Infrastructure procurement risks: What data-led analysis reveals in Indonesia

Visit Indonesia Corruption Watch for a more detailed analysis of Indonesia’s infrastructure procurement data.

Wasteful spending is common in infrastructure projects, and global demand far outstrips investments in the sector. But governments can earn investors’ trust and make infrastructure funds go further by publishing accessible data on how projects are planned, managed and executed. At the project level, having open data about infrastructure procurement allows the myriad of people involved in these complex projects – such as planners, project managers, engineers, and surveyors – to coordinate effectively and spot potential issues early. At the sector level, it allows governments to set better laws and policies, and take action when the rules are broken.

The value of such information is well illustrated by an analysis of Indonesia’s infrastructure contracting data conducted by the civil society organization Indonesia Corruption Watch (ICW). To understand what the data reveals about Indonesia’s infrastructure procurement practices, ICW calculated a range of common indicators using methods developed by the open contracting community. This means similar analysis can be conducted in other countries where contracting data is published in the Open Contracting Data Standard (OCDS) format (more on that later).

One of the world’s largest economies, Indonesia spent more than US$12 billion on infrastructure in 2020, accounting for about half of all its public tenders. Infrastructure development is one of the government’s top priorities but a daunting task in a mountainous archipelago nation with some of the biggest cities as well as some of the most remote islands on earth. 

As this year’s G20 president, Indonesia has been a global leader in advocating for digital transformation in the public sector, and while it’s mandatory for all infrastructure projects with a public budget to be awarded through e-procurement, ICW’s research reveals gaps in the government data that stifles competition, and could lead to inefficiencies in the spending and delivery of infrastructure projects. 

Notable gaps include a lack of detail in most tender notices (about 70%), which inhibits suppliers’ understanding of projects, particularly new entrants to the market, and means government agencies are less likely to hire the best people for the job and monitor projects effectively. No data is recorded on the reason for canceled tenders, which account for about 20% of infrastructure contracting procedures. Nor is there a record of which projects rely on subcontractors, which makes it difficult to track the project and all responsible parties from start to finish.

The analysis also revealed concerning tendering practices, such as a large share of projects (10%) starting in the last quarter of 2020, potentially to spend allocated budget funds before the end of the financial year. In these cases, contractors have less than three months to complete these single-year projects, which is likely to affect the quality of work. Moreover, the state-owned-enterprises that won some of the most valuable contracts have questionable records, suggesting vendors’ past performance is not adequately being taken into account in the tendering process. The average tender duration is around one month, which is on the short side for competitive tenders in infrastructure projects. Finally, for one in four infrastructure deals in 2020, the award value was considered high risk (defined as a contract value below 80% and above 99% of the tender value).

Around 20% of tenders were canceled in 2020. Source: Opentender

Days between tender start date and award date in 2020. Source: Opentender

ICW carried out the analysis to assess how useful Indonesia’s existing infrastructure data is, and how red flags methodologies can be applied to understand corruption risks in infrastructure projects and procurement. The data covered infrastructure tenders carried out in 2020, and was accessed via the infrastructure dashboard on ICW’s Opentender.net platform, which aggregates data from various government sources. The dashboard, which was developed in April 2021, employed the following open contracting guidelines: OC4IDS use cases; OCDS Redflags Mapping; and OCDS Use-Case Guide. Using these guidelines allows for a large range of useful indicators to be calculated from the data, such as how competitive procedures are, whether tenders are awarded at a fair price, and whether projects are implemented on time and on budget, to name a few. For some indicators, ICW complemented the data analysis with manual online research (for example, to check companies’ track record).

The analysis revealed other important features of the infrastructure procurement market which could be valuable for the government, investors and others interested in the sector. For example, construction has always dominated the state’s large expenditures in the past decade. When the pandemic began in 2020, construction work was put on hold and resumed in 2021 with a 148% increase. In the recovery phase of the pandemic, it is important that state budget funds are spent efficiently to avoid a repeat of 2019 when infrastructure projects severely underperformed: of the 223 strategic projects planned only 46% were achieved). 

The full findings and methodology of the analysis can be accessed here. There are more aspects of infrastructure-related projects that could and should be investigated further. However, lack of data availability, disclosure, and quality poses several challenges to performing data-driven analysis. 

To improve data-driven decision making in the sector ICW recommends the following changes:

• More and better data on bidders for infrastructure projects, including subcontractors. Having this data will provide a more holistic view on competition and market concentration as well as a better picture of whether private sector vendors outside state-owned enterprises have been bidding but not winning contracts, or whether they have never participated at all in the process. 
• Further analysis on infrastructure projects from non-tender data to understand whether there are more new suppliers registered in other procurement methods. This is also to capture a more holistic view of whether tender duration needs to be adjusted to the current market
• Once a clearer picture on participation on construction projects is captured, we also recommend further analysis of the experience of private construction companies when participating in public bidding (or the lack thereof).
• Integration of data analysis on the evaluation system for better future planning, especially for past vendors who did not complete their projects as agreed in the contract, i.e. publication on SIKAP (vendor management system) and more data on the implementation phase such as progress reports, project delivery, handover reports, etc. 
• More advanced planning (e.g. tenders in the first quarter) to reduce the number of construction tenders carried out in the last quarter of the year. 
• For agencies in charge of construction work to improve tender notices with clearer description and title complemented with better and systemic announcement of tender notices. 
• Publication of more structured, high quality data and a category explaining the reason for canceled tenders.
• Create a common identifier for every infrastructure project from start-to-finish, including all types of procurement methods.

ICW will continue to work on monitoring infrastructure related tenders in the future. They plan to develop a joint-approach with the National Public Procurement Agency to focus on monitoring infrastructure projects engaging a broader range of citizens as part of their strategy in public monitoring. 
Reach out to us at data@open-contracting.org if you want to replicate the approach/system or simply just want to be connected with other reformers who work on red flag analytic systems around the world!