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W&P Newsletter – Update On The New Construction Service Regulation

The Government just issued Government Regulation No. 14 of 2021 on Construction Services (“GR 14/2021”), which amends the previous Government Regulation No. 22 of 2020 on the same matter (“GR 22/2020”).

GR 14/2021, as one of the implementing regulations of the Omnibus Law, simplifies the previous regulatory framework on construction services and provides construction service providers with the guidelines for doing business in Indonesia.

Below are the key points of GR 14/2021.

  1. Omission of Construction Business License (“IUJK”)
    The Omnibus Law amends Law No. 2 of 2017 on Construction Services (“Law 2/2017”), changing the term “Construction Business License” or “Izin Usaha Jasa Konstruksi” (“IUJK”) to “Business Authorization” or “Perizinan Berusaha”. However, this change of term once raised the question of whether the intention is to merely change the technical term or to completely omit the requirement for the IUJK. GR 14/2021 eventually confirms the latter understanding, for the term IUJK is no longer found in GR 14/2021.
    The following table presents a comparison of the required construction licenses before and after the Omnibus Law.

 

Before

After
For construction companies:

  1. IUJK
  2. Construction Company Certificate (Sertifikat Badan Usaha – “SBU”)
  3. Business Identification Number (Nomor Induk Berusaha – “NIB”)
For construction companies:

  1. SBU
  2. NIB
    (omission of the IUJK)
For construction companies’ employees:

  • Work Competency Certificate (Sertifikat Kompetensi Kerja – “SKK”).
For construction companies’ employees:

  • SKK (no change)

 

  1. Role of Construction Service Development Board (“LPJK”)
    Previously, there was uncertainty on the delegation of power by the Government for accreditation and registration of construction service providers. GR 14/2021 clears up the uncertainty, stipulating that the Construction Service Development Board (Lembaga Pengembangan Jasa Konstruksi or “LPJK”) is the authorized body and is responsible for the accreditation and registration of construction service providers. In addition, GR 14/2021 also authorizes the LPJK to appoint an Expert Assessor in the case of a building failure.
  1. Construction Service Activities
    The construction service business may take the forms of the following activities: (i) consultation, (ii) implementation, and (iii) integrated services, each of which may be undertaken by a construction service provider with proper licenses.Previously, the consultation activity had to be done independently, while the implementation and the integrated services could be done collectively.

    The above policy has slightly changed under GR 14/2021. While the new regime still allows a construction service provider with an ‘integrated services’ license to concurrently provide the implementation service, yet it prohibits an ‘implementation service’ license holder from concurrently undertaking the integrated services. It carries the impression that a construction service provider is not permitted to possess simultaneous licenses for integrated and implementation services, but an ‘integrated services’ provider may simultaneously undertake the implementation activity without an additional license. Nevertheless, it seems that in practice, this is still subject to further implementing regulations or guidance from the government.

  1. Clearer Criteria for Works under Integrated Construction Services
    Under GR 14/2021, the works to be undertaken by a provider of integrated construction services must satisfy certain criteria, namely, they must be either:
    a. complex works; or
    b. urgent works, which if not implemented on an integrated basis may lead to a loss of value for money.While the above reflects a good intention by the government to clear up the previous confusion about the eligible works for integrated services, the Government has yet to provide further details on how to determine the fulfilment of any of the aspects above through further implementing regulations or guidelines.

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