Third-Party Risk in the Availability Payment: The Palapa Ring Western Package
Main Article Content
Abstract
The Palapa Ring Western Package is the first Public Private Partnership infrastructure project in Indonesia implementing Availability Payment (AP). Prevailing regulations allow the Government Contracting Agency (GCA) and Implementing Business Entity (IBE) to determine the system of incentives and penalties of AP in their project contract. This research explores two main issues: (1) whether the IBE has obligation for contingent cost liabilities outside of the contractually determined AP amount in the occurrence of damage caused by a third party which interrupts or disrupts infrastructure service availability and (2) whether the GCA has the right to penalize AP amount to the IBE in the occurrence of damage by a third party which interrupts or disrupts service availability. By applying normative legal research using the statute approach, this research concludes that in this project, the IBE has obligation for contingent cost liabilities outside of contractually determined AP amount in the occurrence of damage by a third party and the GCA has the right to penalize AP amount if the IBE fails to maintain service availability. The contractual allocation of operational and maintenance risk to the IBE creates obligation to bear costs during the project lifetime including those due to third-party risk. Further, the use of formula to calculate AP to IBE is solely based on performance data in maintaining service availability according to contractually agreed standards. Thus, the use of AP in the Palapa Ring Western Package may be a point to reference for future Public Private Partnership infrastructure projects.
Article Details
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
All writings published in this journal are personal views of the authors and do not represent the views of this journal and the author's affiliated institutions. Author(s) retain copyrights under the licence of Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
References
113 Ministry of Finance of the Republic of Indonesia. (2016). Proyek KPBU Palapa Ring Paket Barat Mencapai Tahap Perolehan Pembiayaan (Financial Close). https://www.djppr.kemenkeu.go.id/page/load/1622
Abdel Aziz, A. M. (2007). Successful Delivery of Public-Private Partnerships for Infrastructure Development. Journal of Construction Engineering and Management, 133(12). https://doi.org/10.1061/(asce)0733-9364(2007)133:12(918)
Andrew Nathaniel. (2021a). Interview of PT Palapa Ring Barat President Director Syarif Lumintarjo.
Andrew Nathaniel. (2021b). Reply to Request for Information by Directorate of Infrastructure, BP3TI, Ministry of Communication & Informatics of the Republic of Indonesia.
Andrew Nathaniel. (2021c). Response to Inquiry by Ministry of Communication and Informatics of the Republic of Indonesia (BAKTI Kominfo).
Availability Payment. (n.d.). Thomson Reuters. https://uk.practicallaw.thomsonreuters.com/0-518-1769?transitionType=Default&contextData=(sc.Default)
Availability Payments in Public Private Partnerships: Issues And Implications. (2018).
Aziz, A. A., & Shen, T. L. (2016). Management of Force Majeure Risks in Canadian PPP Transportation Projects. Construction Research Congress 2016: Old and New Construction Technologies Converge in Historic San Juan - Proceedings of the 2016 Construction Research Congress, CRC 2016. https://doi.org/10.1061/9780784479827.055
Bappenas. (2005). Visi dan Arah Pembangunan Jangka Panjang (PJP) tahun 2005-2025. Badan Perencanaan Pembangunan Nasional.
Bappenas RI. (2015). Rencana Pembangunan Jangka Menengah Nasional 2015-2019. Rencana Pembangunan Jangka Menengah Nasional 2015-2019.
Brinkerhoff, D. W., & Brinkerhoff, J. M. (2011). Public-private partnerships: Perspectives on purposes, publicness, and good governance. Public Administration and Development, 31(1). https://doi.org/10.1002/pad.584
Cebotari, A. (2021). Contingent Liabilities: Issues and Practice. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1316713
Cui, C., Liu, Y., Hope, A., & Wang, J. (2018). Review of studies on the public–private partnerships (PPP) for infrastructure projects. International Journal of Project Management, 36(5). https://doi.org/10.1016/j.ijproman.2018.03.004
Dethier, J.-J., & Moore, A. (2012). Infrastructure in developing countries: An overview of some economic issues. ZEF- Discussion Papers on Development Policy, 165. https://doi.org/10.22004/ag.econ.123305
Effah Ameyaw, E., & Chan, A. P. C. (2013). Identifying public-private partnership (PPP) risks in managing water supply projects in Ghana. Journal of Facilities Management, 11(2). https://doi.org/10.1108/14725961311314651
EPEC. (2012). The Guide to Guidance How to Prepare, Procure and Deliver PPP Projects. European PPP Expertise Centre.
