19th Asia Construct Conference 2013

THE CONSTRUCTION SECTOR OF INDONESIA*

Akhmad Suraji1
1
Research Specialist on Construction & Infrastructure Management, University of Andalas Indonesia
1
Secretary of R&D Committee, the Construction Services Development Board, Indonesia

akhmadsuraji@yahoo.co.uk

1. EXECUTIVE SUMMARY
Economic growth of Indonesia has increased from 6.10% in 2010 to 6.5% in 2011. It is
expected this year (2012) is about 6.3% - 6.7% and up to 7.4% (2016) (Central Bank of
Indonesia, 2012). The construction growth sligtly decreases from 7.0% (2010) to 6.4% (2011),
but it is expected to grow between 8.2% – 8.6% in this year. The contribution of construction
sector to GDP is 756.5 Trilion IDR (2011) and 410.1 Trillion IDR (Sem-I 2012) based on
current price and 160.1 Trillion IDR (2011) and 82.8 Trillion IDR (Sem-I 2012) under
constant price (2000). CBS (2012) also published that the contribution of construction sector
to GDP is 9.9% (2009), 10.3% (2010), 10.2% (2011) and 10.2& (Sem-I 2012). The growth of
GDP of construction sector is 7.2% from Sem-I 201 2011 to Sem-I 2012. In the next
following years until 2014, the volume of construction market will increase dramatically.
Under the new masterplan of economic development (2011 – 2025), the Government
estimates almost 2,000 Trillion IDR of infrastructure investment to boost economic growth
under the new six economic corridors across archipelago (MP3EI, 2011). The market covers
various infrastructures both under government funds and state owned companies as well
public privarte partnership financing schemes. For the fiscal year 2012, the goverment
spending for infrastructure provision accounts for almost 200 Trillion IDR and the next
coming year accounts for 380 Trillion IDR (2013) in which public work projects covering
road networks, water resources and human settlement will get the public funding almost 86
Trillion IDR (2012).

2. MACRO ECONOMY REVIEW & OUTLOOK

2.1 Overview of National Economy

The Indonesian economy is growing significantly since it was hit by Asia economic
crisis in 1997 and global financial crisis in 2008. Now it is considered to be in stable
state and to growth at 6.06% (2008) but it slightly decreases at 4.5% (2009) and then
increases 6.10% (2010) then 6.5% (2011). During the last five years, economic of
Indonesia were increased by 5.5% (2006), 6.3% (2007), 6.0% percent (2008), 4.5%
(2009), 6.10% (2010) and 6.5% (2011). This year, t is expected to grow 6.3% – 6.7%.
Furthermore, the value of GDP at current prices in 2011 Q-III was IDR 1,921.6 trillion
and increased in the year 2012 Q-III to become IDR 2,050.1 trillion. In the third quarter
of 2011, GDP at constant prices was IDR 632.4 trillion and in the fourth quarter of 2011
was IDR 624.0 trillion. The growth of GDP without oil and gas in the period of quarter I
(2012) was IDR 632.8 trillion and in the quarter II was IDR 650.6 trillion (CBS, 2012).
Other component of GDP which has significant contribution to GDP is Gross Fixed
Capital Formation (GFCF) and export of goods and services. The growth of GFCF is
expected 9.6% - 10.1% in 2012. The growth of GFCF in the period of quarter II (2012)
over quarter II (2011) was 12.3%. The growth of export of goods and services is 10.9%
of 2012 Q-II over 2011 Q-II (CBS, 2012) and decreased as compared to 17.4% in the
period of quarter II (2011) over quarter II (2010) (CBS, 2011).

*
This paper is updated from the country paper presented in the 18th Asia Construct, 2012
 19th Asia Construct Conference 2013

The business trend index of economic sectors shows a better condition. In second quarter
of 2011 was 105.75 while in the fourth quarter was 106.92. Meanwhile in the first
quarter 2012 was 103.89 and in the second semester was 104.22. It shows that business
condition in general is sligtly stable. This business condition is growing better since
increased revenue due to increasing production capacity and number of working time.
Higher business revenue occurs in the finance sector, property and services. The higher
increased workforce occurs in the construction sector. The highest business index is
111.51 occuring in the construction sector in 2011 but it decreases to 104.83 in 2012 Q-II.
It shows that this sector is the among decreasing sectors in 2012 compared to 2011.
However, the agriculture sector has increased its index from 98.14 in 2011 Q-IV to
111.31 in the first quarter 2012 but decreasing to 106.15 in the second quarter 2012.
Overall, the business trend index during first quarter of 2012 was 103.89 and then grow
up to 104.22 in the second quarter. In the first semester 2012, business condition in the
construction sector increased from 98.53 (2012 Q-I) to 104.83 (2012 Q-II).

2.2 Main Economic Indicators

The Indonesian economy is in a stable shape towards increased growth. The Indonesian
gross domestic product for 2004 in constant 2000 real prices was RP. 1511 Trillion which
represents a 1.03% increase on the previous year. To January 2005 the gross domestic
product grew at an annual rate of 5.13% in Central Bureau of Statistics data (CBS,
Economic Indicators, January 2005). During the same period the consumer price index
standing at 118.53 in January 2005 grew by only 1.43 points against 0.57 the previous
year (2002=100). The interest on 90-day bank deposit bills was 6.65% in October and the
10-year Treasury Bonds returned 8.31%. Rising cost of materials including that for crude
oil leading to an increase in inflation from 5.06% in 2003 to 6.4% in 2004 and the
cyclical Rupiah devaluation of 20% against the US$ has forced the government to
instigate minimization of energy consumption, spending and subsidy provisions
nationwide. The unemployment rate however, increased from 15% in 2003 to 16% in
2004. Despite current uncertainties about the international economy and the downturn in
balance of payments from US$28.6 Billion in 2003 to 23.5 Billion in 2004, the rate of
economic growth is forecasted to continue to the end of 2010 at 6 % while construction
growth is expected to achieve 7 – 8% in 2011, with the domestic economy proving to be
relatively resistant to adverse global economic conditions. The inflation rate was higher in
2008 (11.06%), then decreased 2.78% in 2009 and 6.96% in 2010. This year, the inflation
rate is forecasted about 4.42%. Table 1 and Table 2 show that main economic indicators.
As shown in Table 2, the construction sector growth is very better since the Asia
economic crisis. The growth is expected to increase since the government launched of the
new masterplan of economic development 2011 – 2025 in which infrastructure
development becoming a key strategic role of the national economic development
(MP3EI, 2011). Under this new masterplan, there are six economic corridors across the
nation with its very specific target of development.

