The Bill on Construction Services

The Bill on Construction Services

Background

On 15 December 2016, the House of Representatives of Republic of Indonesia agreed to pass the Bill on Construction Services into the new Law on Construction Services ("Bill Construction Law "). The Bill Construction Law is still waiting the consent from the President of Republic of Indonesia.

The Bill Construction Law is made since the Law Number 18 of 1999 on Construction Services ("Old Construction Law") is unable to meet the demands and dynamics of the execution of construction services business, as it has problems in facing the challenges of free trade, the business field which is not yet in accordance with the needs of business competitiveness, the diversity of competency standards and the lack of competitiveness of human resources as well as the high incidence of construction work failure and building failure.

The Bill Construction Law has broadened the scope of the Construction Services’ business fields, which now includes assessment, planning, design, manufacture, operating, maintenance, demolition, reconstruction, and/or supervision.

As below are some provisions regulated under the Bill Construction Law, as follows:

Business License

Business License is a license granted to a business entity or sole proprietorship to carry out Construction Works. The Bill Construction Law emphasizes that the business of construction services that is conducted by individuals and business entities must have a Business License. Business License is given only to the sole proprietorship or business entity that has a certificate in accordance with the business classification and qualification.

Business Certification

Classification’s and qualification’s certification of construction services business is given by the Board of Accreditation and Certification of Construction Services. The Board of Accreditation and Certification of Construction Services has the duty and authority that includes: (a) carry out accreditation of business entities associations and professional associations; (b) certifying business entities; (c) nullify the accreditation of business entities associations and professional associations; (d) nullify the certificate of a business entity; (e) make decision upon objection of the result of the accreditation and certification; and (f) submit the business entities certification data to the development and community institute through the information systems.

Construction Workers

A construction worker who carry out activities in the field of construction services is required to have a Registration Letter. To obtain a Registration Letter, construction workers must have a Work-Competency Certificate. Work-Competency Certificate is obtained after passing the Competency Test which is conducted by professional certification institute. Service Providers are required to have a certified construction workers.

Foreign Business Entities and Foreign Individual

Foreign business entities or foreign individuals who work in Indonesia must: (a) have Business Certification and Business License in Indonesia; (b) establish operational cooperation and/or capital cooperation with qualified national business entities of which have been certified; (c) prioritizing more Indonesian workers than foreign workers; (d) has a high-tech, cutting-edge, efficient, environmentally sound techonology which pays attention to local wisdom; and (e) conduct technology transfer process.

Financing

The Bill Construction Law asserts the obligation of Service Users to provide guarantee of payment and to give payment upon the submission of the Service Provider’s work result in accordance with the Construction Work Contract. Service Users are required to have the ability to pay and are responsible for the cost of construction works. Implementation of construction works can be financed by government, private and / or community as Service Users.

Construction Safety Standards

So as to ensure the orderly implementation of construction works, the implementation of construction works must meet the Construction Safety Standards, which includes: (a) engineering, including the public safety requirements, building construction, geographical conditions prone to earthquakes, quality of work, quality of materials and/or building components, and quality of equipments; (b) security, safety, and health of construction workplace; (c) social protection of labors/workers in the construction works implementation; and (d) local environmental governance and environmental management.

Construction Work Failure and Building Failure

If  the implementation of construction works do not meet Construction Safety Standards, Service Users and/or Service Providers may become the party responsible for the construction work failure and/or building failure. Construction work failure and building failure shall be determined by an expert appraisal which is appointed and asssigned by the development intitute. The development institute shall designate and assign an expert appraisal no later than 1 (one) month after the receipt of the report on the occurrence of construction work failure and building failure.


Rahmaddiar Ibrahim, S.H 

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