Government Prepares Regulations for Construction Project Price Increases Next Year
The Ministry of Public Works (PU) aims to have regulations from the National Public Procurement Agency (LKPP) issued this year to address the escalation of construction project prices, following feedback from contractors regarding rising costs.
Minister of Public Works Dody Hanggodo stated that the government is still discussing measures to handle the issue, in coordination with the Coordinating Ministry for Economic Affairs and the LKPP.
“It should be this year. Otherwise, contractors will complain. Next year, the costs will change, and it will be a different matter,” Dody said in Semarang, Central Java, on Sunday (27/09/2026).
Dody noted that the most recent discussions were held with the Coordinating Ministry for Economic Affairs, involving the LKPP. He stated that the LKPP has been requested to prepare provisions that can serve as a reference for ministries and agencies in responding to price escalations.
“Most recently, we held a meeting with the Coordinating Minister for Economic Affairs. The LKPP was summoned. Ultimately, the result is the same: the LKPP must prepare a circular or some form of institutional regulation,” he said.
However, he could not yet confirm the form or the timing of the issuance of these provisions, as the government is still awaiting the regulations prepared by the LKPP. Once the provisions are available, Dody continued, the government will examine the mechanisms that can be undertaken according to the needs of each project.
“It will be adjusted to the needs. Whether we must, for example, add funds, or use other methods,” he said.
According to Dody, contractors are currently requesting price adjustments. The government will continue discussions once official provisions from the LKPP are available. Dody did not confirm the percentage of the adjustment requested by contractors, noting that technical discussions regarding the amount lie with the Directorate General of Construction Development.
Previously, on 2 June 2026, Dody stated that the Ministry of Public Works had coordinated with the LKPP regarding the escalation of material prices, which is being influenced by the dynamics of the US dollar exchange rate and global oil prices. Feedback from several associations has also been collected by the Ministry of Public Works through the Directorate General of Construction Development to be submitted to the LKPP.
Inter-governmental discussions regarding the impact of price changes on contracts have been ongoing since at least 29 April 2026. At that time, the Ministry of Public Works and the LKPP discussed the impact of global market dynamics on government contracts alongside the Coordinating Ministry for Economic Affairs, the Ministry of Finance, the Ministry of Transportation, the Presidential Staff Office, the Financial and Development Supervisory Agency (BPKP), and the Central Bureau of Statistics (BPS).
Current government procurement regulations already provide for price adjustments under certain conditions. Based on Presidential Regulation Number 46 of 2025, price adjustments can be applied to multi-year contracts with an implementation period of more than 18 months, starting from the 13th month, provided they meet the requirements specified in the selection and contract documents.