As mandated under Law No. 2 of 2017 on Construction Services (“Law 2/2017”),1 the Government recently issued Regulation No. 22 of 2020 on the Implementing Regulation to Law No. 2 of 2017 on Construction Services (“Regulation 22/2020”) in order to set out more technical, detailed stipulations relating to construction services, including:2
- Responsibilities and authorities of the government;
- Business structures of construction services;
- Market segmentation of construction services;
- Organization of construction-service business;
- Development;
- Organization of public participation; and
- Procedures for the imposition of administrative sanctions.
However, due to the wide scope of Regulation 22/2020, this article will focus its discussion on points (3) and (4) above.Market Segmentation of Construction Services.
Under Regulation 22/2020, the market for construction-service businesses is segmented based on several criteria, as follows:3
- Risk, which is determined based on the following aspects: a) Scope of work; b) Location of work; and c) Workforce demand;
- Technology, which is determined based on the following aspects: a) Materials; b) Equipment; c) Experts; and d) Implementation methods; and
- Cost, which is defined as the amount of money required to complete a given job. In terms of the abovementioned criteria, the company types and market segmentations for construction
services break down as follows:
Small Companies are only allowed to handle low-risk construction services which utilize simple technologies and which involve low costs; and are only allowed to handle construction works within their areas of expertise.
Medium-sized Companies are only allowed to handle construction services which are medium-risk in nature, which utilize average technologies and/or which involve medium costs.
Large Companies and Representative of Foreign Construction-Service Companies are only allowed to handle construction services which are high-risk in nature, which utilize advanced technologies and/or which involve high costs.
Despite the market segmentations outlined above, Regulation 22/2020 still allows for small and medium-sized construction companies to engage in medium- and high-risk construction works if they employ the required experts.
It is important to note that Regulation 22/2020 requires all construction-service companies to secure business certificates. These certificates may be obtained through certification processes that are organized by certification agencies established by accredited construction business associations, as well as through registration processes that are organized by the Minister of Public Works and Public Housing. Once issued, such certificates remain valid for three-year periods and are extendable.
Regulation 22/2020 has been in force since 23 April 2020.