Estrella Faria, J. A. (2012). The UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects. The Journal of World Investment & Trade. https://doi.org/10.1163/221190002x00094
F. William McCarty, & John W. Bagby. (2011). The Legal Environment of Business: Study Guide. Richard d Irwin.
Farquharson, E., Torres de Mästle, C., & Yescombe, E. R. (2011). How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets. In How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets. https://doi.org/10.1596/978-0-8213-7863-2
Francisca Christy Rosana, & Kodrat Setiawan. (2021, February 11). Palapa Ring Barat Jelaskan Penyebab Blackout di Anambas dan Natuna. https://bisnis.tempo.co/read/1432005/palapa-ring-barat-jelaskan-penyebab-blackout-di-anambas-dan-natuna
Garner, B. A. (2014). Black’s Law Dictionary 10th Edition. In West Group.
Grimsey, D., & Lewis, M. K. (2002). Evaluating the risks of public private partnerships for infrastructure projects. International Journal of Project Management, 20(2). https://doi.org/10.1016/S0263-7863(00)00040-5
Hovy, P. (2015). Risk allocation in public-private partnerships: Maximizing value for money. International Institute for Sustainable Development.
Hwang, B. G., Zhao, X., & Gay, M. J. S. (2013). Public private partnership projects in Singapore: Factors, critical risks and preferred risk allocation from the perspective of contractors. International Journal of Project Management, 31(3). https://doi.org/10.1016/j.ijproman.2012.08.003
Iossa, E., Spagnolo, G., & Vellez, M. (2014). The Risks and Tricks in Public-Private Partnerships. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2416733
Irwin, T., & Mokdad, T. (2010). Managing Contingent Liabilities in Public-Private Partnerships. In Managing Contingent Liabilities in Public-Private Partnerships. https://doi.org/10.1596/23187
Jayasuriya, S., Zhang, G., & Jing Yang, R. (2019). Challenges in public private partnerships in construction industry: A review and further research directions. In Built Environment Project and Asset Management (Vol. 9, Issue 2). https://doi.org/10.1108/BEPAM-01-2018-0024
J. David Reitzel, Gordon B. Severance, Micharl J. Garrison, and Ralph D. Davis. (1994). Contemporary Business Law and the Legal Environment: Principles and Cases (5th ed.). McGraw-Hill College.
Kwak, Y. H., Chih, Y., & Ibbs, C. W. (2009). Towards a comprehensive understanding of public private partnerships for infrastructure development. In California Management Review (Vol. 51, Issue 2). https://doi.org/10.2307/41166480
Law Number 17 Year 2007 on The Long-Term National Development Plan of 2005-2025 (State Gazette of Indonesia Year 2007 No. 33), Pub. L. No. 17 (2007). https://peraturan.bpk.go.id/Home/Details/39830
Liu, J., Love, P. E. D., Davis, P. R., Regan2, J. S., & Michael. (2015). Performance Measurement Framework in PPP Projects. International Journal of Business and Social Science, 6(7).
Managing PPP Contracts. (n.d.). PPP Knowledge Lab. https://pppknowledgelab.org/guide/sections/73-managing-ppp-contracts
Minister of Finance Regulation Number 260 Year 2016 on Procedures for Availability Payment in Public-Private Partnership Projects in the Provision of Infrastructure (State Gazette of Indonesia Year 2017 No. 11), (2016). https://peraturan.bpk.go.id/Home/Details/121416/pmk-no-260pmk082016
Palapa Ring Western Package Partnership Agreement, 284/M.KOMINFO/HK.03.02/02/2016, 002/PRB/PD-DIR/II/2016.
Paul Richards. (1999). Law of Contract (4th ed.). Pitman Publishing.
Payment Mechanism. (n.d.). PPP Knowledge Lab. https://pppknowledgelab.org/guide/sections/63-payment-mechanism
Percoco, M. (2012). Infrastructure Investment and Growth in Developing Countries: Does the Type of Contract Matter? Journal of Infrastructure Development, 4(2). https://doi.org/10.1177/0974930612465225
Pinz, A., Roudyani, N., & Thaler, J. (2018). Public–private partnerships as instruments to achieve sustainability-related objectives: the state of the art and a research agenda. Public Management Review, 20(1). https://doi.org/10.1080/14719037.2017.1293143
Posner, P. L., Ryu, S. K., & Tkachenko, A. (2009). Public-private partnerships: The relevance of budgeting. OECD Journal on Budgeting, 9(1). https://doi.org/10.1787/budget-v9-art3-en
Presidential Regulation Number 2 Year 2015 on Medium-Term National Development Plan for Years 2015-2019 (State Gazette of Indonesia Year 2015 No. 3), Pub. L. No. 2 (2015). https://peraturan.bpk.go.id/Home/Details/41718/perpres-no-2-tahun-2015
Presidential Regulation Number 13 Year 2010 on Amendment of Presidential Regulation Number 67 Year 2005 on Cooperation Between Government and Business Entities in Infrastructure Provision, Pub. L. No. 13 (2010). https://peraturan.bpk.go.id/Home/Details/41037/perpres-no-13-tahun-2010
Presidential Regulation Number 38 Year 2015 on Cooperation Between Government and Business Entities in Infrastructure Provision (State Gazette of Indonesia Year 2015 No. 62), Pub. L. No. 38 (2015). https://peraturan.bpk.go.id/Home/Details/41764/perpres-no-38-tahun-2015
Presidential Regulation Number 56 Year 2011 on Second Amendment of Presidential Regulation Number 67 Year 2005 on Cooperation Between Government and Business Entities in Infrastructure Provision, Pub. L. No. 56 (2011). https://peraturan.bpk.go.id/Home/Details/41175/perpres-no-56-tahun-2011
Presidential Regulation Number 66 Year 2013 on Third Amendment of Presidential Regulation Number 67 Year 2005 on Cooperation Between Government and Business Entities in Infrastructure Provision (State Gazette of Indonesia Year 2013 No. 161), Pub. L. No. 66 (2013).
