The regulation of damages for late completion is an important aspect of construction work. However, Law Number 2 of 2017 concerning Construction Services as amended by Law Number 11 of 2020 concerning Job Creation (“Construction Law”) and its implementing regulations do not clearly regulate the imposition of damages for late completion. In fact, many construction disputes arise as the result of or are related to delayed completion.
The regulation on damages for late completion of construction work is now better regulated in Presidential Regulation Number 16 of 2018 as amended by Presidential Regulation Number 12 of 2021 concerning Government Procurement of Goods/Services (“PR 16/2018”). Article 3 paragraph (1) of PR 16/2018 states that the procurement of goods/services based on PR 16/2018 includes construction work. In other words, construction work is now treated as one part of the procurement of goods/services.
PR 16/2018 only applies to procurement of goods/services within Ministerial/Institution/Regional Organs that utilizes money from the State Budget (APBN)/Regional Government Budget (APBD), including the procurement of goods/services which are partially or fully funded from domestic loans and/or domestic grants received by the Government and/or Regional Governments; and/or procurement of goods/services using the budget from the APBN/APBD including the procurement of goods/services partially or wholly financed from foreign loans or foreign grants. Therefore, the provisions for damages in PR 16/2018 do not apply to delay damages for the completion of construction work outside the APBN/APBD.
Article 78 paragraphs (3), (4), and (5) of PR 16/2018 states that Provider who is late in completing work in accordance with the Contract, will be subject to administrative sanctions, namely delay damages sanction. Therefore, referring to the provisions of Article 78 paragraphs (3), (4), and (5) of PR 16/2018, the delay damages can be defined as a fine imposed on the Provider as a result of the Provider’s failure to complete the construction work in accordance with the contract.
Delay damages is a part of administrative sanctions, namely fines as stipulated in Article 78 paragraph (4) of PR 16/2018. The administrative sanctions are as follows:
Pursuant to Article 56 of PR 16/2018, if the Provider fails to complete the work until the contract implementation period ends, but the Commitment-Making Officer (PPK) assesses that the Provider can complete the work, the PPK provides the Provider with the opportunity to complete the work. The provision of opportunities for the Provider to complete the work is made in the addendum to the contract which regulates the time for completion of the work, the imposition of damages for late completion on the Provider, and the extension of the performance guarantee. Referring to these provisions, damages and the extension of time to complete the construction work may be given by the PPK if the PPK considers that the Provider is able to complete the work.
However, the imposition of damages needs to consider force majeure as referred to in Article 55 of PR 16/2018 which states that in the event of a force majeure event, the implementation of the contract can be terminated. Force majeure is a condition that occurs beyond the will of the parties to the contract and is previously unforeseeable, resulting the obligations set out in the contract being unable to be fulfilled.
Article 79 paragraph (4) of PR 16/2018 states that the imposition of delay damages is determined by the PPK in the contract at 1‰ (one per mil) of the contract value or the value of the contract part for each day of delay. The contract value or the value of the part of the contract does not include Value Added Tax (VAT). There are two value approaches that are referenced in Article 79 of PR 16/2018, namely the contract value or the value of contract part.
First, the imposition of damages by referring to the contract value. The application of the imposition of delay damages of the contract value is applied to work whose level of usefulness can only be achieved by the user of the services if the work has been completed in its entirety, such as the construction work of a building unit that the user can receive benefits if the building construction work has been completed in its entirety, then the imposition of delay damages is based on the contract value.
Second, the imposition of delay damages by referring to the contract part. The imposition of damages in the amount of the contract part is applied to the work if such work is completed partially and the user has obtained benefit thereof. For example, the construction of a factory where the factory can be operated commercially by the user but in its complementary parts, such as the installation of yard fences, has not yet been completed by the Provider. In this case, the calculation of the delay damages can be calculated from the part of the contract that has not yet been implemented, namely the value of the fence installation.
In the end, provisions regarding the definition, imposition, and calculation on the amount of delay damages in PR 16/2018 may serve as reference for construction work funded by APBN/APBD. However, there is no prohibition for construction work funded outside the APBN/APBD to refer to the provisions of PR 16/2018 and to incorporate the terms or its principles into privately funded construction.
 Article 3 paragraph 1 of PR 16/2018 states that the Procurement of Goods/Services includes: Goods, Construction Works, Consultancy Services, and Other Services.
 Contract is a Goods/Services Procurement Contract, which is a written agreement between Budget User/Proxy of Budget User/Commitment-Making Officer and Provider or implementer of In-House Procurement (Article 1 point 44 of PR 16/2018).
 Provider is an Economic Operator that provides goods/services under a contract (Article 1 number 28 of PR 16/2018).
 Article 1 point 52 PR 16/2018.
 https://fakpi.org/2018/07/02/denda-keterlambatan-pekerjaan-berdasarkan-perpres-nomor-16-tahun-2018/, accessed on 13 October 2021.