COMPARATIVE ANALYSIS OF MODEL OF STATE BUDGET AND LOCAL
GOVERNMENT BUDGET CONTRACT AGAINST MODEL OF FIDIC CONTRACT
By:
Ediyanto Arief (1823000061)
Rizal (1823000081)
Hapit Sugandi (1823000211)
ABSTRACT: The government of Indonesia invests hundreds of trillions of rupiah every year to build the
country’s infrastructure. The construction contract is one of the guarantees to ensure the success of the
project, therefore the clauses must be efficient, fair and balanced. This paper consists of a comparison of
the General Condition of Contract (GCC) of the State Budget and the Local Government Budget with the
1999 FIDIC General Conditions of Contract (GCC) Model. In addition, it aims to analyze the ten main causes
of claims that often occur in construction projects in Banten Province. Afterwards, match the cause of the
claim on the State Budget and Local Government Budget GCC, which are then compared to the FIDIC GCC.
Methodology used to determine the highest cause of claim is the Relative Important Index (RII). Hereafter,
Multistep Methods was used for its comparative analysis. Based on the analysis results on factors, ten
dominant factors were found to be cause of claim in Banten Province, in which the highest three are: 1)
possession of site and availability, 2) ambiguities in contract document, 3) changes in design. The analysis
showed that the FIDIC GCC is the most efficient, fair, and balanced contract for claims management. Based
on the results of the study, it is recommended to adopt model of FIDIC contract because it has advantages
in most aspects as a model of Indonesian construction contract.
Keywords: Construction Contract, FIDIC General Conditions of Contract, RII, Comparative Analysis,
Contract Model
Introduction
In Indonesia, the implementation of
construction industry using funds from State
Budget and Local Government Budget is
carried out through the auction process of
goods and services by the government as
service users. Construction projects using
fund from the government (State Budget and
Local Government Budget) implement
contract standards referring to the Law of
the Republic of Indonesia No. 2 of 2017
concerning Construction Services and
Presidential Regulation of the Republic of
Indonesia Number 16 of 2018 concerning
Procurement
of
Government
Goods/Services and Ministerial Regulations
which is related.
According to Sarwono Hardjomuljadi (2014:
2), the use of standard general condition of
contract will significantly save costs and
time. A fair and balanced general condition
of contract will greatly support the
development of the world of construction
services, especially as one of the means of
encouraging domestic contractors. The use
of standard general conditions of contract
(GCC), in this case, FIDIC Conditions of
Contract for all public sector construction
contracts in Indonesia not only have a
positive impact on service users but also for
service providers because service providers
also do not need to read and review the
general conditions of contract for each
project with different service users,
remembering that all projects use the same
general conditions of contract. In addition,
the competence and availability of experts is
relatively low, aspects of risk having not yet
been taken into account, added by the role of
consultant planners is not yet optimal. In
real situation, the number of supervisors is
still limited; the division of roles and
responsibilities of supervisors is not yet
optimal; the remuneration of construction
workers is not yet suitable; equipment &
materials does not meet the specifications;
and operational system procedures have not
been carried as applied rules.
In this study, a comparative analysis will be
carried out between several models of
Indonesian contract issued by the Ministry
of Public Works and Housing (PUPR) (State
Budget) and the Agency of Public Works and
Housing of Banten Province (Local
Government Budget) against the model of
FIDIC contract. This study aims at
identifying the cause of the highest
construction claim in Banten Province.
Afterwards, match the ten (10) highest
causes of the claim to the clauses in General
Contract Terms (GCC) of the State Budget
and
Local
Government
Budget.
Furthermore, it is compared to the clauses of
FIDIC general conditions of contract. This
comparative analysis results concluded that
which of contract model is considered to be
more fair, balanced, and effective in
accordance with the objectives of the
construction project. Besides, it is used to
analyze whether the model of FIDIC contract
can be used as a contract model for activities
financed by the State Budget and Local
Government Budget or not.
