ANALYSIS OF LIABILITY IN GOVERNMENT GOODS AND SERVICES PROCUREMENT CONTRACTS

ANALYSIS OF LIABILITY

IN GOVERNMENT GOODS AND SERVICES PROCUREMENT CONTRACTS[1]

 

Merry Tjoanda

 

Background

In carrying out its role as a developer of public facilities and infrastructure, and as a provider, in this case, of the needs of its citizens, the government requires the private sector to supply goods and services. This creates a legal relationship between the government, as the user, and the private sector, as the provider, which is structured in the form of a contract.

The contracts made by the government are multi-aspect and have a very distinctive character[2]. Although the legal relationship formed between the government and its partners is a contractual relationship, it contains not only private law but also public law. While in commercial contracts the parties have very broad freedom in regulating legal relations or regulating their contractual obligations, in government procurement contracts, this freedom does not fully apply because this contract applies to a special legal regime.

The lack of legal instruments specifically governing commercial contracts by the government is also a factor in the weakness of the procurement system. Theoretically, there are various legal issues regarding government procurement that can be submitted for further study. From a contract law perspective, there are several legal issues that can be submitted as material for study, especially regarding the application of general principles of contract law in government procurement contracts. Starting from the understanding that contracts are a process, attention in the study of procurement contracts is focused in addition to the situation leading to the formation of the contract (pre-contractual phase), also in the situation after the contract is closed (post-contractual phase) or concerning the implementation of the contract. In this regard, it is necessary to have an understanding of the principles of contract law and their application in these two situations.

In the event of ambiguity in the contents of the contract which gives rise to different interpretations, the interpretation is carried out to the detriment of the drafting party. This is what is called contra preferentem rule[3]This situation offers little benefit to providers of goods and/or services. This situation arises from the pressure of public law elements into contractual relationships involving the government.

Based on the facts in government procurement contracts, various obstacles may arise in the implementation of these contracts. This situation can arise due to the government's position as a contractor, with state financial standards hindering contract implementation. Furthermore, this reality is supported by the government's tendency to position itself as a public legal entity in contracts, which often leads to abuse of authority and other unlawful acts. Furthermore, there is the possibility of violations of principles and norms by providers of goods/services, which can give rise to liability in contracts involving the government as the user of the goods/services. Based on the background description above, the problem formulation is: what form of liability is implemented in government procurement contracts?

 

Discussion

1. Government Accountability

According to the Big Indonesian Dictionary, liability means the state of being obliged to bear the burden of everything if something happens, being able to be sued, blamed, prosecuted, and so on.[4]. In the legal dictionary there are 2 (two) terms that refer to responsibility, namely liability liability and responsibility. Accountability (liability/aansprakelijkheid) is a specific form of liability. The definition of liability refers to the position of a person or legal entity that is deemed to be obliged to pay some form of compensation/damages after a legal event or legal action has occurred.[5]

Liability is a broad legal term, which contains the meaning that; liability liability refers to the most comprehensive meaning, encompassing almost every character of risk or responsibility, whether definite, dependent, or possible. Liability defined to indicate; all the characters' rights and obligations. In addition liability liability also a condition of being subject to actual or potential obligations; a condition of being responsible for actual or possible things such as losses, threats, crimes, costs, or expenses; a condition that creates a duty to carry out laws immediately or in the future[6].

The government is a legal subject, as a supporter of legal rights and obligations, which has two legal positions, namely as a representative of a legal entity and a representative of a government office. As a legal subject, the government can carry out legal acts, namely acts that are relevant to the law or acts that can give rise to legal consequences. Thus, every form of legal act will certainly give rise to legal consequences, both positive and negative. Positive legal consequences are not relevant in relation to liability. Negative legal consequences are relevant to liability because they can give rise to claims from parties affected by negative legal consequences. Losses experienced by someone or violations of citizens' rights are examples of negative legal consequences, which generally arise because the government ignores laws that should be implemented or because the government prohibits that should be abandoned. In a state of law, every legal subject, whether the government or citizens, who violates the law or legal subjects whose actions give rise to legal consequences for the state, then the legal subject must return to its original state (herstel in den vorige toestand). 

The government's position as a legal entity and representative of the office, with these two positions will give rise to two forms of legal acts, namely public legal acts and civil legal acts. Public legal acts are acts regulated and subject to the provisions of public law, while civil legal acts are regulated and subject to the provisions of civil law. Because of the existence of these two types of government acts in relation to liability, there are also two types of liability borne by the government, namely public liability and civil liability. In addition to these two types of legal acts, the government often also carries out civil legal acts in relation to public legal authority, meaning there is a mixture of public legal acts and civil law. Therefore, the third type of liability is government liability in using a mixed legal instrument between public law and civil law. 