Table 1. Main Economic Indicators

Indicators 2007 2008 2009 2010 2011 2012 (fc)

Economic Growth (%) 6.28 6.06 4.5 6 6.5 6.3 – 6.7
Construction Growth (%) 10.40 10.50 7.95 7.3 7.4 8–9
Inflation (%) 6.59 11.06 2.78 6.96 3.8 4.5 – 5.5
Foreign Exchange
9.300 10.895 9.353 8.946 9.010 9.400
(Rp/US$)
Source: Central Bank of Indonesia, Finance Ministry of RI, www.oilprice.net (2009) Updated (2012)
 19th Asia Construct Conference 2013

Table 2. Macro Economic Development Indicators

(1,000,000 IDR)
INDICATORS
2008 2009 2010 2011 2012 2013* (fc)
GDP at constan prices 2000 Rp. Billion 2,412,076 2,050,100 709,507.4
2,082,104 2,165,388 2,286,650
GDP at current market price 6,165,836 7,020,000 2,375,330.9
4,954,029 5,152,190 5,440,713
GDP growth (%) 6.50 6.4 5.83+
6.06 4.00 5.6
GDP growth (%) for agriculture, forestry and 6.16
fishery sector 4.77 3.57 2.9 3.4 3.9
GDP growth (%) for manufacturing sector 5.0 6.3 5.55
3.66 4.38 3.6
GDP growth (%) for services sector 7.0 7.7 2.91
6.45 6.09 4.6
GDP growth (%) for mining sector 4.6 5.0 0.31
0.51 1.86 3.5
GDP growth (%) for construction sector 5.3 5.6 6.53
7.31 7.95 7.3
GDP growth (%) Financial, Ownership and 2.20
Business Services 8.24 7.10 5,5 7.3 8.0
GDP growth (%)Transportation and 3.28
Communication 16.69 14.43 11.9 13.8 15.1
GDP growth (%)Trade, Hotel and Restaurant 7.9 9.2 6.35
7.23 7.59 9.3
GDP growth (%)Electricity, Gas and Water 5.80
Supply 10.92 8.33 7.2 4.2 4.2

Population (number) 227,779 230,633 237,556 241,417 244,775

Population growth rate (%) 1.62 1.39
0.95 1.25 2.9
Labour force (number) 109,67 112,80
111,879 113,852 116,000
Labour force growth rate (%) (5,4) 2,8
1.76 1.76 1,9
Unemployment rate 7,700,220 7,610,000
9,427,590 9,258,964 8,595,600
Unemployment growth rate (%) (10.42) (1.17)
(10.62) (1.79) (7.16)
Inflation rate 5.38 4.23
10.31 6.02 5.67
Short term interest rate (%) 16.62 17.12 17.56 17.58 18.00
Long term interest rate (%) 13.90 14.87 15.18 15.27 16.00
Changes in Consumer Price Index (2007=100) 170.18 186.16 118.37 114.59 131.92
Average change against USD$ 10,895 10,150 8,950 9,200 9,500
Source: CBS (2009, 2010, 2011, 2012, 2013) & Central Bank of Indonesia (2009, 2010, 2011, 2012, 2013)

3. OVERVIEW OF THE CONSTRUCTION INDUSTRY

3.1 Construction Investment
The construction value completed can be seen in Tabel 3. The Government of Indonesia
has expressed her desire to speed up infrastructure development in order to accellerate
economic growth to levels of 7.8% through increasing the ratio of Investment to GDP to
28.4% from 19.6%, opening new job opportunities to reduce unemployment and poverty
alleviation to 5.1% and 8.2%. The above investment driven development plan can be
seen in Table 4 which depicts infrstructure demand between 2005-2009 to be Rp.145
Trillion or US$15.825 Billion. A more accurate picture can be obtained in Table 5 which
illustrates for construction investment and maintenance demand in the Department of
Public Works to total Rp.73.59 Trillion; broken into Bina Marga (Roads and Bridges)
Rp.21.27 Trillion, Sumber Day Air (Water Resources) Rp.34.53 Trillion, Cipta Karya
(Human Settlements) Rp.14.60 Trillion, and Other Public Works Rp.3.18 Trillion.
 19th Asia Construct Conference 2013

Table 3. Value of Construction Completed by Type of Construction

2006 – 2011 Based on Contract Price (CBS, 2011)
(1,000,000 IDR)
TYPE OF CONSTRUCTION 2006 2007 2008 2009 2010 2011*

1 Residential 9,305,172 9,305,172 11,263,484 12,448,707 13,758,648 15,206,431

2 Non residential 22,069,558 23,528,407 29,613,637 34,421,939 40,010,954 46,507,445

3 Electrical installation 3,363,393 3.563,451 3,775,409 3,999,974 4,237,897 4,489,972

Gas and Water supply

4 371,544 319,911 275,453 237,173 204,214 175,834
installation

5 Sanitary installation 194,926 184,447 296,659 477,137 767,413 1,234,285

6 Foundation 850,095 625,198 1,127,658 2,033,936 3,668,572 6,616,935

Sound system, AC, lift,

7 1,268,817 1,476,285 1,261,856 1,273,379 1,285,008 1,296,742
etc

8 Water supply network 512,374 538,055 681,455 789,341.97 914,309.44 1,059,061.58

Oil and Gas pipe

9 648,546 646,127 1,031,995 1,338,225 1,735,324 2,250,257
network

10 Electricity network 1,027,867 2,406,148 3,653,882 7,051,032 13,606,640 26,257,240

11 Road and bridge works 19,897,065 21,008,143 25,345,791 28,670,093 32,430,404 36,683,909

12 Irrigation/drainage 4,553,470 5,392,472 6,999,582 8,687,475 10,782,390 13,382,477

Electric power supply

13 and Telecomunication 1,137,230 458,105 218,031 103,770 49,388 23,506
Network
Construction or
14 improvement of airport, 1,598,572 1,513,014 1,112,716 1,053,162 996,795 943,445
harbor, bus station, etc

Other construction
15 5,144,678 6,180,386 7,827,060 9,402,775 11,295,708 13,569,719
works

TOTAL
71,943,309 79,391,287 94,484,668 111,988,121 135,743,665 169,697,259

Source: CBS (2009)

 19th Asia Construct Conference 2013

Table 4. Source of fund for construction projects 2012 (Natsir, 2012)

No Source of Fund Procured in 2012 Progress in 2012
(Million Rp)

1 NATIONAL BUDGET FOR PW 71,667,107 55,653,800

2 NATIONAL BUDGET FOR NON PW 57,266,604 31,605,713
3 LOCAL BUDGET 10,862,957** 11,917,551**
4 STATE OWNED CO 107,641,153 93,971,416
5 LOCAL GOV COMPANIES 104,391** 358,958**
6 DOMESTIC INVESTMENT 59,29,458 21,978,306
7 FOREIGN INVESTMENT 35,432,656 8,491,582
8 JOINT INVESTMENT 145,822,700 25,940,013

TOTAL 488,092,026 249,917,339

Source: PusbinSDI (2012)

** Under Updating

Table 5. Construction Investment Plan under PPP Projects (PPP Books, 2011)

Source: PPP Books (2011)

 19th Asia Construct Conference 2013

Public works investment is one of key government plan to deliver roads, water resources
and human settlement infrastructures. Tabel 5 shows public works invesment plan for the
period of 2010 – 2014. The road construction projects have higher priority funding, then
water resources project such as irrigations, dams and river engineering projects. However,
the human settlement projects covering sewerages, waste treatments and water supply are
also among the prioritised public work projects.

Table 6. Public works investment plan (2010 – 2014) (IDR Trillion)

YEAR
Public
No Total
Works
2010 2011 2012 2013 2014

Water
1. 11.468 14.908 19.320 25.125 32.679 103.500
Resource

2. Roads 20.102 24.360 30.033 37.061 45.344 156.900

Human
3. 9.081 11.033 13.413 15.964 19.509 69.000
Settlements
Source: Center for Strategic Studies, the Ministry of Public Works (2010)

3.2 Construction Companies

According to Law No. 18/1999, construction company consists of consulting and
contracting company. Consulting company can be designer and also supervison engineer.
Most of construction companies are small medium enterprises.

