For foreign sponsors, contractors, and financiers eyeing Indonesia’s expanding infrastructure pipeline, the ground rules for private-sector participation have just been rewritten. On 30 July 2026, the Head of the National Public Procurement Agency (Lembaga Kebijakan Pengadaan Barang/Jasa Pemerintah, or “LKPP”) issued Regulation No. 1 of 2026 on Procurement Procedures for Government Cooperation with Business Entities in the Provision of Infrastructure (the “New Procurement Regulation”), which came into force on the date of its promulgation. The New Procurement Regulation implements Article 40 of Presidential Regulation No. 38 of 2015 on Government Cooperation with Business Entities in the Provision of Infrastructure (“PR 38/2015”), and repeals and replaces its immediate predecessor, LKPP Regulation No. 1 of 2025 (the “Old Procurement Regulation”).

The New Procurement Regulation is the operative procurement framework for public-private partnership projects in Indonesia (Kerja Sama Pemerintah dengan Badan Usaha, or “KPBU”), governing, in particular, the selection of the private-sector counterparty that will establish the special-purpose vehicle to sign the KPBU Agreement. Existing procurement processes that have already entered the prequalification stage remain governed by the Old Procurement Regulation, and KPBU Agreements, preparation-body engagements, and umbrella contracts already signed continue in force until they expire. For foreign sponsors, engineering contractors, technology providers, and infrastructure financiers that are new to or intend to be active in Indonesian infrastructure, the New Procurement Regulation confirms the KPBU framework’s established openness to foreign participation. It retains the procurement mechanisms of tender and direct appointment, with the following key takeaways:

 

Confirmed Eligibility of Foreign Entities

Under Article 1 (9) of the New Procurement Regulation, a “Business Entity” (Badan Usaha) is defined to include state-owned enterprises, regionally-owned enterprises, private limited liability companies established under Indonesian law, foreign legal entities (badan hukum asing), and cooperatives. The definition preserves foreign legal entities as eligible participants in their own right, a point on which the Old Procurement Regulation was less explicit. Article 9 reaffirms this by permitting foreign entities to bid either as a single entity or as members of a consortium. A consortium may take the form of an equity cooperation, an operational joint operation, a partnership (kemitraan), or any other form of cooperation, provided that its constitutive agreement records each member’s rights, obligations, and responsibilities (Article 9 (7) and (8) of the New Procurement Regulation).

However, there are two essential points to consider for foreign entities intending to participate in KPBU.

  • First, where a consortium is selected as the winning bidder, the consortium leader(s) must own more than 50% of the equity of the implementing business entity to be incorporated. Although the New Procurement Regulation does not mandate that foreign entities serve as consortium leader(s), this provision is a material consideration for foreign investors who typically enter Indonesian consortia in a minority capacity alongside a local majority partner.
  • Second, for procurements that are anticipated to attract foreign bidders, tender and panel-formation announcements must be placed in international-circulation media or on a website that provides international-level infrastructure project information, reinforcing the framework’s outward-facing stance (Appendices of New Procurement Regulation).

 

Two Entry Pathways – Solicited and Unsolicited Procurement

The New Procurement Regulation preserves the two-pathway architecture familiar under PR 38/2015. Solicited procurement (Prakarsa Pemerintah) applies where the project is initiated by a government or the board of directors of a state-owned or regionally owned enterprise acting as the project responsible authority (Penanggung Jawab Proyek Kerja Sama, or “PJPK”). Conversely, unsolicited procurement (Prakarsa Badan Usaha) applies when a business entity initiates the project and submits a proposal, feasibility study, and supporting documentation to the relevant government (Articles 17(1) and 26(1) of the New Procurement Regulation)

 

Solicited Procurement

For solicited procurement, the New Procurement Regulation retains three tender variants: (i) one-stage tender, (ii) two-stage tender with optimisation dialogue, and (iii) combined prequalification with one-stage tender, along with direct appointment where the strict conditions for that route are satisfied (Articles 18 (3) and 20 of New Procurement Regulation). The two-stage tender remains reserved for projects in which the minimum requirements have been determined. Still, additional requirements and an optimisation dialogue are needed to obtain the best value-for-money offer (Article 20(3) of the New Procurement Regulation).

 

The Unsolicited-Proposal Toolkit

The unsolicited pathway is the more differentiated of the two. The New Procurement Regulation provides a codified toolkit of three tender variants: (i) one-stage tender, (ii) combined prequalification with one-stage tender, and (iii) Swiss Challenge, together with direct appointment in defined circumstances (Articles 27 (5) and 29 (1) of the New Procurement Regulation).

