Presidential Regulation 12/2021: Modernizing Government Procurement

Introduction to the Regulation

Presidential Regulation (Perpres) Number 12 of 2021 is an amendment to Perpres Number 16 of 2018 regarding Government Procurement. This update aligns procurement rules with the Job Creation Law (Undang-Undang Cipta Kerja). Its primary focus is to improve the ease of doing business, ensure economic equality, and strengthen the Micro, Small, and Medium Enterprises (SMEs/UMKM) sector. The regulation introduces policies designed to simplify and enhance the efficiency of public sector spending.

Overall, Perpres Number 12 of 2021 covers vital updates. These include rules for domestic product usage, the mandatory involvement of small businesses, and adjustments to construction service procurement funded by national (APBN) and regional (APBD) budgets. Furthermore, it sets the stage for a more digital, efficient, and transparent procurement future.

Key Changes Introduced in Perpres 12/2021

1. Support for Micro, Small Enterprises, and Cooperatives

A major highlight of Perpres Number 12 of 2021 is the increased role of Small Enterprises and Cooperatives. The government recognizes SMEs as the backbone of the Indonesian economy. Consequently, this regulation mandates that at least 40% of the government procurement budget for goods and services must be allocated to products from micro-enterprises, small businesses, and cooperatives.

This provision provides a massive opportunity for local entrepreneurs to participate in state-funded projects. It also accelerates economic distribution across society. For example, in construction procurement, local manufacturers of building materials now have a clearer path to supply the government, supporting domestic economic sustainability.

2. Construction Service Procurement via APBN/APBD

The regulation provides more detailed guidelines for construction services funded by state budgets. Previously, construction procurement was often hindered by lengthy and inefficient bureaucratic processes.

Under Perpres Number 12 of 2021, projects must follow organized procedures that prioritize time efficiency, budget accuracy, and quality. A significant innovation is the mandatory use of e-procurement systems. Moving the process online reduces the potential for budget misuse and increases public trust. For instance, infrastructure projects like roads and bridges are now more transparent, as every stage from planning to execution can be monitored by the public digitally.

3. Priority for Domestic Products

Prioritizing domestic products is a core policy of this regulation. The government is now required to choose locally manufactured goods over imports whenever possible. This move strengthens the domestic manufacturing sector and creates a fairer market for local businesses.

To qualify, domestic products must meet specific standards, including the Domestic Component Level (TKDN), SNI certification, and eco-friendly criteria. In sectors such as technical equipment and office supplies, local products take precedence, ensuring that government spending stimulates national growth.

The Evolution: Perpres 16/2018 and Perpres 46/2025

To understand the current landscape of Government Procurement, we must look at the preceding and succeeding regulations:

• Perpres Number 16 of 2018: This is the primary foundation that established the e-procurement framework. It introduced selection methods such as Tenders, Direct Purchasing, and Direct Appointments.
• Perpres Number 46 of 2025: This future-looking regulation further refines the rules by introducing clearer guidelines for procurement at the village level (Village Budget/APB Desa), which was previously less regulated.

Implementation Challenges

1. Digital Infrastructure Gaps

While the regulation pushes for electronic systems, not all regions in Indonesia have adequate digital infrastructure. Some remote areas still face difficulties in accessing and managing e-procurement platforms. Continuous investment in digital connectivity across the archipelago is essential for this policy to succeed.

2. Strengthening Human Resource Capacity

The success of Perpres Number 12 of 2021 depends heavily on the people managing it. Currently, there is a gap in the knowledge and skills of local officials regarding the latest procurement procedures. Intensive training and professional development are vital to ensure that officials can implement these complex rules correctly.

Conclusion

Perpres Number 12 of 2021 brings transformative changes to the Indonesian procurement system. By prioritizing domestic products, empowering small businesses, and refining construction guidelines, the regulation fosters transparency and economic growth. However, addressing digital infrastructure and human resource capacity remains critical to its long-term success. When these hurdles are cleared, Government Procurement will yield even greater benefits for the national economy.

Visit the Village Regulations page for official access.