Table 7. The Number of Construction Companies including Consulting Companies

CONSULTING COMPANIES CONTRACTING COMPANIES
NO QUALIFICATION
NUMBER % NUMBER %

1 LARGE 449 7 1,742 1

2 MEDIUM 264 4 21,032 12

3 SMALL 5,892 89 160,026 87

TOTAL 6,605 100 182,800 100

Source: NCSDB (2012)

The number of foreign construction companies has been increasing since a couple of
years ago. In the year (2011), the number of foreign contracting companies registered in
Indonesia is 128 firms mostly coming from Japan and the number of consulting
companies registered in Indonesia is 78 companies, and the number of EPC contractors is
23 companies. The consulting companies are mostly also coming from Japan dan China
as well as Korea. The number of contractors from China now increases up to 39 firms.
While 5 contractors of India also already expanded their business in Indonesia. In this
year, the number of foreign construction companies increased.
 19th Asia Construct Conference 2013

Table 8. The Number of Foreign Construction Companies

Year 2007 2008 2009 2010 2011 2012

ASEAN 10 14 14 14 16 16

NON-ASEAN 108 181 184 193 237 239

Total 118 195 198 207 253 255

Source: PusbinUK (2012)

Table 9. The Origin of Construction Companies in Indonesia

Tahun 2005 2006 2007 2008 2009 2010 2011 2012
Japan 32 80 55 77 75 74 80 80
China 0 9 25 30 32 32 39 39
Korea 5 11 11 19 26 33 57 60
India 2 2 1 0 0 1 5 5
Source: PusbinUK (2012)

3.3 Construction Employees and Workforce

Total number of registered engineers is about 106,283 professional engineers (2008). The
following table 6 shows the distribution of certificate held by professional engineers
according to their expertise.

Table 10. The Number of Professional Engineer

ENGINEER
QUALIFICATION
JUNIOR

SENIOR

MASTER
APPRENTICE

TOTAL

Electrical
Engineer 165 5,225 3,869 433 9,692
Landscaping
Designer 327 4,423 1,099 213 6,062
Civil Engineer 4,841 58,368 18,182 1,917 83,308
Mechanical
Engineer 62 2,282 710 74 3,128
Other 37 253 438 71 799
Architecture 265 1,268 1,497 264 3,294
Total 5,697 71,819 25,795 2,972 106,283

Source: NCSDB (2008).

 19th Asia Construct Conference 2013

The number of workforce working in the construction sector is more than 5 million
people in average. The following table 7 shows annual number of construction workers.

Table 11. The number of construction workforce

Year 2007 2008 2009 2010 2011 2012
Construction
Labour 5,252,581 5,547,324 5,858,606 5,590,000 6,340,000 6,100,000
Source: CBS (2012)

3.4 Construction Cost

Indonesia is a large country with high diversity. It is very difficult to get a standard figure
of construction cost across archipelago. In Jakarta, skill worker may have 100,000 rupiahs
daily wage while in other regions such as Yogyakarta only 40,000 rupiahs. It is similar to
natural material price such as sand and stone. In Central Java where sand and cobble
stone are easier to get, the cost of sand is roughly 70,000 up to 90,000 rupiahs for 1 m3. It
is quite common to buy a truct of sand which is about 2.5 – 3.5 m3 will cost about
300,000 up to 350,000 rupiahs.

REFERENCES
1. Central Berau of Statistic (2011), Economic Indicators, Jakarta
2. Central Berau of Statistic (2010), Economic Indicators, Jakarta
3. Central Bank of Indonesia (2009), Annual Report of National Economy, Jakarta
4. Central Bank of Indonesia (2010), Annual Report of National Economy, Jakarta
5. Central Berau of Statistic (2007), Economic Indicators 2007, Jakarta, Indonesia, June, 2007
6. Mulyo, SS & Abidin, IS (2007), Construction Market in Indonesia, Japan - Indonesia Seminar II,
Department of Public Works, Republic of Indonesia, Jakarta.
7. Public Works Department (2008), Program and Target Development, Jakarta
8. Suraji, A (2007), The Indonesian Construction 2030, National Construction Services
Development Board, Jakarta
9. Wuryanti, W (2005) Cost Index Component of Reinforce Concrete & Composite for
Building Construction (in Indonesian), Seminar, Institute for Research & Development,
Ministry of Public Work, Jakarta.
 STRENGTHENING THE CONSTRUCTION SUPPLY CHAINS: INDONESIAN
APPROACH IN CONSTRUCTION ECONOMICS PROGRAMS

Muhamad Abduh1 and Agus Rahardjo2

ABSTRACT: As defined, construction economics is the application of the techniques and expertise of
economics to the study of the construction firm, the construction process and the construction industry.
Its purpose would be the improvement of the areas of the study. In Indonesia, recent developments led
by the government are focusing on the improvements of the structure of construction industry. As
known by most of the construction practitioners, the construction industry has a fragmented structure
with many small to medium sized firms that ultimately this fragmentation is the industry’s cause of
poor performance. The response is then to impose policies for project supply chain integration with the
assumption that this will ensure industry development. This paper discusses an effort driven by
Indonesian government in construction economics program to strengthen the existing construction
supply chains. The strengthening strategy was to provide policies for implementing Supply Chain
Management (SCM) practices in construction industry. The potential impacts of the policies to the
structure of construction supply chains and also potential benefits for the members of the SCM were
simulated.

KEYWORDS: construction economics, construction supply chains, fragmentation, integration,

structure of supply chain.

1. INTRODUCTION

The Indonesian construction industry contributes to the wealth of a nation; construction sector
contributes about 6.5% of the GDP and around 6% of national labors depend on this sector (Statistics
Indonesia, 2013). The construction industry is characterized by business and process fragmentation
because the structure of project organization is complex and has many phases. Process integration for
the construction industry has been an attractive topic for researchers and practitioners in this industry
since integration can benefit all parties involved in a construction project. As of May 2013, there were
117,042 registered contractors in Indonesia; 941 or 0.8% of them are big size contractors; 11,002 or
9.4% are medium size; and 105,099 or 89.8% are small size contractors (Husaini, 2013). The
distribution of construction works are not even among the contractors. In year 2012, total value of
construction was Rp. 324 Trillion and about 85% of them were performed by big size contractors. The
concentration ratio for 8 biggest contractors (CR8) are still 0.2; which means that the market is
considered competitive for big contractors. In addition, most of the contractors are categorized as
generalists than specialists. The above information concluded that fragmentation also occurs in
Indonesian construction industry. This is of concern of construction practitioners in Indonesia, since
the performance of construction industry would have potential impacts to the economics of the nation.

1
Associate Professor, Faculty of Civil and Environmental Engineering, Institut Teknologi Bandung
2
Head of Center for Construction Delivery Development, Construction Development Agency, Ministry of Public Works

1
The problem of integration has been identified in the last 15 years and there were evidences that it will
give significant negative impacts, i.e., low productivity, cost and time overruns, conflicts and disputes,
and resulting claims and time-consuming litigations. These have been acknowledged as the major
causes of performance-related problems facing the industry. The legacy of this high level of
fragmentation is that the project delivery process is considered highly inefficient in comparison with
other industry sectors (Tucker et al. 2001).

The discipline of construction economics has emerged to answer the problem as the application of the
techniques and expertise of economics to the study of the construction firm, the construction process
and the construction industry. Bröchner (2013) believed that a closer engagement with economic
theories of industrial organization will provide public policy makers with a better understanding of
incentives for efficient of scare resources in the construction, and this new emerging discipline could
provide instruments in reforming construction industry. Within this discipline, there has been a
growing recognition that it is important to integrate the various disciplines/participants in a
construction project including integrating all the members of the supply chain.

