Introduction

In Indonesia’s national development plan (RPJMN), infrastructure is divided into economic, social, and supporting categories, each prioritized to enhance connectivity, economic productivity, and social welfare. Traditionally, provision relied on conventional procurement (PBJ) funded by the state budget (APBN), where government agencies directly contracted private firms under strict regulations. Yet, fiscal constraints and rising demand have made this model insufficient. To address the gap, Indonesia increasingly turns to Public–Private Partnerships (PPPs), which enable private entities to finance, build, and operate infrastructure under long-term arrangements, thereby complementing conventional PBJ.

Globally, PPPs are viewed as governance instruments that combine public oversight with private sector efficiency, optimizing resources and sharing risks. Recent scholarship underscores their role in stakeholder coordination and sustainable development (De Matteis et al., 2024). In Indonesia, PPPs serve not only as financing tools but also as policy instruments to accelerate infrastructure delivery—particularly toll roads, which are vital for reducing logistics costs and spurring regional growth (World Bank, 2018).

The governance of PPPs in Indonesia is supported by a layered regulatory framework. Presidential Regulation (Perpres) No. 38 of 2015 establishes core PPP principles—transparency, fairness, competition, and Value for Money (VfM)—while LKPP Regulation No. 29 of 2018 sets detailed procurement procedures for private entities. Sector-specific rules strengthen this framework: Ministry of Public Works and Housing Regulation (Permen PUPR) No. 01/PRT/M/2017 regulates toll road PPP procurement, and Government Regulation (PP) No. 23 of 2024 consolidates toll road governance, aligning sectoral rules with national PPP policy objectives. Together, these instruments provide standardized processes while balancing investor attractiveness and public accountability.

Nevertheless, regulations alone cannot secure effective outcomes. As Song et al. (2023) note, PPPs require governance mechanisms that go beyond financial structuring to protect the public interest. Central to this is the concept of VfM, which ensures projects deliver optimal benefits relative to costs. Yescombe (2011) argues that PPP procurement is justified only when it demonstrates superior VfM compared to conventional methods. Recent evidence suggests that VfM assessments often overemphasize cost savings at the expense of broader measures such as service quality and sustainability (Zhao et al., 2023). Without robust VfM analysis, PPPs risk being perceived as costly financing arrangements rather than legitimate governance tools.

The procurement stage is especially decisive, as it sets contract design, risk allocation, and performance standards. Inadequate oversight here undermines VfM, leading to inefficiencies or poor service delivery. Recognizing these challenges, the Badan Pemeriksa Keuangan (BPK), Indonesia’s Supreme Audit Institution (SAI), has expanded its audit scope beyond conventional APBN-funded procurement to include PPP projects. This marks a significant novelty, as PPPs—unlike conventional procurement—rely on more flexible regulatory mechanisms to attract private investment. Such flexibility, while necessary, creates accountability risks, making audits essential not only to safeguard transparency but also to ensure PPPs deliver real VfM for the public.

Methods

Methods This study employs a qualitative case study of toll-road PPP projects in Indonesia, drawing on anonymized audit evidence. It examines how BPK’s procurement audits enhance transparency, accountability, and value for money (VfM). Audit findings, recommendations, and challenges are analyzed against theoretical and regulatory frameworks to show how audits can address governance gaps and foster institutional learning. In this way, the study highlights the evolving role of SAI as both compliance watchdogs and enablers of better procurement practices.

Case Study

Between 2015 and 2020, Indonesia experienced a substantial expansion of toll road development under the PPP framework, resulting in the successful construction of 476.33 kilometers of new toll roads. This achievement was further reinforced by the toll road quality index reaching 4.6 out of 7, placing it among the best and underscoring the effectiveness of PPPs in delivering both quantity and quality in infrastructure provision (ADB, 2020). The procurement of these projects was regulated by Perpres No. 38 of 2015 on PPPs and its implementing ministerial regulations, which set out principles of transparency, accountability, competition, and VfM. Within this regulatory environment, the BPK initiated audits to examine whether toll road PPP procurements adhered to these principles while also meeting legal and technical requirements. The audit design combined compliance and performance evaluation, focusing on sequencing of procurement processes, fairness of competition, and the adequacy of cost benchmarking—particularly through the preparation and use of the Owner’s Estimate (OE). As a reference for audit practice, it is important to define the essential elements of an ideal PPP procurement process within Indonesia’s regulatory framework and also guided by international standards issued by the International Organization of Supreme Audit Institutions (INTOSAI), particularly the Performance Audit Standard (ISSAI 3000) and the Compliance Audit Standard (ISSAI 4000).