Accountability (liability) unlawful government actions (onrechtmatige overheidsdaad), attached to both government institutions and individual government officials. Institutional liability attaches when a violation of the law is committed by a government official in carrying out the duties and authority of the government institution and causes harm or suffering to the people. Therefore, the consequences arising from such actions attach to the responsibility of the government institution.

However, if the error is deliberately committed by government officials when carrying out their duties and authorities with arbitrary actions (willekeur) and abuse of authority (detournement de pouvoir) so that it is contrary to the general principles of good governance (algemene beginsselen van behoorlijke bestuur) and causes harm to the people, then personal (individual) liability is attached. Or the error was committed when not carrying out government duties and authorities.

There are two perspectives on mapping the accountability of government institutions and personal (individual) accountability. First, the perspective that focuses on positions, holds that the position attached to an individual (apparatus) is an institutional position, so that in carrying out their duties and authority (power of office) they represent the institution. Therefore, mistakes in carrying out their position are institutional mistakes, and the institution is liable for all risks of official actions. This, as stated by Logemann, is to ensure that it can run (= become concrete (specific) = to be useful for the country), then the position (as the personification of rights and obligations) requires a representative (vertegen woordiging)[7]. The person carrying out this representation is an official, namely a person or legal entity. Therefore, what is in power is not the person, but the position. Therefore, the person or person is an official who represents a position, namely carrying out a permanent work environment for the benefit of the state.[8].

Second, the view that is closer to the accountability of actions, that in carrying out actions, a person will be held responsible for what is done, whether it is done intentionally or due to negligence. Thus, in carrying out the work of a position in concrete terms, it is greatly influenced and determined by the personal condition of the person (individual) who receives the position, so that the consequences of his actions are not solely the responsibility of the position or institution, but rather are attached to personal accountability.

Government liability in goods and services procurement contracts is a legal remedy that can be taken by the goods and services provider (private party) as a result of losses incurred by one of the parties in the contractual relationship (privity of contract). This concept of liability is a result of a mistake made by one party against another party which can be in the form of default or breach of promise and unlawful acts (onrechtmatigedaad).

 

Liability Under Private Law

1. Default

A reciprocal contract always creates an active and a passive side. The active side creates the right for the creditor to demand fulfillment of the performance, while the passive side creates an obligation for the debtor to fulfill the performance. Under normal circumstances, performance and counter-performance are exchanged, but under certain conditions, the exchange of performance does not proceed as intended, resulting in an event called a breach of contract. Violations of these contractual rights give rise to an obligation to compensate for the breach of contract as regulated in Article 1236 of the Civil Code (for performance to provide something) and Article 1239 of the Civil Code (for performance to do something).

In practice, contract drafting often includes clauses with the contents as mentioned above, for example 'fatale termijn', so that if the debtor fails to fulfill one of the contractual obligations, a default automatically occurs. Typically, to address this situation, a contract termination clause is included as a possible sanction the creditor may take.

According to Article 93 of Presidential Regulation Number 54 of 2010, the Commitment Making Officer can unilaterally terminate the contract if:

1. fines for delays in carrying out work due to errors by the Goods/Services Provider have exceeded 5% (five percent) of the Contract value;
2. The Goods/Services Provider is negligent/in default in carrying out its obligations and does not correct its negligence within the specified time period;
3. The Goods/Services Provider is proven to have committed corruption, collusion and nepotism, fraud and/or forgery in the Procurement process as decided by the authorized agency; and/or
4. Complaints regarding procedural deviations, alleged corruption, collusion and nepotism and/or violations of fair competition in the implementation of the Procurement of Goods/Services are declared correct by the authorized agency.

One of the conditions for terminating a contract according to Article 1266 of the Civil Code is that there must be a default, therefore before the creditor demands termination of the contract, the debtor must be declared negligent (statement of negligence/ ingebrekesteling)[9]. Article 1266 of the Civil Code is waived through Article 93 of Presidential Regulation Number 54 of 2010, thus the termination of the contract is declaratory, meaning the termination of the contract due to default without the need for a statement of negligence. In implementing a contract, there are potential obstacles to its implementation, such as force majeure and difficult circumstances.

In the event that the contract is terminated due to an error by the goods/services provider, the sanctions imposed on him/her are: the performance guarantee is forfeited; the remaining down payment must be paid in full by the goods/services provider or the down payment guarantee is forfeited; the goods/services provider must pay a fine; and/or the goods/services provider must be included in the Black List.