2. CONSTRUCTION SUPPLY CHAINS

Studies by Bertelsen (1993), indicated project cost increases of up to ten percent because of poor
supply-chain design. Supply Chain Management (SCM) analyzes the impact of facility design on the
construction process and enables superior project planning and management, avoiding the fragmented
approach of other methods. Through SCM, all parties are kept aware of commitments, schedules, and
expedited activities. All the parties work as a virtual corporation that can source, produce, and deliver
products with minimal lead-time and expense.

Vrijhoef and de Ridder (2005) explains that the supply chain is basically representing a series of serial
and parallel connections between clients and suppliers leading to the delivery of one or more products
to one or more end clients. Basic social and economic rules dictate that clients buy products when this
adds value to them, and suppliers produce products when this delivers profit. Clients want to increase
the value added, and suppliers want to increase their profit. These interests are basically opposite,
however aimed at a common goal: the transaction at a certain price. In order to combine the interests
of both clients and suppliers, two basic strategies are optional, based on a collaborative approach
These strategies are firstly aimed at the increase of the total benefit (value minus costs), and then on
sharing the benefit. In construction, this is often organized in a collaborative and dynamic process
between suppliers and clients. This requires faith and trust of both clients and suppliers in a “dynamic
approach” to define value, costs and price in a collaborative process, resulting in benefit for both.
When the strategies are extended through the supply chain, basically the model will include multiple
parties and thus multiple transactions. The strategy will then have to be collectively grounded, and
must be aimed at achieving collective benefit for all parties. The complexity increases with the number
of parties involved, and so does the level of coordination of parties.

The supply chain has been defined as ‘the network of organizations that are involved, through
upstream and downstream linkages, in the different processes and activities that produce value in the
form of products and services in the hands of the ultimate customer’ (Christopher 1992). SCM looks
across the entire supply chain, rather than just at the next entity or level, and aims to increase
transparency and alignment of the supply chain’s coordination and configuration, regardless of
functional or corporate boundaries. The traditional way of managing is essentially based on a
conversion view on production, whereas SCM is based on a flow view of production. The conversion
view suggests that each stage of production is controlled independently, whereas the flow view
focuses on the control of the total flow of production (Koskela 1992).

The construction industry is specialized and heterogeneous with varied structural and behavioral
characteristics across individual markets. The greatest difficulty with supply chain management in

2
terms of construction research and practical application is that currently too little is known about these
characteristics and how to describe them.

Researches in the area of construction supply chain in Indonesia have been recently emerged.
Wirahadikusumah and Susilawati (2006) studied several high-rise building construction projects in
Jakarta and portrayed the construction supply chain patterns, general as well as specific patterns found
in those projects. This initial understanding of the characteristics of construction supply chains was
then followed by a study on developing their performance indicators (Wirahadikusumah et al. 2008a).
These indicators were developed based on the three concepts of lean construction, i.e., “conversion,”
“flow,” and “value.” The proposed system can be used as a tool in assessing the effectiveness and the
efficiency of the chains.

Wirahadikusumah et al. (2008b) have also used the performance indicators to obtain general portrayal
of the construction supply chains on high-rise building projects. The study found that in general,
Indonesian large construction firms have managed their supply chains but mainly with regard to the
concept of “conversion.” These firms have maintained long-term relationships with major suppliers
and subcontractors. The companies use centralized procurement for main materials and distribute them
to projects around the country as needed.

The management practices related to the “flow” and “value” concepts have yet to be implemented.
Efforts in managing the “flow” include identifying and minimizing non value-adding activities.
Achieving the value as requested by the client is the main goal of the whole production processes.
However, in general, contractors have been focused on fulfilling the contract clauses with limited
regards for conducting lean production process while at the same time they need to focus more on the
client’s satisfaction.

Another research by Abduh et al. (2012) was aimed at identifying the cost structure of construction
project supply chain and the influencing factors. Research findings are not too compelling in terms of
data collected, but it suggests an important issue on the way Indonesian construction companies
manage their cost control systems. The cost structure or account for construction projects in general
was not yet satisfactorily developed. It appears that the firms do not require classifying the level of
detail of its cost structure in view of the fact that there is no necessity to maintain job cost information
as well as to adequately control the project. Likewise, cost structure of construction supply chain
differs to the manufacturing industry, in which the cost structure of supply chain is very detailed in
order to be able to track down all information of expenses, and to manage the activities, as well as to
identify opportunities to chop down particular expenses. In general, it seems that the less competitive
environment of Indonesian construction industry would be the biggest major factor that caused the
findings.

Furthermore, the study also found that the cost of purchasing was very significant in supply chain
activity due to merely cost of material purchased. To the contrary, costs of transportation and
inventory were trivial. From this finding, it can be concluded that efforts to reduce supply chain cost
by reducing costs of inventory and transportation would not be effective. Factors that could influence
the cost of supply chain, especially cost of purchasing, therefore are much related to management of
supply chain, such as procurement policy, material requirement planning, supplier qualification,
selection process, contract, and supplier development.

3. CHALLENGES FOR THE INDONESIAN CONSTRUCTION SUPPLY CHAINS

Moreover, Abduh (2012) mentioned three more problems faced by construction industry in Indonesia
related to its existed supply chains, they are:

3
 1. There is no competition among the existed contractors’ supply chains; some of the reasons
are due to lack of real competitions among contractors, no demand on managing supply
chains from the owners, ad-hoc and temporary relationships among parties in the existed
supply chains, and no loyalist in the existed supply chains.
2. There is always a difference between members of supply chains performing the execution
of the project and members that were proposed in the bids; some of the reasons are due to
lack of SCM practices in contractors, limitation to have eligible sub-contractors in a
project, no unbiased protection to the sub-contractors, and no incentives to have long-term
relationship between project participants.
3. There is no natural localization of contractors in Indonesia; some of the reasons are due to
much intervention from the big national contractors to local district projects, no capacity
buildings for local district contractors, and vertical integration practices by some state-
owned enterprises.

The Indonesian government, represented by the Ministry of Public Works, has been very keen to solve
the problems. There have been three national seminars conducted and the establishment of four
working groups by the Minister of Public Work to work on those issues since two years ago. One of
the working groups (i.e., WG2) was specialized to analyze the effectiveness of Supply Chains
Management (SCM) practices in solving the problems. It was suggested by the WG2 that there were
two levels of challenges in implementing SCM in the Indonesian construction industry; they are in the
level of construction firms and in the level of construction projects (Figure 1).

Figure 1: Typical Model of Construction Project’s Supply Chains

In construction firm level of supply chains, the challenge is to implement the best practices of SCM
effectively by the contractors, especially big size ones. SCM is aimed at coordinating or integrating a
number of product-related activities among supply chain participants to improve operating efficiencies,
quality, and customer service in order to gain sustainable competitive advantage for all of the
organizations involved in the collaboration. SCM is considered as extended version of the
management of logistics of an organization by including or integrating the supply networks and
distribution network to it. Some important elements of SCM that should be considered in the
implementation are purchasing system, operation system, distribution system and integration.

Meanwhile, in construction project level of supply chains, there are two major parties that could
deliver the management of the supply chains. Firstly is the owner, and the second one is the contractor
itself.