Guided by the principles set out in Perpres No. 38/2015, such a process must safeguard public accountability, ensure fair competition, and secure VfM. The following table summarizes the key dimensions that should be present in every PPP procurement to strengthen governance and ensure auditability.

Table 1. Key Elements of PPP Procurement

The anonymized cases of three toll road projects—X, Y, and Z—illustrate typical governance challenges that arise in PPP procurements based on BPK’s audit report (2024). The use of anonymized labels is intended to safeguard the confidentiality of the audited entities and project details, in line with prevailing audit regulations and ethical standards. This ensures that the analysis focuses on systemic governance issues rather than attributing shortcomings to specific parties, while still providing valuable lessons for policy and practice. To provide clarity, the cases are summarized in the following table:

Table 2. Summary of Cases

From these cases, BPK issued several key recommendations. The sequencing of procurement must strictly follow legal requirements, ensuring that prerequisites such as Location Determination are fulfilled before tendering begins. The preparation and use of the OE should become a mandatory benchmark for negotiations, supported by transparent documentation and rigorous evaluation. Furthermore, secure and dual-format (digital and physical) archiving systems are necessary to preserve procurement records and safeguard auditability. Beyond technical fixes, the findings carry important policy implications. They underscore the need for closer alignment between regulatory provisions and procurement practices, institutional strengthening in cost evaluation and negotiation, and improved document governance. For BPK, this represents not only an expansion of its audit mandate—traditionally focused on conventional procurement financed by the state budget (APBN)—but also a novelty in its oversight role. By extending audits to PPP projects, BPK helps ensure that accountability and governance extend equally to infrastructure funded through private capital participation, thereby reinforcing public trust and advancing more sustainable procurement practices in Indonesia’s toll road sector.

Lesson Learned, Challenges and Opportunities

From these cases, several lessons can be drawn that are relevant not only for Indonesia but also for other SAIs conducting procurement audits in PPP contexts. First, procurement stages must be sequenced properly, as premature tendering exposes projects to route changes, cost escalation, and contractual risks. Second, the use of OE and data-driven analysis is vital to ensure price reasonableness, negotiation credibility, and transparency in tariff and concession arrangements. Third, systematic documentation and archiving are essential to provide a reliable audit trail and institutional memory across the long lifecycle of PPP contracts. These lessons highlight that procurement audits, when well executed, serve not only as compliance checks but also as instruments for strengthening governance and safeguarding value for money.

Nevertheless, auditing PPPs in Indonesia presents considerable challenges. The large number of operational toll roads compared to the limited pool of qualified auditors necessitates prioritization, leaving some risks insufficiently examined. The complexity of PPPs—shaped by diverse legal, financial, technical, and socio-political factors—demands a multidisciplinary approach and significant resources, while incomplete documentation such as missing OE weakens VfM assessments. At the same time, opportunities are emerging: refinements in Indonesia’s PPP regulatory framework, growing institutional capabilities, and lessons from international best practices (e.g., UK, Canada, Australia) provide pathways to strengthen audit methodologies. Furthermore, the adoption of integrated assurance models, where oversight bodies coordinate and share results, can reduce duplication and enhance accountability, ensuring more holistic governance of PPP infrastructure projects.

Conclusion and Way Forward

In conclusion, the Indonesian experience with PPP procurement audits demonstrates both the promise and the complexity of embedding accountability and VfM into infrastructure delivery. While the regulatory framework anchored in Perpres No. 38/2015 provides a solid foundation, practical implementation reveals persistent weaknesses in sequencing, documentation, and cost benchmarking that expose projects to financial and governance risks. The BPK’s expansion into PPP audits marks a significant step in aligning oversight with evolving procurement models, reinforcing the principle that public accountability must extend equally to projects financed through private capital. By learning from anonymized case studies and integrating best practices from other jurisdictions, Indonesia can strengthen its audit methodologies, foster institutional learning, and ensure that PPPs fulfill their intended role as instruments of sustainable infrastructure provision that serve the broader public interest.

References

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