REVIEW OF FINANCIAL PENALTIES IMPLEMENTATION ON NON-COMPLIANCE WITH ROAD PERFORMANCE INDICATORS

Abstract

Indonesia's national road preservation system, mainly routine road maintenance, was initially carried out independently by the project manager as a road section manager. This maintenance has been transformed into a "long segment" scheme since 2016. The contractor is subject to financial penalties in the form of withholding payments for each failure to meet the road performance indicators within the specified repair response times. The government, specifically the project manager, has not adequately applied the current financial penalties for late fulfillment of road performance indicators in Indonesia. The implementation of financial penalties that is not adequate is inversely proportional to the number of public complaints related to road performance, which represents the impact of road performance that does not meet the criteria. This study recommends developing a comprehensive policy for penalties related to the late fulfillment of road performance indicators. The policy should consider multiple indicators and components and adjust the coefficient of each component based on the severity of the condition. In addition, this study advises revising the formulation of financial penalties using relevant data, such as average daily traffic volume or public complaints.