Evidently, the owners have been concerned on the value of the constructed facilities delivered by
contractors as well as by the contractors’ supply chains, i.e., suppliers and sub-contractors. The

4
concerns were practiced in the form of evaluation criteria of contractors’ proposals that should include
the assessment of the adequacy of contractors’ suppliers and sub-contractors, and also in the form of
owner’s inspection and control on the products delivered by suppliers and the works performed by the
sub-contractors in the field. Yet, these practices do not give the owners further involvement in
establishing and configuring the supply chains of the projects, and therefore do not control the
fulfillment of the defined value directly; it is performed through the contractors instead. It has been
identified by Wirahadikusumah and Abduh (2010) that there are three models of construction project
supply chains (SC) based on the owner’s involvement, i.e., i). SC nominated by owner (NO); ii). SC
created by owner (CO); and iii). SC managed by owner (MO). The three models have different levels
of owners’ involvements in the construction project supply chains, while concurrently managing their
value chains. In this case, the ability of the owner in preparing the packages of construction works
based on the available construction supply chains is imperative.

However, contractors have a central role in the management of construction supply chains. A general
contractor has a potential to improve the performance of the whole construction supply chains by
better coordination with the parties involved in formal and direct contracts, and with the parties which
have contracts with the owner as well. To address the issue of fragmentation in the construction
industry, the adversarial attitudes, the inefficient use of labor, the wastage of materials, the high cost of
construction and the functional inefficiencies of buildings, contractors can play a significant role.
Contractors can start replacing short-term, contractually driven single project adversarial inter-
company relationships with long-term, multiple project relationships based on trust and cooperation.
These long-term, strategic supply chain alliances incorporate continuous improvement targets to
reduce costs and enhance quality, and focus on the through-life cost and functional performance of
buildings. The lack of trust and the dominance of lowest bid procurement within the construction
supply chains are not easy to tackle, however general contractors need to take the lead since studies
have shown the potential benefits for them and the parties within the supply chains.

4. PROPOSED POLICIES

Based on the challenges as mentioned above, the Indonesian government was profound to implement
supply chains management in construction for answering them in its construction economics program.
It is believed that the performance of the construction industry is dependent on the performance of its
supply chains. Moreover, the performance of the supply chains will be shaped by the dynamic
interaction between the structure of the supply chain and the conducts of its members. Hence, in order
to improve the performance of construction industry, the structure of supply chains and the conducts
of the members of supply chains should be taken care of by the government.

An effort to strengthen the construction supply chains in Indonesia has been conducted since the last
two years. The strategy chosen by the government was to implement Supply Chain Management
(SCM) practices in construction companies and projects, as well as in the industry level. Several
policies for executing the strategy have been developed including the following:

1. Advising the construction projects’ owners to proportionally consider the existed supply
chains related to their projects in preparing their work packages with the main objective is
to achieve the values demanded by the owners.
2. Promoting the elimination of regulation that limited numbers of eligible sub-contracting in
a construction project.
3. Promoting the implementation of Supply Chain Management (SCM) practices in
construction firms; especially for big-size and the state owned contractors.
4. Forcing the big size contractors to implement partnering with local contractors in
delivering their construction projects, to empower the local contractors, and to include the
local contractors in their SCM systems.

5
 5. Promoting the medium and small size contractors to be specialist rather than generalist
contractors and practicing under big size contractors’ SCM. For this, the classifications of
contractors, as well as their definitions, are important to be settled first.
6. Providing productive and conducive subcontracting environment and mechanisms to
protect the subcontractors properly in their businesses.

5. POTENTIAL IMPACTS OF THE POLICIES IN SCM

In order to validate the premises of the developed policies, a what-if analysis to estimate the impacts
of the policies to the structure of supply chains and also benefits for contractors involved in the SCM
has been established. A static, deterministic, and discrete simulation model has been developed to
compare between the existed structure of construction supply chains in Indonesia and the managed
structure by SCM. Moreover, in regards to whether the SCM arrangement would benefit the members
of the SCM, especially for medium-size and small-size contractors, potential improvement of profit
per project has been simulated as well. Yet, the simulation model used for the purposes is still in
development stage. However, as of this paper was written, the model has revealed a promising result.
The model was developed based on the structure of supply chains in a project level as depicted in the
following Figure 2.

Tier-1 Tier-2 Tier-3

Small 1

Mid 1 Small 2

Small n

Small 1

Big-Size Mid 2 Small 2

Small n

Small 1

Mid m Small 2

Small n

Figure 2: Typical Structure of Construction Supply Chains Project of Big-size Contractor

The assumptions made for the simulation were derived from authors’ experiences, and previous
studies by Bertelsen (1993), Wirahadikusumah and Susilawati (2006), and Department for Business
Innovation and Skills (2013); a formal survey is being conducted to validate the assumptions. The
assumptions are as follows:

 The structure of construction supply chain project follow the model in Figure 2; big
contractors (tier-1) will be supported by several medium-size contractors in tier-2 (m) and then
also further supported by several small-size contractors in tier-3 (n).
 Construction market shares for big, medium, and small sizes contractors are 85%, 11%, and
4% respectively.

6
  Average contract values for construction projects performed by big, medium, and small sizes
contractors are Rp. 100 Billion, Rp. 7.5 Billion, and Rp. 0.65 Billion respectively.
 Average number of big-portion work sub-contractors in tier-2 (n) is 5, and the average number
of big-portion work sub-contractors in tier-3 (m) is 4.
 Average percentages of profit per project for big, medium, and small sizes contractors are 6%,
8%, and 10% respectively.
 Average percentages of indirect costs per project for big, medium, and small sizes contractors
are the same: 20%.
 Average percentage of works sub-contracted is 60% of the contract value excluding profit and
indirect cost of the tier-1 and tier-2 contractors.
 There are 45% of subcontractors in tier-2 that work at the same time to other tier-1 or the same
tier-1 contractors.
 There are 10% of subcontractors in tier-3 that work at the same time to other tier-2 or the same
tier-2 contractors.
 Firms that actively compete for getting jobs from the owners in their own markets are 80%,
60%, and 40% for big, medium-size, and small contractors respectively.
 A contractor that has already implemented SCM will execute the project by distributing the
works mostly to its own SCM members.
 Better coordination will be gained by implementing SCM and it will reduce the indirect cost
of the project, i.e., procurement cost, to 10%.
 SCM will create loyal sub-contractors and therefore will reduce number of sub-contractors
that work at the same time to other tier-1 contractors to 40%, and will reduce number of sub-
contractors that work at the same time to other tier-1 contractors to 5%.

Based on the assumptions and current data of the market of construction supply chains in Indonesia (as
of May 2013), the simulation model produced the following findings:

1. Supply Chains Management (SCM) would increase the number of impacted medium-size and
small-size contractors involving in construction projects (as sub-contractors in tier-2 and tier
3) as much as 688 (6.3%) and 2,754 (3.6%) respectively (Figure 3).

Mid-Size Small

75.1%

68.8%
67.0%
63.4%

Existing SC With SCM

Figure 3: Percentage of Sub-contractors Involved in Construction Projects

2. Supply Chains Management (SCM) would increase the average annual profits of impacted
medium-size and small-size contractors by working for big contractors as much as 13.5% and
29.3% respectively (Figure 4).
3. Supply Chains Management (SCM) would increase the average annual profits of impacted
small-size contractors by working for medium-size contractors as much as 42.5% (Figure 5).

