Legal Aspect of Construction Services According to Law No. 18 of 1999 – Indonesia

Construction services hold a very important and strategic role in achieving various aims in order to support the objectives of national development to realize a fair and prosperous society both materially and spiritually based on Pancasila and the 1945 Constitution. Therefore, it is necessary to arrange a specific regulation of construction services, which is now set under the Law Number 18 of 1999 on Construction Services (“Construction Services Law”).

Overview of Construction Services
Construction services is consultancy services of construction work planning, services of construction work performance, and services of construction work supervision. The parties in a construction work consist of service user and service provider. Construction services are carried out by the construction services provider, in the form of individuals or business entities. Construction services that carried out by individuals as the service provider can only perform the low risk construction work, with simple technology, and low cost. Meanwhile, the high risk construction work and/or high technology and/or high cost can only be performed by limited liability companies or the equivalent foreign corporations.

License for Construction Services Provider
Construction services provider in the form of business entities shall (i) comply with the provisions of business license in the field of construction services; (ii) possess certificate, classification, and qualification of a construction service company. A classification and qualification standard of proficiency is an acknowledgment of the proficiency level of every business entities both national and foreign in the field of construction services business. Such acknowledgment is obtained through a test(s) carried out by an institution assigned to perform it. The process of obtaining such acknowledgment is through a registration activity comprising classification, qualification, and certification. Therefore, only certified business entities that are permitted to work in the field of construction services business.

The business license of construction services has been further stipulated in Article 14 of Government Regulation Number 28 of 2000 on Business and Society of Construction Services Role (“PP 28/2000”) jo. Government Regulation Number 4 of 2010 on Amendment of PP 28/2000 and Decree of Minister of Settlement and Regional Infrastructure Number 369/KPTS/M/2001 on Guidelines of Licensing for National Construction Service Business.

Construction Work Binding
Binding in construction services work relationship is established based on the healthy competition principle in the selection of service provider through public or limited tender, and in certain conditions, the selection of service provider may be carried out through direct selection or direct appointment. The selection of service provider shall consider the conformity of field business, the balance between capability and workload, and performance of the service provider. Business entities owned by the same person or a group or in the same management are not entitled to join the tender for one construction simultaneously. The procedure of service provider selection has been further stipulated in Government Regulation Number 29 of 2000 on Construction Services Performance (“PP 29/2000”) jo. Government Regulation Number 59 of 2010 on Amendment of PP 29/2000.

Construction Work Contract
The regulation of work relationship between the service user and the service provider shall be set forth in a construction work contract. A construction work contract is made in Bahasa Indonesia and with regards to construction work contract with foreign parties, it could be made in Bahasa Indonesia and English.

As a minimum, a construction contract shall consist of description on (i) the parties; (ii) work description; (iii) liability and/or maintenance period; (iv) experts; (v) rights and obligations; (vi) terms of payment; (vii) event of default; (viii) dispute settlement; (ix) termination of the construction work contract; (x) force majeure; (xi) construction failure; (xii) workers' protection; (xiii) environmental aspect. In relation to construction work contract on planning works, it shall contain provision of the intellectual property rights.

The description of work description comprises scope of work, work value, and the performance time limit. The scope of work comprises (a) work volume, is the amount of work to be performed; (b) administrative requirement, is a procedure that had to be complied with by the parties in conducting interaction; (c) technical requirement, is the technical provisions that had to be complied with by the service provider; (d) liability or guarantee, is a form of protection, among others for work performance, receipt of the down payment, accidents of workers and the society; (e) report of the result of construction work, is the result of work progress set forth in a written document.

Value of work, is the amount of costs to be received by the service provider of the performance of the entire work scope. The performance time limit is the period of time to complete the entire work scope including the maintenance period.

The Society and the Construction Services Society Roles
The society has roles in the performance of construction work, such as (i) supervising, to realize the orderly performance of construction work; (ii) receive a reasonable compensation for losses that occurred directly due to the performance of such construction work; (iii) maintain order and comply with the prevailing provisions in the aspects of construction work performance; (iv) participate in preventing any construction work that endangering the public interest.

The construction services society is a part of the society having its interests and/or activities related to construction services business and work. The construction services society is carried out through a construction services forum, performed by an independent and self reliant institution. Such forum has and upholds their code of professional ethics. The role of the construction services society has been further stipulated in PP 4/2010.

The Government Role
The government also has a role in the performance of construction work, that is conducting the development of construction services. Such development is carried out in the form of regulating, empowering, and supervising. The regulating function is carried out by issuing laws and regulations and technical standards. Meanwhile, the empowering function is performed on construction services business and on the society in order to develop its conscience of rights, obligations, and its roles in the performance of construction services. Furthermore, the supervising function is performed on the performance of construction work in order to ensure the realization of orderly construction services in accordance with the prevailing laws and regulations. The performance of the development may be carried out together with the construction services society. Such development has been further stipulated in Government Regulation Number 30 of 2000 on Performance of Construction Services Development.




Class Action
There is a possibility that the society suffers losses due to the performance of construction work. Therefore, the society has a right to file a class action. A right to file a class action means a right of a small group of the society to act on behalf the society in large numbers that has suffered losses, based on the same issues, legal factors, and conditions due to the losses or disruption as the result of the construction work performance.

Sanction
The administrative sanctions may be imposed for the violation of Construction Services Law, in the form of (i) written warning; (ii) temporary termination of construction work; (iii) restriction of business activities and/or profession; (iv) temporary prohibition on the use of the construction work result (limited to the services user); (v) suspension of business and/or profession license; (vi) revocation of business and/or profession license. In addition to the administrative sanctions, the performer of the construction work may be subject to a sentence of a maximum 5 (five) years imprisonment or subject to a fine sanction in a maximum of 10% (ten percent) of the contract value.

Helen Taurusia, SH


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Legal Aspect of Construction Services According to Law No. 18 of 1999 – Indonesia
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