eGovernment for Development

eTransparency Case Study No.8

More Transparent Tendering for Infrastructure Development in Indonesia

Case Study Authors

Anonymous

Application

In 2001, the Department of Settlement and Regional Infrastructure in Indonesia introduced an online information system to support the process of tendering.

Application Description

The Department of Settlement and Regional Infrastructure is responsible for public infrastructure in Indonesia (particularly transport, water and housing infrastructure), with a budget of more than US$100m annually, much of which is dispersed through a system of tenders, bids and contracts.

The new information system provides information about all aspects of the procurement process:

• Details of projects to be tendered, including their content, duration and budget allocation.
• Tendering process details including dates, value, details of the pre-qualification process and information regarding the tender winner.
• Contact details for the relevant procurement officer that enable queries or inputs into the process.

Armed with this information, citizens and citizen groups could then identify cases where tendering procedures have not been followed properly, or where contractors with close relations to government have received many contracts, or where infrastructural deliverables have not been constructed.

Contractors themselves can also benefit from the information provided by the system. It helps them to know what to bid for. They can also use e-tendering components within the system in order to submit their bids online. However, full e-procurement is not yet possible because electronic documents are yet to be given legal status in the Indonesian courts. Thus all key documents must still be handled in the conventional manner.

There are no specific technical standards or benchmarks for the transparency of tendering in Indonesia, nor is there any law regarding freedom of information. Normal government regulations apply to the actual tendering/procurement processes.

Role of ICT

The e-tendering system is Web-based, and made available to citizens and businesses via the Internet in Bahasa Indonesia (the national language). The system uses ASP for scripting, with My-SQL for the underlying database.

Application Drivers/Purpose

President Suharto ruled Indonesia from 1965 until his resignation in 1998. His rule is typically seen as autocratic and as fostering corruption. The e-tendering application was introduced as part of post-Suharto reform in Indonesia. One main focus of this reform has been good governance, including an attempt to address widespread corruption and to reduce the costs of government. Another has been more balanced regional development, which has sought to redress earlier distortions between the disadvantaged Eastern and better-developed Western parts of the country, and to devolve decision-making powers away from a small Jakarta-based clique. All elements came together in the development of the e-tendering/procurement system, which aims to improve the transparency and efficiency and costs of tendering/procurement. A key driving force for the application in practice is seen to be external pressure from international donor organisations.

Stakeholders

Senior officials and staff of the Department of Settlement and Regional Infrastructure are key internal stakeholders for this new system. Consultants and businesses are stakeholders since their approach to bidding has been affected. Finally, citizens and NGOs are stakeholders since they have a general interest in improvements in both the efficiency and effectiveness of government infrastructural contracting.

Transparency and the Poor

There has been no direct support for transparency to the poor, since the service is primarily targeted at government-to-business links. There is also little or no ICT infrastructure in most poor communities, especially outside Jakarta.

Impact: Costs and Benefits

Project costs are unknown.

The main system benefits seem to be:

a) Increased awareness about tendering processes among some citizens. There have been a few queries about tenders from members of the public and NGOs. This may have a knock-on impact to make contractors and government officials feel they are under greater scrutiny than previously. It may help to create some groundswell of demand for more freedom of information and greater transparency.

b) Benefits of reduced costs for contractors who wish to participate in the bidding process. Although this has no direct transparency benefit, it may help broaden the range of contractors who participate. In general, contractors have been supportive of the system.

There is a perception that, before the system's introduction, most tender winners had a close relationship with government officials, whereas perhaps 25% fewer do after system introduction. What is not clear is the extent to which this can be attributed to the e-tendering system, or to broader changes in the post-Suharto era.

Other benefits are, at present, more a potential than a reality. For example, there is still confusion about the way in which evidence derived from the Web site could be used in a legal context. Thus, there are no actual cases of the system having been used to seek redress against possible wrongdoing in procurement, and so there is - as yet - no clear way in which this system can be used to move beyond mere reporting to actual accountability and control of the procurement process.

Government officials perceive that the system thus far has had no significant impact on levels of corruption. It is still the norm that contractors would find themselves paying 20-40% of the overall tender value to members of the tender committee and, in some cases, to higher-level officials who have oversight of the committee's work. Some of this corruption can be attributed to greed, but much can be attributed to need: the need to recover money paid out to get project budgets agreed in the first place (see below), and the need to supplement low public sector wages. Breaking this cycle of need, and institutionalised processes of corruption set in place during the Suharto era, is not going to be easy.