7
 Mid-Size Small

2,950
2,599

351 454

Existing SC With SCM

Figure 4: Annual Profits of Sub-contractors Working for Big-Size Contractors (in Rp. Million)

267

187

Existing SC With SCM

Figure 5: Annual Profits of Sub-contractors Working for Medium-Size Contractors (in Rp.
Million)

Existing SC With SCM

26,340
21,950

1,386 2,081
84 112

Big Mid Small

Figure 6: Annual Profits of Competing Contractors (in Rp. Million)

4. Supply Chains Management (SCM) would also affect the rest of contractors that are not
involved in SCM. By implementing SCM in big-size and medium-size contractors, numbers
of medium and small size contractors involved in SCM are increasing. Meanwhile, the

8
 number of rest contractors that are not involved in SCM is reduced. Therefore, there is higher
probability for them to get jobs from the owners in competitions and would lead to increased
profits as well. On the other hand, the better coordination and less indirect cost caused by
implementing SCM would benefit also the big-size contractors that implement SCM. Based
on Figure 6, the most potential increased annual profit would be gained by medium-size
contractors (50%). Small size contractor would also potentially increase its significant annual
profit as much as 33%. On the other hand, the big-size contractor would potentially gain 20%
more of their annual profit by implementing SCM.
5. By comparing Figure 4, 5, and 6, it can be concluded that the implementation of SCM by big-
size contractor would benefit mostly to the medium-size and small size contractors that are
involved in the SCM. The potential increased in annual profit for them (Figure 4 and 5) are
higher than the contractors that are not involved in SCM (Figure 6).
6. It also can be concluded from the results above that the implementation of SCM would
benefit more to the small-size contractors than medium-size contractors. The potential annual
profit for small-size contractor that is involved in SCM would be 2 up to 4 times higher than
the one that is not involved in SCM. In the meantime, the potential annual profit for medium-
size contractor that is involved in SCM would only 1.5 times higher than the one that is not
involved in SCM. This finding would then be an opportunity to empower the small size
contractors by increasing their involvements in big and medium size contractors’ SCM.

6. CONCLUSION

Indonesian government has been keen to implement supply chains management in construction for
answering latent problems faced by the industry in its construction economics program. It is believed
that the performance of the construction industry is highly correlated with the performance of its
supply chains. On the other hand, the performance of the supply chains is determined by the
interaction between the structure of the supply chain and the conduct of its members. Therefore, in
order to improve the performance of construction industry, the structure of supply chains and the
conducts of the members of supply chains should be managed carefully by the government.

Problems and challenges in managing construction supply chains in Indonesia have been identified.
The government tried to minimize them since they will cause poor performance of the Indonesian
construction industry. An effort to strengthen the construction supply chains in Indonesia has been
conducted since the last two years. The strategy chosen by the government was to implement Supply
Chain Management (SCM) practices in construction companies and projects, as well as in the industry
level. The policies prepared to execute the strategy has been developed including the elimination of
limitation of eligible sub-contracts in a project, definition of generalist and specialist contractors,
standardization of sub-contacting, and manual of SCM practices for contractors and owners. A
simulation of the proposed policies has been also established to estimate the impacts of the policies to
the structure and conducts of the members of the Indonesian construction supply chains. Promising
potential benefits for both are initially found. Furthermore, the SCM implementation would also be an
opportunity to improve and empower small size contractors that are the majority of the population and
problems.

7. ACKNOWLEDGEMENTS

The authors are members of the Working Group 2 (WG2): Strengthening the Construction Supply
Chains; one of four working groups engaged for preparing policies and regulations for improving the
structures of the Indonesian construction industry. The substances of this paper are taken from the
WG2 report to the Indonesian Ministry of Public Works. The WG2 activity is supported by the Center
for Construction Delivery Development, Construction Development Agency of the Ministry of Public
Works. The authors also wish to express their gratitude to other members of the WG2 for their
supports and time given to the working group.

9
8. REFERENCES

Abduh, M. (2012). “Rantai Pasok Konstruksi Indonesia”, Buku Konstruksi Indonesia 2012,
Harmonisasi Rantai Pasok Konstruksi: Konsepsi, Inovasi dan Aplikasi di Indonesia.
Kementrian Pekerjaan Umum.
Abduh, M., Soemardi, B.W., & Wirahadikusumah, R.D. (2012). Indonesian Construction Supply
Chains Cost Structure and Factors: A Case Study of Two Projects, Journal of Civil Engineering
and Management, Volume 18, Issue 2, 2012, pages 209-216
Bertelsen, S. (1993). Construction Logistics I and II, Materials Management in the Construction
Process (in Danish) Boligministeriet, Bygge-og, Boligstyrelsen, Kobenhavn, Denmark.
Bröchner, J. (2013). Developing Construction Economicsas Industry Economics. Modern
Construction Economics. Editor: Gerard de Valence. Spon Press.
Christopher, M. (1992). Logistics and Supply Chain Management: Strategies for Reducing Costs and
Improving Service. Pitman Publishing, London, UK.
Department for Business Innovation and Skills. (2013). Supply Chains Analysis into Construction
Industry: A Report for Construction Industrial Strategy. BIS Research Paper No. 145.
Department for Business Innovation and Skills, UK.
Koskela, L. (1992). Application of the New Production Philosophy to Construction. Technical Report
72, Center for Integrated Facility Engineering, Department of Civil Engineering, Stanford
University, CA.
Husaini, H.W. (2013). Indonesia Construction Industry Overlook. Proceedings of International
Seminar on Optimization of Heavy Equipment for Road Construction. Construction
Development Agency, Ministry of Public Works. Jakarta. 1 October 2013.
Statistics Indonesia. (2013). Economy and Trades,
http://www.bps.go.id/menutab.php?tabel=1&kat=2&id_subyek=04, (1 August 2013)
Tommelein, I.D., Ballard, G., Kaminsky, P. (2009). Supply Chains Management for Lean Project
Delivery. Construction Supply Chains Management Handbook. O’Brien et al. (Ed), Chapter 6.
CRC Press. Boca Raton.
Tucker,S.N., Mohamed, S., Johnston,D.R., McFallan,S.L. & Hampson,K.D. (2001). “Building and
Construction Industries Supply Chain Project (Domestic)” Report for Department of Industry,
Science and Resources, www.industry.gov.au, 27/7/ 2004.
van Hoek, R.I. (2001). The Rediscovery of Postponement: A Literature Review and Directions for
Research. Journal of Operations Management, 19, 161-184
Vrijhoef, R. & Ridder, H.A.J., (2005). Supply Chain Integration for Achieving Best Value for
Construction Clients: Client-Driven Versus Supplier-Driven Integration. Conference
Proceedings, QUT Research Week 2005, 4-8 July 2005, Brisbane Australia.
Wirahadikusumah R. D. and Susilawati (2006). ”Pola Supply Chain Konstruksi pada Proyek
Konstruksi Bangunan Gedung.” Jurnal Teknik Sipil ITB Volume 13 No. 3, Juli 2006, 107-122
Wirahadikusumah, R., Soemardi, B., Abduh, M., and Noorlaelasari, Y. (2008a).” Pengembangan
Indikator Kinerja Supply Chain pada Proyek Konstruksi Bangunan Gedung.” Jurnal Teknologi,
Fakultas Teknologi Universitas Indonesia, Edisi No.3 Tahun XXII, September 2008.
Wirahadikusumah, R., Soemardi, B., Abduh, M., and Oktaviani, C. (2008b). ”Gambaran Kinerja
Supply Chain pada Proyek Konstruksi Bangunan Gedung,” Jurnal Teknologi, Fakultas
Teknologi Universitas Indonesia, Edisi No.4 Tahun XXII, Desember 2008.
Wirahadikusumah, R.D., and Abduh, M. (2010). “Reinforcing the Role of Owners in the Supply
Chains of Highway Construction Projects”. Proceedings of the First Makassar International
Conference on Civil Engineering (MICCE2010), March 9-10, 2010, ISBN 978-602-95227-0-9.

