THE EFFECT OF E-PROCUREMENT ON THE INFRASTRUCTURE PROVISION IN INDONESIA

Physical infrastructure, particularly roads, has become a crucial element for the government of Indonesia in developing its economy. However, weak control by the central government, due to decentralization and the complexity of the works, has led to inefficiency, ineffectiveness, and a high likelihood of corruption. To tackle these issues, the government has introduced the electronic procurement (e-procurement) system. This paper develops a dataset on national road projects under full and semi e-procurement systems, and examines the effect of the use of e-procurement on contract prices. It will show that the full e-procurement system significantly reduces the price of the contracts. However, lower prices do not guarantee quality of work. Therefore, the government should consider putting quality measurement in the system to increase transparency and public scrutiny. In addition, to further reduce transaction cost and increase the effectiveness and efficiency of the public procurement process, the government could apply e-contracting and e-payment to the procurement system. Physical infrastructure, particularly roads, has become a crucial element for the government of Indonesia in developing its economy. However, weak control by the central government, due to decentralization and the complexity of the works, has led to inefficiency, ineffectiveness, and a high likelihood of corruption. To tackle these issues, the government has introduced the electronic procurement (e-procurement) system. This paper develops a dataset on national road projects under full and semi e-procurement systems, and examines the effect of the use of e-procurement on contract prices. It will show that the full e-procurement system significantly reduces the price of the contracts. However, lower prices do not guarantee quality of work. Therefore, the government should consider putting quality measurement in the system to increase transparency and public scrutiny. In addition, to further reduce transaction cost and increase the effectiveness and efficiency of the public procurement process, the government could apply e-contracting and e-payment to the procurement system.