning Regulation No. 04 of 2015 on
Implementation Procedures of PPP;
c) Ministry of Home Affairs Regulation No. 96 of 2016 on Settlement of Availability
Payment;
d) Ministry of Finance Regulation No. 260 of 2010 jo. Ministry of Finance Regulation No.
08 of 2016 on Sovereign Guarantee;
e) Ministry of Finance Regulation No. 223 of 2012 on Viability Gap Fund; and
f) Ministry of Finance Regulation No. 260 of 2016 on Settlement of Availability Payment
in PPP Projects.

Other than general regulations above, the execution of PPP projects should consider the
sectoral regulations of the infrastructure that will be build.

b. SOC

If a procurement held by an SOE to choose its contractor, it specifically subjects to Ministry of

SOC Regulation No. PER-03/MBU/08/2017 on Procedures of SOC Cooperation/Partnerships
(“PER-03/MBU/08/2017”). PER-03/MBU/08/2017 regulated that all cooperation and
partnerships of an SOC subject to their internal standard operating procedures on that matter.
Hence, in order to be selected as contractor of an SOC, a company should follow the procedures
set by the SOC.

2. In respect to the Regulations in the Article 1:

1) The types/kinds of government authorities, public institutions or state-owned companies that are
regulated by the Regulations and the extent to which the Regulations reach to control their
procurement activities

2) Type of bidding procedure to apply for a specific construction project and criteria to apply a
specific type, for example:

1 Competitive bidding or not

2 (in case of competitive bidding) Open bidding or limited competitive bidding after passing a
prequalification procedure.

3 Type of construction contract to apply (Lump-Sum Turn-Key/Re-measurable with unit

price/Cost-Reimbursable/etc.)

3) Details of each type of bidding procedure from bid announcement to entering into contract (as
summarized in brief manner)
 4) How to evaluate bid for selection of successful bidder, for example:

1 Type of successful bidder: the lowest bidder or any other type, and details of each type

2 Components for evaluation: commercial, technical, compound thereof or any other

3 Alternative bids: the standards/criteria for such alternative bids

4 Any other additional explanations not included in the above questions

5) Criteria or standards of disqualification and prohibition or restriction to bidding procedure:

1 In case of bid rigging (including bid rigging committed in other countries

2 In case of any illegal actions in relation to solicitation and bribery (including illegal actions
committed for other projects or in other countries)

3 In case of termination of construction contract due to defective work or any other cause
attributable to bidder (including illegal actions committed for other projects or in other
countries)

4 Any other additional explanations not included in the above questions?

6) Requirements to apply to only foreign bidders during such bidding procedure or restrictions

3. As we know, it is generally known that even if a construction contract is made between successful
bidder and project owner or anybody, the contract in respect to which any defective decision or breach
of the Regulation during bidding procedure is found may be acknowledged defective and might be
concluded null and void. Furthermore, the bidder might lose his firm position of the contractor to such
contract and his compensation for works done under such defective contract is possible not to be
respected.

What happens in the same case occurring in KSA?

II. Besides foregoing, general aspect on construction services

1. Are there (What are) any legislations or regulations regarding construction industry and construction
contract (for examples in Korea: Framework Act on the Construction Industry, Fair Transactions in
Subcontracting Act, Construction Technology Promotion Act, Antitrust Policy, Civil Law,
Commercial Law and etc.)

2. Are there any other general requirements to doing business in construction services as a foreigner? For
examples:

1) The establishment of incorporate entity independent from its parent company in home country or
any branch office or liaison office

2) Requisite for acquiring licenses

3) Whether or not direct/indirect investment to KSA is required?

4) Whether or not partnering or cooperation with local staff or local companies is compulsory?
 5) Any other additional explanations not included in the above questions?

3. Discriminative treatment against foreign construction companies

1) If such discrimination exists, what are the major discriminative treatments in comparison to local
companies?

2) Is there any bilateral or multilateral agreement on investment including the Republic of Korea? If
so, what are the major contents in the agreement?

3) If foreign companies is treated discriminative manner by the government of Thailand or related

government body of KSA (including the case that legislation itself is discriminative against
foreign companies), are there (what are) any reliefs for those receiving discriminated treatments?

4. Is there construction supervision system that is regulated under competent law?

1) The extent to which such supervision system reaches to control construction services

2) Legal and contractual relationship among the supervisor, employer and constructions contractor

3) Authority that such supervisor is granted in general?

5. Is there public system or legislation regulating subcontract and relating issues like unfairness?

1) Are there classification and categories in construction industry? And is there registration system
or license in accordance with such classification and categories?