Literature Review
Construction Contract
According to Sarwono (2017), the
implementation of large construction works
owned
by
government
institutions,
including ministries and State-Owned
Enterprise (SOE), is carried out by third
parties appointed as contractor services
providers through a construction contract,
which is in its implementation almost all
constructions refer to the FIDIC Conditions
of Contract as a "model law". Therefore, an
understanding of construction contracts,
claim management, settlement of general
construction disputes and the model of
construction contracts issued by Federation
International Des Ingenieurs-Conseils (FIDIC)
domiciled in Geneva-Switzerland are
absolute conditions for construction-work
success.
The legal aspects of construction contracts
in Indonesia are based on the applied
contract law in Indonesia. The law regarding
this agreement is contained in the Civil Code
Book III concerning the contract. In addition,
construction contract law is specifically
regulated in the Construction Services Law
(CSL), Which is Law No. 2 of 2017
concerning Construction Services applied to
all construction projects in Indonesia.
FIDIC General Conditions of Contract
FIDIC is a well-known organization
throughout the world for having issued
standard general conditions of contract
known as a fair and balance conditions of
contract. To date, people even call the
Conditions of Contract for Construction
(1999), which is a development of the FIDIC
Conditions of Contract for Works of Civil
Engineering Construction (1987) and the
oldest conditions of contract of the group of
standard general conditions of contract
made by FIDIC, as "FIDIC" only.
According to Miroslaw and A.J Clark, "When the
new Contract Terms were prepared, FIDIC tried
to present the best so that the "Conditions"
could be applied not only to the Common Law
system (i.e. the Legal System of Anglo-America)
but also to the Civil Law system. To achieve this,
the contract working group reviews the
clauses, so that they can be applied based on
the two laws mentioned above. This new
edition also shows more flexibility and
adaptability. For example, in the old edition,
a conditional performance guarantee was
needed, which was different from the World
Bank. Meanwhile, in the new edition, the
guarantee form is set by "Special Condition"
which can be applied to make employers
more flexible.
General Condition of Contract (GCC) in
Indonesia
General Condition of Contract in
construction field in Indonesia for the public
and private sectors are still tailor-made and
not standardized, so even for a contract said
to be based on a FIDIC Conditions of
Contract, in fact, it is a mutilated FIDIC
Conditions of Contract, which is no longer a
fair and balanced FIDIC Conditions of
Contract.
An
activity
of
project
implementation based on a construction
contract is very dynamic and uncertain, even
the risk of a construction project is very
complex. In a large-scale infrastructure
project, risks and obligations should
theoretically be shared fairly among
contractual arrangements that normally use
the FIDIC Conditions of Contract. However,
to avoid unexpected risks and to avoid
disputes during implementation, both
national and international contractors must
pay attention to local characteristics and
local contract practices. (Sarwono, 2014:
19).
The use of general conditions of contract for
construction in the public sector, which is
still an ambition of stakeholders in the field
of construction services, is actually legally
possible, as stated in Law No. 2 of 2017
concerning Construction Services, Chapter 1
regarding General Provisions, Article 1 point
8 stating: "Work Contracts for Construction
are all contract documents governing the
legal relationship between the Service User
and the Service Provider in the
implementation of Construction Services".
Factors Causing Construction Claims in
Indonesia
Claims are considered as one of the most
important items can causing harmful effects
to the construction organization and
industry. Submitting claims has become a
common practice and an important feature
in many construction projects. Claims can
often occur in large projects and can cause
budget difficulties for the Owner. They can
cause financial difficulties, cash flow
restrictions, and loss of liquidity to the
contractor. Understanding the causes of
claims is very important to avoid or reduce
claims in the construction industry.
According to Sarwono (2011), construction
claims occur because of two things, which
are desire and chance.
Research by Sarwono (2014), on road and bridge
projects under the Ministry of Public Works and
Housing, it found that the highest cause of claims
was changes in design followed by inefficiency
and disruption at the top. Besides that, the
inclusion of changing in laws and regulations
is one of the dominant causes. Apart from
the above factors, there is a new factor,
namely the slow decision making of the
employer, which apparently was not caused
by incompetent project staff, but rather
caused by fears of a "criminalization" step.