The system ought to make the tendering process easier and quicker for government officials (indeed, this benefit is identified by the Department's own evaluation). However, informal feedback from government officials is not particularly positive. Those procurement officials who have computer expertise feel that the e-tendering system is creating additional work for them, yet for no additional income. They prefer to use their computing skills and what should be their government work time to earn money undertaking unofficial outside consultancy work; they then pay a small amount to more junior government staff to do the tendering data entry for them. Procurement officials without computer expertise, despite their training, feel the e-tendering system is something they do not understand. In both cases the result - coupled with general absence of a culture of transparency - has meant officials have little to do with the system, getting more junior staff to actually interact with it. This has tended to undermine both the perceived value and usage of the system.

Evaluation: Failure or Success?

The system won first prize in 2002 in the e-government category of a competition held by the Indonesian magazine "Warta Ekonomi". A formal evaluation of the project has been conducted by the Department of Settlement and Regional Infrastructure. On the technical side, the main concerns arising from the evaluation were access difficulties, particularly caused by ICT infrastructural constraints. On the non-technical side, contractors supported the system but wanted full e-procurement to be introduced. Issues identified by independent evaluations are described above in the Impact section and below in the Challenges section. Overall, the e-tendering system at present can be given the category of partial success/partial failure overall and as largely unsuccessful so far in addressing corruption, though the Department does appear committed to trying to improve the system.

One additional concern remains the fact that, by turning the spotlight on tendering, the system may be reducing the attention paid to a major source of corruption: the budgeting process. In order to get local projects agreed for funding, money passes upwards to bribe both executive and legislative officials at first provincial and then national level. That money has then somehow to be recouped at the local level, which may explain the lack of progress to date against corruption in tendering and procurement.

Enablers/Critical Success Factors

1. Political support . Although this e-transparency system has met with indifference or resistance from a number of middle-level officials, it has been pushed along by support from a number of key groups - senior officials in the Department of Settlement and Regional Infrastructure who needed to show support for the good governance agenda; public groups who lobby for greater transparency; and some fraction of contractors who felt their business opportunities would be enhanced by a more transparent system.
2. ICT awareness . It only needed a small cadre of staff in the Department to be aware of the potential role of ICTs in supporting transparency to help get the ball rolling on this type of e-transparency project.

Constraints/Challenges

1. Lack of legal infrastructure . This e-transparency system is limited in a number of ways by legal constraints. The operation of the e-tendering system is constrained by the absence of "cyber-laws" that would recognise the legitimacy of electronic documents and electronic transactions. The transparency aspects of the system are constrained by the lack of freedom of information and transparency laws that could give legal 'teeth' to attempts to use the system to hold government officials to account.
2. Staff resistance . This arises from a variety of causes. Some officials are resentful or fearful about the potential loss of bribe income the system could entail; they tend to manipulate what data goes into the system to their own advantage. Others lack the skills to use the system and so tend to ignore it. Others still are resentful of what they see as an additional workload without any commensurate additional reward; as noted above, they pay juniors to do that work for them.
3. Lack of broader engagement/awareness . Even as it currently stands, the e-tendering system could be used by citizen groups and other NGOs to maintain pressure on government to deliver on infrastructural commitments, and to reduce corruption in the tendering process. NGOs and academic groups could also help spread awareness about the system, and disseminate information drawn from the system. As yet, though, few NGOs or academic groups are engaged or involved with the e-tendering system.

Recommendations

1. Involve citizen groups . Although citizens as individuals can play a role in transparency, that role is better taken on by representative groups such as NGOs or academic organisations. Such groups should be involved in both the design and implementation of e-transparency systems if those systems are credibly to affect the accountability of government officials.
2. Don't just focus on technical skills . Lack of technical skills is still an issue for this e-transparency system, both inside and outside government. However, the 'transparency' aspects of the system are more important than that 'e' aspects, and training and change management should thus also focus on introducing more transparent procedures, systems and culture into government.
3. Don't just focus on digital ICTs . Digital ICTs only penetrate so far. To really reach out to a developing country's citizens, e-transparency systems must either a) make use of more pervasive technologies such as radio or television, and/or b) make active use of ICT-owning intermediaries who can then trickle-down information and services by non-ICT means.

Further Information

https://eproc.pu.go.id/publik/proyek/semieproc07/

Case Details

Case Editor : Richard Heeks.
Author Data Sources/Role : Web Site, Documents and Interviews; No Direct Role.
Centrality of Transparency : Mixed. Type : Transaction. Audience : External. Content : Contractual. Sector : Economic Services. Outcome : Largely Unsuccessful.
Region : South-East Asia. Start Date : 2001. Submission Date : December 2003.