Following the issuance of Construction Service Business License (“IUJK”) to the Foreign Construction Service Business Entity (“BUJKA”), BUJKA is entitled to participate in a bidding or procurement of construction services and also to work in government or private projects. BUJKA may conduct its business and participating in a bidding or procurement of construction services by establishing Kerjasama Operasi (KSO) or hereinafter translated as Joint Operation with National Construction Service Business Entity (“BUJKN”) based on principles of equality of construction service and equality of construction service qualification.

Basically Joint Operation is a form of cooperation between BUJKA with one or more BUJKN, which only for temporary to handle one or more construction work and it is not presume to be as establishing a new entity.  This has been regulated in Article 1 Point 6 of Regulation of Minister of Public Works of the Republic of Indonesia Number 10/PRT/M/2014 concerning Guidelines on the Requirements for the Granting of Foreign Construction Service Business Entity Representative Office License.

The thing that you may need to note is, in such cooperation, the BUJKA and BUJKN are jointly and separately having the same liability to the construction service user or project owner.

There is a certain criteria of BUJKN that you can invite to form a Joint Operation:

  1. in the form of Limited Liability Company;
  2. 100% (hundred percent) of its share is owned by Indonesia citizen and/or Indonesian legal entity, the Republic of Indonesia, the local government, Private Company (BUMS), State Owned Enterprise (BUMN), and/or Regional Government Owned Enterprise (BUMD);
  3. owning Corporate Certificate (Sertifikat Badan Usaha/SBU)with qualification as a large classification; and
  4. owning a Construction Business License i.e. National IUJK.

Furthermore, the BUJKA which has established a Joint Operation with BUJKN, may carry out a construction work financed by:

  1. State Revenues and Expenditure Budget or Local Revenues and Expenditure Budget;
  2. loan;
  3. foreign grant;
  4. foreign investment and local investment; and/or
  5. private fund in accordance with the provision of regulation.

In addition to the above explanation, BUJKA can only carry out work and/or establishing cooperation with BUJK, under a certain project with the following criteria:

  1. Having a High Risk
  2. High risk construction work is construction work which its implementation and the building utilization may potentially endanger public safety, property, human life, and environment.

  3. Built with a High Technology
  4. High technology construction is a type of construction work that requires a special working method, high technology equipment, specific construction tools and requires many experts.

  5. High Costs
  6. The category of a high cost construction work is a construction performance work with the value of work at least IDR100,000,000,000 (one hundred billion rupiah), and the value of its construction planning work and/or construction supervision work at least IDR10,000,000,000 (ten billion rupiah).

Thus, if a construction work does not meet three criteria as written above, the BUJKA cannot participate in the bidding/procurement for such construction work.
Furthermore, regarding the performance of Joint Operation between BUJKA and BUJKN, it should be carried out under the following provisions:

  1. at least 50% (fifty percent) of the construction value is conducted within Indonesia territory; and
  2. at least 30% (thirty percent) of the construction value is conducted by BUJKN.

Whilst, regarding to the Joint Operation for construction planning work, it should be carried out under the following criteria:

  1. the entire work of technical planning is conducted within Indonesia domestic territory; and
  2. at least 50% (fifty percent) of the construction planning value is conducted by BUJKN.

The above explanation indicates that the establishment of Joint Operation is not limited only at the construction performance phase, but it started since the procurement/bidding process, performance process, towards further until the end of construction work.

To ensure a smooth investment and infrastructure project operation from the legal perspective, SMART Consulting has assisted Clients in dealing with matters related to Construction and Investment Law in Indonesia.

Contact Us Now to get your legal solution for your business goals, and still comply with the prevailing laws and regulations.

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