Research methodology
This study was the first to be conducted on
Comparative Analysis of the Models of State
Budget and Local Government Budget
Contract Against the Model of FIDIC Contract
by focusing on small scale infrastructure and
using the legal basis of Law No. 2 of 2017
concerning Construction Services. The
Research Method uses qualitative and
quantitative methods, which compare
between the causes of the highest claims and
the related clauses of the General Conditions
of Contract against the FIDIC General
Conditions of Contract.
Figure 1. Framework of thinking
Based on preliminary survey results, there
were 25 variables obtained through content
validity. According to Kerlinger (1990),
content validity is validity calculated
through testing the contents of measuring
instruments with rational analysis. The
question sought is "the extent to which the
items in a measuring instrument cover the
entire contents of the object to be measured
by the measuring instrument concerned, or
relate to the representation of the entire
surrounding environment.
Table 1. Variables of Research Based on
Preliminary Survey
In this study, the analytical method used by
the writer uses the Relative Importance
Index (RII) and Multistep Interdependent
Desktop. According to (Johnson, 2001), RII is
an important forecasting method in multiple
regression and evaluating alternative step
considered relatively important. Analysis of
dominance and relative weights becomes
the most successful step of the available
relative importance.
Equation 1. Data Analysis Using Relative
Importance Index (RII)
𝑅𝐼𝐼 =
∑ 𝑃𝑗𝑈𝑗
𝑁(𝑛)
Where:
RII
Pj
Uj
: Relative Importance Index
: Rating of Respondents Cause
claim factor
: total of respondents place
identical value/ratings
on causes of claim factor
N
n
: Sample Size
: achieved highest score
on causes of claim factor
Comparative analysis of the clauses of
General Conditions of Contract against FIDIC
GCC using the Multistep Interdependent
Desktop Method.
Research Site
This research is located in Serang Regency,
Serang City, Pandeglang Regency, Lebak
Regency, Tangerang Regency in Banten
Province.
Population and Sample of research
In this study, Population and Samples are the
managers of five (5) project of State Budget
2019 in Balai Besar Wilayah Sungai CiujungCidanau-Cidurian (BBWSC3) of Banten
Province, Balai Prasarana Permukiman in
Banten and five (5) project of Local
Government Budget 2019 within the Public
Works and Spatial Planning Agency of
Banten Province, Housing and Settlement
Agency of Banten Province.
It showed the number of respondents
referred to as many as 37 people
Data Type
The data needed is primary and secondary
data.
1. Primary data
The data obtained by distributing
questionnaires to respondents,
besides
conducting
interviews
directly with stakeholders.
2. Secondary Data
The data obtained from ten (10)
contracts of State Budget and Local
Government Budget, as well as the
literature relating to this study.
Analysis and Discussions
In this stage, the RII test is conducted to find
out how much the influence of the factors
having been obtained and tested for validity
and reliability. This RII test also makes it
easier for researchers to find out the causes
of construction claims having the highest to
lowest values. Here is one example of
calculating the RII values for variable (A1):
Information:
ΣPiUi : Number/total of 37 respondents'
answers for variable A1 = 176
N : Total of Respondents = 37
N : The highest score that can be achieved on
the cause of the availability of employment =
5
Thus, it is obtained:
ΣPiUi/ N x n =176/(37x5) = 0,9514 =
95,14%
The RII test was applied to 37 (thirty-seven)
respondents with 25 (twenty-five) variables
processed
using
Microsoft
Excel
applications. For a complete and detailed
calculation, it can be seen in full in table 2.
Table 2. RII from Service Users' Point of View
for Factors Causing Claims in Banten
Province
From the analysis results of questionnaire
data using the RII (Relative Important Index)
method, the top ten (10) causes of
construction claims in Banten Province, as
shown in table 2 above.