Compensation for the project initiator (Pemrakarsa) continues to take one of two forms, chosen at the initiative-approval stage of evaluation of procurement documents: (i) a right to match the best financial offer submitted by a challenger; or (ii) an additional score bonus of 10% during evaluation. The compensation election, in turn, determines the tender method: the right-to-match aligns with Swiss Challenge (evaluated on the best financial offer), whereas the 10% score bonus aligns with a value-based evaluation under a one-stage tender (Appendix III of New Procurement Regulation).

Swiss Challenge, in particular, is designed as a fast-track for the initiator. The initiator’s proposal and supporting bid documents are pre-approved as part of the initiative approval letter, and the initiator is therefore not required to submit qualification or bid documents during the tender itself. If evaluation of the challengers’ financial submissions produces an offer better than the initiator’s, the procurement committee notifies the initiator of the best challenger’s financial number (without disclosing the challenger’s identity). The initiator is then given a defined period within which to submit a revised financial proposal equal to or better than the challenger’s. The right to match falls away if the initiator misses the deadline, submits a non-matching revised proposal, expressly waives its right, or withdraws (Article 32 of New Procurement Regulation).

 

Direct Appointment – A Fast-Track for Technology Holders and Land-Controlling Investors

Direct appointment (Penunjukan Langsung) is available in two situations: (i) where the KPBU falls within one of three defined “certain conditions”; or (ii) where the prequalification of an otherwise competitive tender produces only one qualified participant. The “certain conditions” limb is the substantively interesting one for foreign investors. It applies to (a) the development of infrastructure already built or operated by the same business entity; (b) works that can be performed only by a service provider capable of applying a new technology, being the sole such provider; and (c) situations in which the business entity has already secured most or all of the land required for the project (Article 33 and Appendix III of New Procurement Regulation).

The procedure applicable to the direct-appointment route is now unusually consolidated. The initiative approval letter, the approval of the initiator’s bid document, the recognition that the initiator has passed prequalification, and the appointment of the initiator as procurement winner are all issued together as a single instrument (Appendix III of New Procurement Regulation). For foreign technology owners with a defensible sole-source claim and foreign investors with existing brownfield footprints or consolidated land positions, this route can compress the transaction timetable considerably; the evidentiary support for the “certain condition”, however, must be carefully assembled and capable of withstanding subsequent internal government audit and, potentially, third-party challenge.

 

Panel Systems: A New Prequalification Fast-Track

The New Procurement Regulation elevates the panel concept from a supporting mechanism to a headline acceleration tool by contemplating two types of panels. A Panel of Preparation Bodies (Panel Badan Penyiapan) pre-qualifies business entities and international institutions that may be appointed to assist a PJPK during the preparation and transaction phases of a KPBU (Article 11 (1) and (2) of the New Procurement Regulation). Meanwhile, a Panel of Business Entities (Panel Badan Usaha) conducts prequalification of business entities that may ultimately be selected as the implementing sponsor (Articles 18(6) and 27(8) of the New Procurement Regulation).

Under Article 5 (1) (d) of the New Procurement Regulation, each panel is formed by the relevant government (as panel owner) through a standalone prequalification exercise. Panels may be organised by sector (for example, railway or airport panels) or by field (technical, financial, or operational and maintenance); each panel must have at least three members; and the panel’s validity is capped at three years. A PJPK that does not own a panel may use another agency’s panel, provided that the panel’s qualification profile fits the KPBU and the panel owner consents. Once a panel is engaged at the project level, panel members are notified of the project, may propose adjustments to the consortium composition to fit the project’s scope, and confirm their participation before the tender or direct appointment commences. Panel members are subject to at least annual performance review under the umbrella contract, and non-performing members may be removed (Appendix IV of New Procurement Regulation).

For international market participants who anticipate bidding on multiple Indonesian infrastructure projects, panel admission is, in effect, a one-off gate. It converts the burden of per-project prequalification into a single upfront exercise and reduces the cost and timeline for pursuing each subsequent project.

 

Concluding Remarks

The New Procurement Regulation is not a wholesale re-architecture of the KPBU procurement framework, but an important recalibration of the mechanisms by which foreign sponsors, contractors, and financiers can engage with Indonesian infrastructure projects. The expressly retained eligibility of foreign legal entities, the fast-track potential of the Swiss Challenge, the direct-appointment carve-outs, and the newly elevated panel system together create a more differentiated toolkit and, in the right cases, may expedite the path to signing KPBU Agreements.

 

 

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their circumstances.