10
 19th ASIA CONSTRUCT CONFERENCE
14th to 15th November, 2013
JHCC, Jakarta , Indonesia

IMPROVING THE CONTRIBUTION OF CONSTRUCTION

SECTOR IN REDUCING THE COMMUNITY DISASTER RISK :
CASE OF EARTHQUAKE RISK IN INDONESIA

Krishna S Pribadi1, Hery Zulfiar2 & MonaForalisa2

1 Associate Professor, Faculty of Civil and Environmental Engineering, Institut
Teknologi Bandung, Indonesia
2 PhD Students, Faculty of Civil and Environmental Engineering, Institut
Teknologi Bandung, Indonesia
Email: ksuryanto@si.itb.ac.id, zulfiarheri@yahoo.com, mforalisa@yahoo.com
PRESENTATION OUTLINE
• Introduction
• Disaster Risk and Construction
• Role of Construction Industry in Reducing Disaster Risk
• Survey on the Source of Seismic Vulnerability of Buildings in
Construction Process
• Experience from Recent Earthquakes
• How to Improve Construction Sector in Reducing Earthquake
Vulnerability
• Concluding Remarks
 Eurasia
INTRODUCTION Plate
Philipine
Plate
Pacific
• Indonesia, disaster prone country : Plate
• >13.000 islands, Indo-Australia
Plate
• 1.922.570 km2 of lands and
• 3.257.483 km2 of marine territory
Indonesia :
Number of disaster and disaster losses from 1900 – 2011

(http://www.preventionweb.net/english/countries/statistics/?cid=80, accessed 8April 2013)

 RECENT MAJOR EARTHQUAKES OCCURRENCES
IN INDONESIA
Earthquake Event Magnitude Loss of life Displaced Damaged Destroyed
No person Houses Houses
1 Aceh E/Q (and M 9.4 110,000 700,000 57,137 69,932
tsunami),
December 26, 2004
2 Nias E/Q, March 28, M 8.6 850 40,000 71,891 12,010
2005
3 Yogyakarta E/Q, May M 6.8 5,700 600,000 260,000 154,000
27, 2006
4 Bengkulu E/Q, M 8.5 35 390,825 19,375
September 12, 2007
5 West Java E/Q, M 7.4 81 178,490 216,424 46,697
September 2, 2009
6 West Sumatra E/Q, M 7.6 1,117 - 249,833 114,797
September 30,2009
ROLE OF CONSTRUCTION IN DISASTER RISK
• Casualties and economic losses due to damages of both
engineered and non-engineered buildings and infrastructure
• Buildings and infrastructure often performed poorly because of
vulnerable construction materials and practices.
• Community vulnerability to earthquake in Indonesia caused by:
• Unchecked development process under pressure of
population and economic growth
• People living under poverty line
• The construction sector (informal and the formal) may contribute
to both building and infrastructure resilience and vulnerability at
the same time,
DISASTER RISK AND CONSTRUCTION
• disaster risk is “the potential disaster losses, in lives, health status, livelihoods, assets and
services, which could occur to a particular community or a society over some specified future
time period” (UNISDR Terminology, 2010)
• Disaster risk factors : hazards, vulnerability, capacity

• Construction :
• defines the vulnerability of the built environment.
• Includes planning, design, procurement, construction, commissioning, operation and
maintenance and demolition of the construction products
• involves a series of institutional actors and regulations, manufacturing and distribution
activities, project management, and site production activities
ROLE OF CONSTRUCTION INDUSTRY IN
REDUCING DISASTER RISK
• role of the construction industry in disaster management : pre-disaster,
during disaster, post -disaster
• pre- disaster vulnerability reduction activities : design and construction of
structural construction projects to reduce vulnerability to disasters, land use
planning etc.
• Post-disaster vulnerability reduction activities : anticipating and assessing
future disaster risk in order to better prevent and/or prepare toward future
disruptive shocks in the case of disaster event.
• “build back better “ construction process.
ROLE OF CONSTRUCTION INDUSTRY IN
REDUCING DISASTER RISK
Role of the construction industry
stakeholders :
• internal stakeholders : defining
values to be adopted by the
construction process and ensuring
that reducing disaster risk is part of
the values
• external stakeholders : give
pressures to the internal
stakeholders in order values
pertinent to disaster risk reduction
(Olander, 2006)
implemented by the internal
stakeholders.
A SURVEY ON THE SOURCE OF SEISMIC
VULNERABILITY OF BUILDINGS IN CONSTRUCTION
PROCESS
• Survey to respondents representing different stakeholders in the construction process

Technical aspects

Building Products
Seismic vulnerability

Conceptual Procurement Commissioning

Design Construction O&M

Non-Technical aspects
 SURVEY RESULT ON THE SOURCE OF SEISMIC VULNERABILITY
OF BUILDINGS IN CONSTRUCTION PROCESS
Phase Technical Non-technical
 Vulnerable location (limited options,  Traditional values and beliefs,
incompliance to land use)  Fatalistic attitude
 feasibility and EIA studies not  Ignorance to earthquake and
available or just formalities earthquake resistant technology
 Inappropriate need assessment  Following traditional forms or
 Concept not following stakeholders “imported” building style (material,
requirement form) while ignorant to the structural
consequences
 Inadequate dissemination, no risk
Conceptual
awareness
 Political aspiration of the local ruler,
not need based
 Deviation to land use plan due to
political and economical pressure
 Bad coordination among agencies
 High cost for risk and environmental
impact assessment
 Weak law enforcement
 A SURVEY ON THE SOURCE OF SEISMIC
VULNERABILITY OF BUILDINGS IN CONSTRUCTION
PROCESS
Phase Technical Non-technical
 Inadequate or invalid data (soil,  Earthquake prone area selected
hazard etc.) due to various reasons
 Hasty design process  Not enough information on land
 Owners do not obey earthquake use plans
resistant requirements  Traditional forms not suitable to
 Incomplete design criteria, drawing new building materials
and specification (masonry/concrete)
Design  Incompetent designer/engineer  Inconsistencies in applying
building regulation (only for
government buildings)
 Low capacity from the community
for hiring professional engineers
 Budget limitation and lower priority
for earthquake resistance
 A SURVEY ON THE SOURCE OF SEISMIC
VULNERABILITY OF BUILDINGS IN CONSTRUCTION
PROCESS
Phase Technical Non-technical
 Inadequate building permit process,  Disobeying issued building permit
building permit only as formality, no  Lowest price approach
design verification  Incompetent builders selected due
 Incompliance to building permit to various reasons
 Improper procurement process  Political intervention in appointing
Procurement
resulting in incompetent contractors, contractors
no “value for money”, just cheapest
 Inadequate risk assessment to A/E
and contractors
 Unsuitable project delivery method
 A SURVEY ON THE SOURCE OF SEISMIC
VULNERABILITY OF BUILDINGS IN CONSTRUCTION
PROCESS
Phase Technical Non-technical
 Non-compliance to drawing  Non-standardized skills of autodidact
and specification builders/tradesmen
 Discontinuity of materials  Non-compliance to specification as a
supply, resulting in different “culture” to increase profit margin
material quality  Inadequate commitment of
 Inadequate supervision and supervisor/inspector
control  Traditional collective work with
 Inadequate details in the inadequate technical knowledge
Construction
design  Pressure from outside groups
 Repeated design changes (money extortion for security reason)
during construction  Bellow-standard materials (exp. Steel
 Inadequate material inspection reinforcement bars) due to weakness
and quality control in government control
 Corruption
 Inadequate field inspection from
building control agencies
 A SURVEY ON THE SOURCE OF SEISMIC
VULNERABILITY OF BUILDINGS IN CONSTRUCTION
PROCESS