Comparative Analysis of Clauses of
General Conditions of Contract (GCC)
Against FIDIC General Conditions of
Contract
Possession of site and availability
Analysis Results
Table 3. The top ten (10) causes of
construction claims in Banten Province
1) In GCC, submission of work sites that fail
to be fulfilled by the Contractor in SubClause 19.5 impacts the compensation
event in Sub-Clause 64.1d, which must
have prior warning as soon as possible
from the Contractor to Engineer (SubClause 30.1). In GCC, there is no mention
of the time period for the Contractor to
deliver an early warning, while the FIDIC
GCC states no more than 28 days. In GCC,
there is no mention of the period of time
for the Engineer to answer claims from
the Contractor, while the FIDIC GCC states
a maximum of 42 days after receiving a
claim, thus the Engineer must provide a
response whether to approve or refuse by
giving detailed explanation.
2) In GCC, compensation event sub-clause
64.1d becomes the full responsibility of
Employer, due to the unclear role of the
Engineer in the Early Warning Sub-Clause
30.1, wherein the Sub-Clause does not
mention Engineer to follow up the
warning from the Contractor. Whereas, in
the FIDIC GCC, in Sub-Clause 20.1, the role
of the Employer has been “fortified” by
the Engineer who follows up by
approving or rejecting the claims
submitted by the Contractor within a
maximum period of 42 days after
receiving the claim.
3) In GCC, Employer have the obligation to
provide work site in accordance with the
requirements of the contractor stated in
the work plan agreed by both parties in
the initial meeting before signing the
contract. (The work plan provided by the
Contractor is likely to change, not
according to what was made at the time
of bidding). Whereas, in the FIDIC GCC,
Employer shall give the Contractor right
to access to, and possession of, all parts of
the site within the time (or times) stated
in the Appendix to Tender.
Ambiguities in Contract Document
Analysis Results
1) In GCC clause no 30 regarding Early
Warning, Sub-Clause no 30.1, there are
some ambiguous words and phrases, and
this can lead to disputes within. Like the
phrase "as early as possible", this phrase
does not have a clear time line. Whereas,
in the FIDIC GCC, time line it is clearer. it
stated that there is a deadline for
submitting a Claim is no more than 28
days.
2) In GCC clause no 30 regarding Early
Warning, Sub-Clause 30.1, it does not
explain the tasks of the Engineer in detail
after getting a warning from the
Contractor so that it becomes blurred the
meaning of this Sub-Clause 30.1.
Whereas, in the FIDIC GCC, Sub-Clause
20.1, it is explained that the Engineer
must determine and approve or reject the
Claims made by the Contractor no later
than 42 days after receiving the Claim
from the Contractor. It means that there
is certainty for the Contractor for its
Claim.
3) In GCC clause no 30 regarding Early
Warning, Sub-Clause 30.1, in this
sentence, "The Supervisor may order the
Provider to submit it in the form of
writing ...", meaning that the Service
Provider/Contractor may submit a verbal
claim, if this happens it will certainly lead
to a another dispute in the future.
Whereas, in the FIDIC GCC, Sub-Clause
20.1, it expressly states that all Claims
submitted by the Contractor must be in
the form of well-documented written
records, which can be examined by the
Engineer at any time.
Changes in design, Changes in scope of
work, Variations order
Analysis Results
1) In GCC clause, sub-clause 35.1, the
variations
order
comes
from
Commitment-Making
Official/Service
Users. In the FIDIC GCC, sub-clause 13.1,
the variations order comes from the
Engineer.
2) In GCC clause, sub-clause 35.1, changes to
design-related work are carried out by
the Contractor together with the Service
Provider. In the FIDIC GCC, sub-clause
13.1, changes to design-related work are
carried out by the Contractor, if the
Contractor is not able to do this, it can be
submitted to the Engineer supported by
evidence. Afterwards, the Engineer can
cancel, stipulate, or change instructions.