(for example, in Korea, there are two classifications of general construction works and
specializing construction work and, in class of specializing construction works are a total number
of 29 categories in details, including but not limited to reinforced concrete and construction
machine equipment, all categories of which are restricted construction services area beyond
which any specializing construction contractor do not work legally. Separate systems from the
construction industry exist for registration of electric and fire services.)

2) Is there any limitation or restriction in subcontracting construction works which are awarded to
contractor?

1 All portion of awarded work

2 Restriction of subcontracting to other than a specified contractor

3 Designated amount or types of works to be subcontracted compulsorily

4 Any other restrictions in relation to subcontracting

3) Are there regulations or legislations to protect subcontractor?

1 Payment guarantee provided by prime contractor

2 Requirements or restrictions on payment to subcontractor (for example, restrictions on pay

when paid / pay if paid or others)

3 Subcontractor’s entitlement to claim directly against employer who has not direct
contractual relationship therewith. If allowed, any condition required to exercise such
 4 For disputes arising in connection with subcontract, is there any special or separate dispute
resolution procedure from general civil procedure? If so, how does it work?

5 Any other subcontracting protections not explained in the above?

6. Is there any legislation or other rule to control on bidder’s engaging agent or consultant during bidding
and execution stages?

1) The acceptable activities of such agent or consultant

2) The effectiveness of awarded construction contract by engaging the agent or consultant, however,
which is found to be engaged in breach of the legislation or other rule.

7. Joint Ventures

1) The legal status of Joint Venture (or Consortium): Is it acknowledged as separate legal entity
from respective membership itself? If so (whether partly or wholly), to what extent does Joint
Venture may enjoy legal ability and competence?

2) Does concept of un-incorporated Joint Venture (UJV) is acknowledged? If so:

1 Is it possible that parties to UJV enter into internal UJV or Consortium agreement, without
consent from employer, to divide/limit the scope of construction works to be carried out by
each party and their respective liability?

2 What are the liabilities of each member of UJV or Consortium for employer? And is it
possible that such liabilities for employer are limited by putting cap of liability on each
member?

3 In case that a member of UJV or Consortiums need to enter into an agreement with a third
party (including subcontractors), shall such agreement be signed by both parties or a
representative on behalf of both?

4 What are the liabilities of member of UJV or Consortium for third parties other than
employer?

Is it possible that property of UJV or Consortium (including right and obligation arising out
of construction contract with employer) is acknowledged as separate from each member of
UJV or Consortium?

5 Is it enforceable for employer or any third party to recover its loss or damage from
individual property that belongs to each member in case of such loss or damage occurring
due to UJV or Consortium’s act or omission or each member’s activity in the name of UJV
or Consortium? Otherwise (in reverse case)?

6 Are there any other forms of Partnering other than UJV or Consortium?

III. Construction Contract

1. Is there standard construction contract which is compulsory or recommendatory to use for

construction contract (for example, in Korea, General terms of construction contract issued by the
Ministry of Strategy and Finance, and FIDIC and ENAA standard contracts for overseas projects).

1) What are major features of such standard construction contract?

 2) What principle or policy does the standard contract has on the risk allocation among Employer,
Contractor, Designer, Builder and any other?

2. Defect Liability

1) When is the counting point of defect liability period? (For example, the Framework Act on the
Construction Industry in Korea basically stipulates that the counting point of defect liability
period is either substantial completion of works or the date of commencement of actual
possession or operation by employer (whichever is earlier); however, in some countries, the
counting runs when defect remedial period is expired, which is provided for contractor complete
outstanding works remaining at the time of substantial completion)

2) What are the details of defect liability period? Is it compulsory rule? Is there any possibility to
reduce defect liability period?

3) Please explain how Decennial Liability to work (if any)

3. Payment

1) Local practice or legal regulation of payment method (Currency/Cash/Promissory Note and etc.)

2) Local practice or legal regulation about payment frequency/term between previous payment and
the next/advance payment/retention and etc.)

3) Local practice or legal regulation about measurement manner (ex, Progress/Milestone)

4) Local practice or legal regulation about payment timing (including subcontract): for example, is
there any regulation time schedule within which employer or prime contractor shall make
payment after invoicing or completion of work or part thereof?

5) Local practice or legitimate about delay of payment and delay charge(in case that contract is
silent for delay charge, contractor’s entitlement to delay charge)

6) Local practice or legal regulation about payment guarantee and security for guarantee

7) Applicability of provision of Pay-if-Paid or Pay-when-Paid (including subcontract)

8) Applicability of sovereign immunity of government or public organization in terms of payment

matter

9) Local practice or legal regulation about the liabilities of prime contractor in the event that its
subcontractor does make payment to subcontractor’s employee, discharge its obligation for tax
authority or other public organizations

4. Liability

1) Is there any perspective in local practice or legal regulation describing the principle of liability
distribution between employer and contractor?

