4.1. Organizational and Staff Capacity i. Procurement Department
10-23. The Directorate of Human Settlement (DGHS) has a dedicated procurement unit (ULP).
The setup and the staff strength of ULP are found to be adequate to cater to the current needs of ongoing projects at national level.
10-24. All the staff in procurement division are accredited with certificate of proficiency in procurement by the national procurement agency (LKPP) and conversant with national procurement laws.
10-25. The proficiency of the staff in verbal English is reasonably good, but most do not have good skills in written English. This lack of proficiency in English language will pose a constraint in procurement and implementation of an ADB assisted project.
10-26. The staff of ULP and SATKER Strategik usually receive internal training on procurement, but they require specific training on procurement for ADB Loan projects. An extensive training program by the Capacity Development Consultant, to IA and IUs including the cadres of SATKER at provincial levels is recommended to develop the procurement capacity on a sustainable and national basis. The training by Capacity Development Consultant and support of the Procurement Agent will be a key input in mitigating the risks in procurement. The consultant for capacity building will be recruited under a separate contract with ADB Grant, prior to initiating any procurement activities.
ii. Project Implementation Agency
10-27. The organization of MPWH is well structured and well reputed for its efficient functioning.
However, due to its heavy workload, the Ministry may face resource constraint to deal with new large and complex projects. Both the EA and IA have strong audit arrangements in place and anticorruption agencies also operate at each level. Training in ADB procurement guidelines have been provided in the past and IRM of ADB has a programme to conduct more training programme in the future.
10-28. The weakness is that the IA and IU have very limited experience in procurement of multilateral funded projects including ADB and have no experience in Design-Build contracts.
Working with Procurement Agent and international project implementation support consultants (PISC) and extensive training on procurement at the initial stages, by the capacity development consultant, will mitigate the risks attributable to limited experience on ADB funded projects.
10-29. DGHS uses the national guidelines for public procurement, but the guidelines need to be modified to suit the requirement for ADB assisted projects.
4.2. Information Management
10-30. Procurement records are kept in a systematic manner and warranty periods are tracked on regular basis. The key documents related to procurement process (original contracts, bid evaluation reports, bid documents, contract administration papers) are maintained at least for 10 years. Both the hard copy and soft copy of all the documents related to procurement and contract administration are maintained. After 10 years the hard copies of records are transferred to the separate stores, for maintaining record by the Ministry, The risk assessed is low.
4.3. Procurement Practices
i. Procurement of Goods and Works
10-31. DED consultants for ESP will prepare the bid documents for procurement of Goods and Works. Their performance will be monitored by DGHS and ULP. Both the IA and IU at national level have past experience, but limited, on procurement for foreign assisted projects.
10-32. DGHS and Satker follow very sound procurement practices, established by the Ministry.
Most of the bidding and contract awarding activities are controlled by e-procurement systems.
MPWH is pioneer in developing and following an efficient e-procurement system in Indonesia.
Late bids are not accepted and the e-procurement system automatically blocks them. The minutes of meetings and the award decisions are uploaded in the website.
10-33. The evaluation of bids are carried out by POKJA-an ad hoc committee, established by ULP, under a Decree. All the evaluators are procurement professionals, certified by LKPP.
10-34. The Ministry has a sound complaint address mechanism and complaints are resolved through e-procurement system within a short period not exceeding 7 to 10 days.
10-35. It is reported that, the time taken to finalise a contract for foreign assisted projects is discernibly more than that for national funded projects. The reasons for delay, as stated by IA, are attributable to the delay in approval of the bid documents and bid evaluation report by the funding agencies.
ii. Procurement of Consulting Services
10-36. The ULP and IA have past experience in recruitment of consultants mostly for government funded projects. They have very limited experience in ADB, World Bank and JICA funded projects. Recently they prepared bid document on Design-Build contract for Jakarta Sewerage system, funded by JICA. But the bidding is yet to be processed as the project is scheduled to take off in early 2019 and therefore the procurement performance is yet to be tested.
10-37. DGHS mostly uses QCBS method for recruitment of consultants. Both the technical and financial criteria are determined by the recruitment selection committee in advance and included in the TOR. The selection committee is formed with appropriate individual professionals.
10-38. The technical and financial proposals are submitted in separate sealed envelopes. The sealed envelopes having financial proposal is opened publicly only after the results of the technical evaluation is announced through website.
10-39. SATKER Strategik, responsible for recruitment of consultants, informed during the interview that they need specific training on procurement for ADB Loan projects. Development of procurement capacity through comprehensive training by the capacity development consultant is recommended to mitigate the risk.
4.4. Effectiveness
10-40. The current institutional arrangements are assessed to be fairly adequate in supporting the national procurement procedures. However the issues of open competition still remains a concern. While there are a number of capable national contractors in Indonesia to carry out large civil works, the past experience reveals that national contractors could not demonstrate technical and management capability in executing large city sewerage system projects satisfactorily.
Therefore, international contract bidding for some contract packages, depending on the complexity of the contract, may be an effective option. Though the risk assessed is medium, procurement effectiveness can be enhanced with the support of project implementation support consultant for SSDP and compliance of ADB’s procurement procedure.
4.5. Accountability Measures
10-41. Accountabilities and allocation of responsibilities are well defined and covered under national laws. DGHS, as Executing Agency (EA) will be responsible to oversee the project in details, and IA will be responsible for project implementation with the support of the implementation support consultants. DGHS in the past has experience in procurement of contracts funded by World Bank, JICA and ADB, and therefore conflict with ADB’s accounting
procedure is not anticipated. Audit mechanism is already in place in MPWH, but the frequency and level of procurement audit by DGHS could not be confirmed.
4.6. Strengths
10-42. The Ministry of Public Works and Health is extensively using the e-procurement system.
All the Directorates under MPWH are now conversant with e-procurement system for procurement of goods, works under national and local budget. The data center unit (PUSDATA), located at the office of the Secretary General manages the e-procurement system. This in general, has improved the procurement performance and transparency
10-43. National Procurement Law is in force and DGHS follows the law judiciously.
10-44. The audit division in MPWH is active and also the complaint mechanism is in place through e-procurement system, which is an effective step to restrict corruption and promote transparency.
10-45. The Procurement unit (ULP) is staffed only with certified professional cadres and ULP works directly under Secretary General. Head of the procurement department has more than 15 years of experience and is familiar with national procurement rules and regulations, including procurement practices for foreign agencies funded projects. The operational, oversight and supervision functions are consistent with the best practices of procurement.
10-46. Record keeping is practiced in an efficient manner.
10-47. As per national law on procurement, persons with conflict of interest are not involved in related project procurement.
10-48. Bids are opened in public. Late bids are not opened and are rejected.
4.7. Weaknesses
10-49. The DGHS’ procurement cadres lack sufficient experience with procurement of foreign financed projects and they are not familiar with the ADB procurement procedures.
10-50. The staff in general has limited English language skills, which is a major constraint for the IA and IUs in communicating with international consultants/contractors and ADB; and having control over documents provided by the bidders and other parties.
10-51. The current workload in the IA and IUs is high, and especially their commitments on ESP procurement make them more overloaded. This may make the PLP under-resourced for SSDP procurement.
10-52. The DGHS does not have knowledge on procuring Design-Build contracts.