3) In GCC clause, sub-clause 35.5, changes of
work result in increased contract costs,
limited to a maximum of 10% (ten
percent) of the initial contract price, and
subject to budget availability. In the FIDIC
Conditions of Contract, if there is an
adjustment to the Contract Price due to
variations, it is determined through the
formula. This formula is in sub-clause
13.8, as follows: "Pn"=a+b Ln/Lo "+" c
Ec/Eo+d Mn/Mo
Delayed Caused by The Contractor,
Contractor Late Completion
Analysis Results
1) In GCC clause, sub-clause 44.1, if the
Provider is late in carrying out work, the
Commitment-Making Official must issue a
written warning or enact a critical
contract. In FIDIC GCC, sub-clause 8.6, if
the Contractor is late, the Engineer can
instruct the Contractor to revise the work
plan, and if the revised method causes the
Service User to incur the additional costs,
the Contractor based on sub-clause 2.5
[Claims by the Service User] must pay the
fee is for Service Users.
2) In GCC clause, sub-clause 44.2, if the
Contractor is late and declared as Critical
Contract by Commitment-Making Official,
the Contractor is given the opportunity to
catch up with the work completion
schedule by going through 3 (three)
stages of the show cause meeting, as
contained in sub-clause 44.3, and if the
Contractor fails to complete the work
until the implementation period ends,
however,
the
Commitment-Making
Official assesses the Contractor's ability
to complete the work (Clause 45
regarding Providing Opportunities), the
Commitment-Making Official can provide
an opportunity for the Contractor to
complete the work with a sanction of late
fines. In FIDIC GCC, sub-clause 8.7, if the
Contractor fails to comply with subclause 8.2 [Completion Time], based on
the sub-clause 2.5 [Claims by Service
Users], the Contractor must pay late fees
for the failure.
3) In GCC clause sub-clause 44.3,
Commitment-Making
Official
can
terminate the contract unilaterally if the
provider fails at the 3rd evidentiary
meeting after the contract is declared
critical. In FIDIC GCC, sub-clause 15.2, if
the Contractor for no apparent reason
fails to continue the Work in accordance
with clause 8 [Start Date of Work, Delay
and Termination] or fails to comply with
the notice issued by sub-class 7.5
[Rejection] or sub-clause 7.6 [Repair
Work], within 28 days after receiving the
notice, the Service User can terminate the
contract.
Suspension of the works
Analysis Results
1) In GCC clause 28, delays can be made by
the supervisor of the work with reports
passed to the Commitment-Making
Official. In the Contract Model of FIDIC
General Condition of Contract, sub-clause
8.8, the Engineer may instruct the
Contractor at any time to stop the
progress of a part of the Work or the
entire Work, by stating the reason for
termination of work.
2) In the GCC, the Model of State Budget and
Local Government Budget Contract are
not
specifically
specified
clauses
regarding
the
consequences
of
termination of work. For the Contract
Model of FIDIC General Condition of
Contract, it is explained in detail about the
consequences of termination of this work
as stated in sub-clause 8.9 [Consequences
of Termination], sub-clause 8.10
[Payment for Machine and Material
Installation at Termination], and subclause 8.11 [Prolonged Termination].
3) In GCC clause, sub-clause 38.7 regarding
Model of State Budget and Local
Government Budget Contracts, the
Contract of Work can be temporarily
suspended due to force majeure, and it
can be terminated permanently if due to
Force majeure, the work cannot be
continued/completed. In the Contract
Model of FIDIC General Condition of
Contract, the condition of the Force
majeure is set out in clause 19 [Force
Majeure Conditions], in addition to the
FIDIC GCC, it is specifically explained for
Sub-contractors affected by the Force
Majeure that is in sub-clause 19.5 [Force
Majeure
Conditions
Affecting
Subcontractors].
Unforeseeable Physical Condition
Analysis Results
1) in the GCC of the Model of State Budget
and Local Government Budget Contract,
Unforeseeable Physical Condition is
regulated in Clause 35, Sub-Clause 35.1,
"In this case, there is a difference between
the field conditions at the time of
implementation and the drawings and/or
technical specifications specified in the
Contract document, the CommitmentMaking Official together with Providers
can make changes of work". In FIDIC GCC,
this Unforeseeable Physical Condition is
arranged in a special sub-class with the
same
name,
Sub-clause
4.12
(Unforeseeable Physical Condition).
2) In GCC, if due to this Unforeseeable
Physical Condition, the CommitmentMaking Official orders to overcome
certain conditions that cannot be
predicted before caused/not caused by
Commitment-Making
Official,
the
Contractor is got a right to get
Compensation as in the Compensation
Event, Clause 64.,
Sub-clause 64.1.