Presidential Regulation Number 66 Year 2013 on Third Amendment of Presidential Regulation Number 67 Year 2005 on Cooperation Between Government and Business Entities in Infrastructure Provision (State Gazette of Indonesia Year 2013 No. 161), Pub. L. No. 66 (2013). https://peraturan.bpk.go.id/Home/Details/41436/perpres-no-66-tahun-2013
Presidential Regulation Number 67 Year 2005 on Cooperation Between Government and Business Entities in Infrastructure Provision, Pub. L. No. 67 (2005). https://peraturan.bpk.go.id/Home/Details/42594/perpres-no-67-tahun-2005
Agus Sardjono, Yetty Komalasari Dewi, Rosewitha Irawaty, and Togi Pangaribuan. (2018). Pengantar Hukum Dagang. Rajawali Pers.
Sudikno Mertokusumo (2002). Mengenal Hukum: Suatu Pengantar (4th ed.). Liberty Yogyakarta.
Quium, A. (2008). Public-Private Partnerships In Infrastructure Development: A Primer. United Nations Economic and Social Commission for Asia and the Pacific.
Ribeiro, Karisa; Dantas, A. (2006). Private-Public Partnership Initiatives Around the World: Learning From the Experience. University of Canterbury.
Robinson, H. S., & Scott, J. (2009). Service delivery and performance monitoring in PFI/PPP projects. Construction Management and Economics, 27(2). https://doi.org/10.1080/01446190802614163
Schwab, K. (2019). The Global Competitiveness Report 2019. Insight Report. In World Economic Forum.
Sholahuddin Al Ayyubi. (2017, March 31). PII Beri Penjaminan Proyek Palapa Ring. https://teknologi.bisnis.com/read/20170331/105/641529/pii-beri-penjaminan-proyek-palapa-ring
Steven H. Gifis. (2016). Law Dictionary (7th ed.). Barrons Educational Services.
Suhendra, M. (2020). The key success factors of availability payment scheme implementation in the palapa ring western package ppp project. International Journal of Scientific and Technology Research, 9(1).
Tang, L. Y., & Shen, Q. (2013). Factors affecting effectiveness and efficiency of analyzing stakeholders’ needs at the briefing stage of public private partnership projects. International Journal of Project Management, 31(4). https://doi.org/10.1016/j.ijproman.2012.10.010
The World Bank. (2018). Logistics Performance Index. https://lpi.worldbank.org/international/global
Umar, A. A., Zawawi, N. A. W. A., & Abdul-Aziz, A. R. (2019). Exploratory factor analysis of skills requirement for PPP contract governance. Built Environment Project and Asset Management, 9(2). https://doi.org/10.1108/BEPAM-01-2018-0011
Vina Fadhrotul Mukaromah. (2019). Perjalanan Palapa Ring, Dicetuskan Sejak 2005 Hingga Diresmikan Jokowi. https://www.kompas.com/tren/read/2019/10/14/191700465/perjalanan-palapa-ring-dicetuskan-sejak-2005-hingga-diresmikan-jokowi?page=all
Wang, Y., Wang, Y., Wu, X., & Li, J. (2020). Exploring the risk factors of infrastructure PPP projects for sustainable delivery: A social network perspective. Sustainability (Switzerland), 12(10). https://doi.org/10.3390/su12104152
Warsen, R., Nederhand, J., Klijn, E. H., Grotenbreg, S., & Koppenjan, J. (2018). What makes public-private partnerships work? Survey research into the outcomes and the quality of cooperation in PPPs. Public Management Review, 20(8). https://doi.org/10.1080/14719037.2018.1428415
Zou, P. X. W., Wang, S., & Fang, D. (2008). A life-cycle risk management framework for PPP infrastructure projects. Journal of Financial Management of Property and Construction, 13(2). https://doi.org/10.1108/13664380810898131