Based on the principle of proportionality, the sanction must be interpreted as optional, not cumulative, which is assessed based on the error of the goods/services provider which is proportionally appropriate to be used as a reason for terminating the contract.

 

2. Act against the law

The term "unlawful act" is generally very broad in meaning, that is, if the word "law" is used in its broadest sense and legal acts are viewed from various aspects. The term "unlawful act" is a translation of the term "unlawful act" in Dutch which generally has a narrow meaning, namely the meaning used in Article 1365 of the Civil Code.

In relation to unlawful acts by private legal entities based on:

1. Fiction theory; that a legal entity is likened to a human being separate from the human being who is its administrator, therefore legal acts carried out by its administrator cannot be said to be legal acts but rather the actions of another person who can be held responsible to the legal entity.[10].
2. Organ theory; according to this theory, a legal entity is the same as a natural person, capable of carrying out legal acts. If a violation occurs, the legal entity can be held accountable.
3. Theory juridical realityAccording to this theory, a legal entity is a legal reality, formed and recognized in the same way as a human being. Therefore, it can be held accountable for all legal actions.

Thus, based on the fictional theory, private legal entities cannot be sued under Article 1365 but under Article 1367 of the Civil Code. Meanwhile, based on the organ theory and the legal theory, juridical reality, private legal entities can be sued under Article 1365 of the Civil Code. In civil law, provisions regarding the liability of legal subjects, including the government in its capacity as a representative of a legal entity, are contained in Articles 1365, 1366, and 1367 of the Civil Code.[11].

In the implementation of goods and services procurement contracts, sometimes there are also unlawful acts committed by the parties. Although a contractual relationship that does not run well results in a breach of contract, in the implementation of goods and services procurement contracts, it can also occur on the basis of unlawful acts. With the existence of power and authority that is quite broad covering all aspects of community life, the government still uses power according to public law which is an action or deed that is contrary to its legal obligations or the requirements that must be observed in social interactions or other unlawful acts. Of course, the contractual relationship in goods and services procurement contracts applies the principle pacta sunt servanda which is binding for the parties, however the statutory regulations which are the basis for implementing the contractual relationship can also be used as a legal basis in the contractual relationship in question.

In relation to unlawful acts, those responsible must be held accountable for the losses incurred. Losses incurred as a result of errors committed by government officials must be distinguished as personal errors or official errors. Tatiek Sri Djatmiati[12] describe the difference between liability for personal mistakes (faute personnel) and liability for errors in service (service fee).

Legal liability resulting from unlawful acts that result in losses must first be examined as a result of personal error or misuse of authority. This will determine whether the losses are a personal burden for the official concerned or a governmental one.

 

Closing Event

The liability of the parties in a procurement contract is a legal remedy that can be taken by the parties as a result of losses incurred by one of the parties in the contractual relationship (privity of contract). This concept of liability is a result of a mistake made by one party against another party which can be in the form of default or breach of promise and unlawful acts (onrechtmatigedaad). In relation to unlawful acts by the government, a distinction must be made between personal errors and official errors.

 

 

 

 

 

Register Reading

 

Black, Henry Campbell, Black's Law Dictionary, Fifth Edition, ST. Paul Minn, West Oublishing Co., USA, 1979.

Boggiano, Antonio, International Standard Contracts, Graham & Trotman/Martinus Nijhoff, Dordrecht, 1991.

Djatmiati, Tatiek Sri, Principles of Industrial Business Licensing in Indonesia, Dissertation, Postgraduate Program, Airlangga University, Surabaya, 2004.

Hernoko, Agus Yudha, Proportionality Principle in Commercial Contracts, Leksbang Mediatama, Yogyakarta, 2008.

Marzuki, Peter Mahmud, Introduction to Legal Science, Kencana Prenada Media Group, 2009.

Muhammad, Abdulkadir, Law of Contracts, Alumni, Bandung, 1982.

Poerwadarminta, WJS, General Dictionary of Indonesian, Jakarta, 1976.

Ridwan, State Administrative Law, UII Press, Yogyakarta, 2002.

Simamora, Yohanes Sogar, 2009, Law of Contracts, Legal Principles of Government Procurement Contracts for Goods and Services, LaksBang Pressindo, Yogyakarta. 

Tiefer, Charles and Shook, William A., Government Contract Law, Carolina Academic Press, Durham, North Carolina, 1999.

Utrecht, E., Introduction to Administrative Law of the Republic of Indonesia, Tinta Mas Library, Surabaya, 1986.

 

Legislation :

Civil Code

Presidential Regulation of the Republic of Indonesia Number 54 of 2010 concerning Government Procurement of Goods and Services