Government Procurement Policy Agency Regulation Number 1 of 2026 Updates the Procurement Procedures for Government Cooperation with Business Entities in Infrastructure Provision

Introduction

On 30 July 2026, the Head of the Government Procurement Policy Agency (“LKPP”) enacted Government Procurement Policy Agency Regulation Number 1 of 2026 on Procurement Procedures for Government Cooperation with Business Entities in Infrastructure Provision (“LKPP Regulation 1/2026”), which entered into force on the date of its promulgation.

LKPP Regulation 1/2026 serves as a guideline for the implementation of procurement procedures for the Preparation Agency, Implementing Business Entity, as well as the establishment of panels in the provision of infrastructure through the Government and Business Entity Cooperation (“KPBU”) scheme. LKPP Regulation 1/2026 was enacted to implement Article 40 of Presidential Regulation Number 38 of 2015 on Government Cooperation with Business Entities in Infrastructure Provision (“Presidential Regulation 38/2015”), while replacing Government Procurement Policy Agency Regulation Number 1 of 2025 on Procurement Procedures for Government and Business Entity Cooperation in Infrastructure Provision (“LKPP Regulation 1/2025”), which was previously in force.

Comparison

Overall, the scope of LKPP Regulation 1/2026 covers the procurement of the Preparation Agency, the procurement of the Implementing Business Entity, as well as the establishment and implementation of procurement through the Preparation Agency panel and Business Entity panel. In addition to regulating the stages and mechanisms of procurement, LKPP Regulation 1/2026 also regulates procurement principles as well as provisions concerning the establishment, use, and publication of panels, which form part of the governance of KPBU procurement, both for Government-initiated projects and Business Entity-initiated projects.

There are several changes and adjustments under LKPP Regulation 1/2026, as follows:

Key Provisions

• Procurement of the Preparation Agency and Implementing Business Entity

As stipulated in Articles 11 and 18, procurement in the context of KPBU is conducted to select the Preparation Agency and the Implementing Business Entity. The procurement of a Preparation Agency in the form of a Business Entity may be conducted through Selection or through the combination of Prequalification and Selection, with Prequalification potentially being conducted through a Preparation Agency panel. Meanwhile, the procurement of an Implementing Business Entity is conducted through Tender or Direct Appointment, each of which is preceded by Prequalification, which may be conducted through a Business Entity panel.

In addition, this Regulation stipulates that the procurement of a Preparation Agency in the form of an International Institution/Institution/Organization may be conducted through an agreement with the Minister/Head of Institution/Head of Region or through Direct Selection through a panel of International Institutions/Institutions/Organizations serving as Preparation Agencies. This provision provides an alternative procurement mechanism tailored to the form of Preparation Agency to be used in the implementation of KPBU.

• Application of the Swiss Challenge Method to Business Entity-Initiated Projects

Pursuant to Articles 29 and 32, the procurement of an Implementing Business Entity for a Business Entity-Initiated Project (“Project Initiated by a Business Entity”) may use the Swiss Challenge method. The Swiss Challenge is a tender method that provides an opportunity for other Business Entities to compete for the Project Initiated by a Business Entity, while continuing to provide protection to the Initiator through the right to match the best bid submitted by another participant. Accordingly, the Initiator is not automatically designated as the winner merely because it proposed the project. If another participant submits the best bid, the Initiator is given the opportunity to submit a bid matching such best bid. In addition, the Initiator is not required to submit Qualification Documents and Bid Documents as a Participant.

• Flexibility through the Use of Panels

Referring to Article 35, procurement may be implemented more efficiently through panels consisting of a Preparation Agency panel and a Business Entity panel. Procurement through this panel mechanism is permitted if the panel is already available, the panel’s qualifications are consistent with the requirements of the KPBU Project, and the panel has obtained direct approval from the relevant panel owner. 

• Procurement Security Requirements

Articles 41 through 43 affirm that Procurement Participants are required to submit a bid security upon submission of their Bid Documents, while the Implementing Business Entity is required to submit a performance security on the date of execution of the KPBU Agreement. The amount of the performance security is set at a maximum of 5% (five percent) of the investment value. Such security shall be unconditional and must be capable of being drawn no later than 14 (fourteen) working days after the statement of default is received by the issuer of the security. 

• Prohibition of Conflicts of Interest 

To ensure fair business competition and clean governance, Article 46 expressly prohibits conflicts of interest among the parties involved in the procurement process. In particular, consultants assisting the PJPK are strictly prohibited from becoming Participants, serving as members of the board of directors/board of commissioners, providing financing, or providing guarantees for the same KPBU Project. 

Transitional Provisions

Referring to Article 48, upon the entry into force of this Regulation, any procurement process for the Preparation Agency, procurement of the Implementing Business Entity, or panel establishment process that is ongoing and has entered the Prequalification activity stage shall continue to be conducted based on the provisions of Institution Regulation Number 1 of 2025.

In addition, all KPBU Agreements, Preparation Agency Agreements, and Framework Contract agreements that were executed prior to the entry into force of this Regulation shall remain valid and fully effective until the expiry of the relevant agreement term.

Closing 

With the entry into force of LKPP Regulation 1/2026, several changes have been introduced to the procurement procedures under the KPBU scheme, particularly with respect to the mechanism for using panels, the application of Procurement principles, and alternative procurement methods for the Preparation Agency and Implementing Business Entity. This Regulation also provides more detailed provisions concerning the Swiss Challenge mechanism, Procurement security requirements, and the prohibition of conflicts of interest in the implementation of Procurement.