Whereas, in the FIDIC GCC, Sub-clause
4.12, [Unforeseeable Physical Condition]
if this Unforeseeable Physical Condition
causes variations in the work, the
Engineer will determine to approve or
determine to reduce the applicable costs
to this condition. The Engineer must
consider all evidence of Unforeseeable
Physical Condition from the Contractor
when offering the Offer; such data may be
provided by the Contractor, but is not
bound by such evidence.
Comparative Analysis of Clauses of GCC
Against FIDIC GCC related to the top ten (10)
causes of construction claims in Banten
Province are:
Table 4. Comparison Summary of Clauses of
GCC
Against
FIDIC
GCC
Conclusion
Result
of
Research
Hypothesis
The results of the comparative analysis show
that the Contract Model of FIDIC General
Conditions of Contract can be used as a
Contract Model for Construction activities
funded by the State Budget and Local
Government Budget.
Clauses in the Contract Model of FIDIC
General Conditions of Contract are more
comprehensive, fair, and balanced in
anticipation of the possibility of a
Construction Claim from both the Service
User and the Service Provider.
Conclusions
1. From
the
analysis
results
of
questionnaire data using the RII (Relative
Important Index) method, the top ten
(10) causes of construction claims in
Banten Province are: 1) Possession of site
and availability, 2) Ambiguities in
contract documents, 3) Changes in
design, 4) Changes in scope of work, 5)
Delayed caused by the contractor, 6)
Contractor’s late completion, 7) Different
interpretation of contract document, 8)
Variations order, 9) Suspension of the
works, 10) Unforeseeable physical
condition.
Comparative Analysis of General Conditions
of Contract (GCC) of the Models of State
Budget and Local Government Budget
Contract against the Contract Model of
FIDIC General Conditions of Contract
(GCC) in relation to the top ten (10)
causes of construction claims in Banten
Province are: 1) Possession of site and
availability, In GCC clause 19 in compare
to FIDIC GCC Sub-clause 2.1, 2)
Ambiguities in contract documents,
Different interpretation of contract
document, In GCC clause 30. Compare to
FIDIC GCC Sub-clause 20.1, 3) Changes in
design, Changes in scope of work, and
Variations order In GCC clause 35.
compare to FIDIC GCC Sub-clause13.1,
13.2, 13.3, 4) Delayed caused by the
contractor, Contractor’s late completion
In GCC clause 44. and clause 45. Compare
to FIDIC GCC Sub-clause 8.6, 8.7, 15.1,
15.2, 5) Suspension of the works In GCC
clause 28. and clause 38. Compare to
FIDIC GCC Sub-clause8.8, 8.9, 8.11, 19.4,
6) Unforeseeable physical condition) in
GCC Sub-clause 35.1 dan Sub-clause 64.1
compare to FIDIC GCC Sub-clause 4.12.
b. The results of the comparative analysis
show that the Contract Model of FIDIC
General Conditions of Contract can be
used as a Contract Model for Construction
activities funded by the State Budget and
Local Government Budget.
c. Clauses in the Contract Model of FIDIC
General Conditions of Contract are more
comprehensive, fair, and balanced in
anticipation of the possibility of a
Construction Claim from both the Service
User and the Service Provider.
Suggestions
The increase of the understanding of
construction contract clauses is a must for
Service Users, Service Providers, and
Engineers as the main actors in the
implementation of construction contracts.
Regarding General Condition of Contract
(GCC) of State Budget and Local Government
Budget that are national, a thorough study
should be conducted of all the clauses
therein, so that construction contracts are
produced with clauses can anticipating all
events that may occur in construction
project activities.
Understanding of the parties to the events
causing the claims and related clauses is a
necessity, so that the claim submitted is a
legit and professional claim. The role of the
government as regulator is to increase the
understanding of all relevant legislation for
stakeholders in construction activities. In
addition to that, the government must
provide support in the form of simplification
of laws related to lex specialis construction.
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