2) Is limitation of liability applicable in local practice or in law?

3) Is it possible to specify limitation of liability on a contract?

4) If limitation of liability is specified in a contract, are there items that have to be excluded in the
limitation of liability? (For example, willful misconduct, gross negligence or indemnity)
 5) Whether or not does limitation of liability include remedial works for defect? (For example,
some commentators would say that defect liability is primary obligation of contractor so that
limitation of liability does not include, which means defect liability is good example of the
exclusion)

6) Local practice or legal regulation about compensation of consequential & indirect damages

7) Is it enforceable to compensate consequential & indirect damages incurred to the other party if
both parties enter into an agreement including the provision of such compensation?

8) It is normal understanding in English law that liquidated damages is compensation for genuine
damage as estimated upon both party considering but penalty is prohibited and not effective.
However, some jurisdictions acknowledge penalty provision agreed to be effective, which works
as compulsory and contractual mean preventing defaulting party in breach of contract from such
breach situation being remained. In this regard, both liquidated damages and penalty are
completely compatible. So, is it possible to have both liquidated damages and penalty which are
coexistence in the same contract in this country? If possible, is it possible to reduce the penalty
amount?

9) Please explain types and policies of insurances, in general, that contractor shall take out for
construction project

10) Please explain local practice or legal regulation for indemnity provision: the extent of loss,
damage and risk to which such indemnity provision covers in contract and exclusion items

5. Labor

1) Whether or not is there a quota or limitation of hiring foreign labors?

2) Please explain local practice or legal regulation regarding employment conditions of foreign
labors

3) In case of hiring local labors, are there any things that foreign bidders need to be aware of?
(Working conditions, payment conditions, day-off conditions, termination of employment
conditions and any others)

4) Please explain penalties or legal effects when violating related labor laws.

6. Please explain types of taxes for which contractor shall be liable such as corporate tax, VAT, social
security tax, personal income tax

7. Impossibility of performance (frustration/force majeure/employer’s risk)

1) Are there any other legislations or local practices enabling that contractual parties discharge of
contractual obligations or get out contractual relationship prior to completion of contract other
than voluntary agreement by contractual parties or contract termination due to default by one of
contractual parties

2) Please explain the attitude of court toward the concept of Force Majeure and acceptability about
Force Majeure provided on contract

3) Please explain the timing of risk transfer (for example, timing of transfer of care and custody
obligations) and exception to risk transfer (for example, Employer’s risk)

8. Termination/Cancellation
 1) Please explain causes of termination or cancellation of contract that legally recognized even
though contract does not expressly provide for

2) Please explain reality or the actual possibilities for contractor to exercise its right of cancellation
or termination in case that legally recognized or provided expressly for under contract.

9. Restrictions on cancellation of contract

1) Is it possible to prohibit the employer’s right to cancellation of project (restoring to the original
state) (for example, in Korea, the right to cancellation is restricted after taking-over of
construction works. However, in FIDIC standard contract, exercising the right to cancellation is
possible even after provisional acceptance (taking over) )

2) Is it possible for employer to exercise its convenient termination? If possible, where can legal
grounds be found? And, in case of employer’s convenient termination, to what extent can
contractor be compensate compared to employer’s termination for cause)

3) Any other advice not contained in the above question about rejection

10. Governing Law, Jurisdiction

1) Is it possible for parties to contract to choose the governing law?

11. Ground conditions

1) Please explain contents in legislation or local practice for risk allocations regarding to ground
conditions in project site.

2) Is it legitimate that contract shall be liable for (all or any portions) unforeseeable ground
conditions?

3) In general, according to the local practice or legislations, to what extent shall contractor be liable
for unforeseeable ground conditions

12. Variation

1) Please explain whether or not employer has a right of change to work in the middle of
construction, and is there limitation of such right of change to work?

13. Is there a principle to resolve matters which are ambiguous or not expressly agreed by both
contractual parties?

14. Lien

1) Please explain whether or not contractor is able to exercise the right to lien, also can the right to
lien be excluded by specifying on a contract agreement?

2) Please explain the range of application of lien.

15. In case that major construction project has been cancelled or terminated prior to completion, is there
legislation or regulation which is applicable to help contractor who has not been received proper
payment?

IV. Others
1. Does the New York Arbitration Convention apply? or is there any bilateral or multilateral treaty in
relation to enforceability of court judgement?

2. Please explain the credibility of court judgement in Thailand and any other things that foreign bidders
shall be aware of.

3. Please explain measures of dispute resolutions for construction project in Thailand other than court
ruling.

4. Please explain statute of limitation in construction services

5. Please explain legislations in relation to environment which give direct impacts on construction
business