Phase Technical Non-technical

Commissioning  Inadequate  building occupation by
commissioning owner before
procedure commissioning
 Inadequate acceptance  regulation on the
criteria assessment for
 Underestimating occupational worthiness
commissioning not in place
procedure
 maintenance training
 A SURVEY ON THE SOURCE OF SEISMIC
VULNERABILITY OF BUILDINGS IN CONSTRUCTION
PROCESS
Phase Technical Non-technical
O&M  No or inadequate operation and  low awareness on the need of
maintenance manual proper maintenance
 no or inadequate operation and  maintenance considered as waste
maintenance training  reactive maintenance instead of
 inadequate maintenance preventive maintenance
 use of building beyond its  absence of regulation on routine
operational life maintenance
 building use different with initial  maintenance budget not
building function which change prioritized
the loading characteristics  policy for reducing or omitting
 inadequate assessment for maintenance budget to save
building occupational- worthiness money (in short term)
 modification of building ignoring
existing capacity of structural
elements
EXPERIENCE FROM RECENT EARTHQUAKES
• Non-engineered buildings , Central Aceh 3 August, 2013
EXPERIENCE FROM RECENT EARTHQUAKES
• Non-engineered buildings , Central Aceh 3 August, 2013
EXPERIENCE FROM RECENT EARTHQUAKES
• Engineered (school) building , Central Aceh 3 August, 2013
ENGINEERED BUILDING, EARTHQUAKE IN BANDA ACEH 2004

Photo source: Wayan Sengara, PhD.

ENGINEERED BUILDING, YOGYAKARTA EQ 2006

IWS
WEST SUMATRA 2009

Foto: I Wayan Sengara, 2009

COLLAPSED ENGINEERED STRUCTURE IN PADANG,
26 SEPT 2009

Soft story collapse of a Government building

(Courtesy: Teddy Boen)
COLLAPSED ENGINEERED STRUCTURE IN PADANG,
26 SEPT 2009
• Damaged houses and buildings did not apply good earthquake resistant
building practices as well as the prevailing building codes in Indonesia, such
as the size and quality of reinforcement bars, proper dimension and spacing
of stirrup, improper construction materials, in particular concrete mix and
materials which produce very low quality of concrete.
• Many damaged houses were found to be using heavy concrete canopy in
front of the house, tied to the small RC tie beams that connect the walls to
the roofs. Dari wawancara di lapangan dengan pemilik bangunan dan tuka
• Most of the masons, carpenters and concreter and steel bar benders have
very limited knowledge on earthquake resistance technology.
• Most of the house owners either build themselves their houses or assign
builders to build their houses without awareness of the earthquake risk in the
area. They just trust the local builders to design the structural features of the
houses, without the capacity of ensuring whether the masons understand or
not earthquake resistant technology.
HOW TO IMPROVE CONSTRUCTION SECTOR
IN REDUCING EARTHQUAKE VULNERABILITY
Elements in building the construction industry to contribute positively to the reduction of
disaster risk (Ofori, 2004):
• Develop a regime of statutory regulations and codes which guides planners and designers
to take preventive action, and contractors to produce items of the requisite quality and
durability.
• Build an efficient and effective enforcement framework to give practical effect to the
regulations.
• Instill within the construction industry an adequate capacity and capability to undertake
designs which give due cognisance to the possibility of all forms of disasters in the
particular context of the locations of the items, and in particular for Indonesia as an
earthquake prone country, the capacity toward seismically safer buildings.
• Ensure that contractors should be able to produce sound construction.
 HOW TO IMPROVE CONSTRUCTION SECTOR
IN REDUCING EARTHQUAKE VULNERABILITY
(i) Human resource development at all level to equip construction professionals with the knowledge and
skills required to undertake appropriate designs and construction .
(ii) Proper registration of contractors and builders to ensure that they will be updated in terms of
construction technology required to reduce disaster risk
(iii) Ensure that good quality construction materials are available within the reach of various economical
capacities of house and building owners.
(iv) Develop new materials and technology to cater to the need of various users in different parts of the
country, in order that earthquake resistant buildings and houses are economically feasible and
reachable.
(v) Develop the industry technical and technological capacity to handle various projects with enough
protection to the disaster risk, catering the needs of different types of clients (formal and informal
sectors) in pre- and post-disaster situation
(vi) Develop and disseminate user friendly information materials on method and good practices in disaster
risk reduction, and in particular, earthquake vulnerability reduction, for the public and for the
construction industry.
THE DISASTER RESOURCE PARTNERSHIP (DRP)
INDONESIA
• A global alliance of Engineering and Construction (E&C) companies
supported by the World Economic Forum.
• Aims to promote “cross- sector, professional, scalable and accountable
humanitarian response to disasters that has the ability to meet growing
demands to reduce suffering and save lives’ and that promotes an ongoing
collaboration between the global humanitarian community, national
governments and local E&C companies.” (WEF 2010).
• DRP Indonesia National Platform has ten member companies : PT. PP
(Persero), PT. Wijaya Karya (Persero), PT. Jaya Konstruksi Manggala
Pratama, PT. Total Bangun Persada, PT. Tatamulia Nusantara Indah, PT.
Waskita Karya, PT. Amec Berca Indonesia, PT. Balfour Beatty Sakti
Indonesia, PT. Yodya Karya (Persero), and Davy Sukamta & Partners.
THE DISASTER RESOURCE PARTNERSHIP (DRP)
INDONESIA
Modes of intervention :
• Direct action: Member companies operating in the disaster affected location
immediately engage in emergency relief such as distribution of food, water,
medical supplies and non-food items
• Secondments: Companies second individual staff members into NGOs or
humanitarian agencies to enhance their capacities (usually when the
company is not operating in the disaster affected area).
• Local technical services: Companies at a national level partner with local or
national governments, academics, or NGOs to provide technical assistance.
This could include, for example, clearing debris, repairing critical
infrastructure, damage assessment and design, project management and
construction expertise.
THE DISASTER RESOURCE PARTNERSHIP (DRP)
INDONESIA
Example of action :
• Post M 6.1 earthquake in Aceh, in July 2013, a team of experts from Indonesia DRP
was deployed in coordination with key UN organisations and government
departments to conduct :
• damage assessment of community health facilities and general hospitals in the
affected area and assessment of local capacities for reconstruction
• training of local builders on construction quality and earthquake-resilient housing
design and construction.
• identified significant areas of improvement such as the need for building safety
personnel at health offices and hospitals, enforcement of building codes and the
need for a vocational engineering and construction school at district level.
(Personal communications with Victor Rembeth, project manager DRP Indonesia
National Platform)
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THANK YOU FOR KIND ATTENTION!