Fraud in Public Procurement : Governance, Internal Supervision and Political-Economic Challenges in the Indonesian Context

Rachmat, Sulaeman and Martani, Dwi and Syakhroza, Akhmad and Setyaningrum, Dyah (2025) Fraud in Public Procurement : Governance, Internal Supervision and Political-Economic Challenges in the Indonesian Context. PUBLIC GOVERNANCE ADMINISTRATION AND FINANCES LAW REVIEW, 10 (2). pp. 115-136. ISSN 2498-6275

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Abstract

This study aims to analyse the factors that influence fraud in government procurement in the context of the central government in Indonesia. By using a mixed method, this research uses a sequential explanatory design involving two stages: a quantitative research using 128 respondents’ data on the one hand, and qualitative research with 9 informants and 132 respondents on the other hand, supported by the use of agency theory and rent-seeking theory enriched with normative studies as an approach to explain types of procurement fraud in Indonesia. Through multiple linear regression on the data of 128 respondents processed using the SPSS application, this study demonstrates that procurement governance is negatively related to procurement fraud, just as the role of effective APIP is negatively related to procurement fraud. In contrast, economic-political pressure is positively related to procurement fraud. Meanwhile, the impact of research findings on procurement regulators’ issuance of related policies underscores first the relationship between law enforcement and APIP. Second, the handling of procurement objections that ensure the confidentiality of whistleblowers through APIP. Third, a procurement clearing house to handle strategic procurement packages involving three areas of expertise: procurement, law and supervision. And fourth, procurement digitisation leading to open data platforms and the use of artificial intelligence in fraud detection.

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