If the SP2D is not immediately disbursed, who bears the risk?
For government project contractors, the disbursement of funds through the SP2D (Fund Disbursement Order) is a crucial moment — the results of months of work are finally paid.
However, in the field, SP2D disbursement doesn’t always run smoothly. Delays can occur due to administrative, validation, or budgetary issues.
In such situations, contractors can face significant financial pressure, especially if they have already incurred costs for materials, labor, and equipment.
To anticipate this risk, the international construction world recognizes an instrument called a Payment Bond — a guarantee that ensures the contractor will receive payment according to the contract, even if the employer fails to pay on time.
This article will review how the Payment Bond concept can complement the SP2D system of government projects in Indonesia, and how L&G Insurance Broker can help contractors understand and utilize it strategically.
Contact L&G Insurance Broker now at Phone number 08118507773 for a free consultation before the risks haunt your business.
What is SP2D and Why is it Important for Contractors?
SP2D (Fund Disbursement Order) is an official document issued by the State Treasury Service Office (KPPN) on behalf of the State Treasurer General (BUN) as an order to disburse funds from the state treasury account to the recipient (usually a contractor or vendor).
SP2D can only be issued after going through the following stages:
- SPM (Payment Order Letter) received from PPK.
- Verify the completeness of contract documents and guarantees.
- Approval of disbursement from KPPN.
Without SP2D, contractors cannot receive any payments from the APBN/APBD — making SP2D a vital endpoint in the government project financial cycle.
What is a Payment Bond?
Payment Bond is a form of guarantee given by a surety company to the main contractor or subcontractor that the project owner (obligee) will fulfill his payment obligations.
In other words, if the employer fails to pay according to the contract, the guarantor company will replace the unpaid amount, up to a certain limit according to the policy.
Its main function is to protect parties who work or supply goods from the risk of late or failed payments.
Legal Basis and Practice of Payment Bonds in Indonesia
In Indonesia, Payment Bonds are not explicitly regulated in government regulations like Bid Bonds, Performance Bonds, or Maintenance Bonds.
However, the practice is starting to be applied in government-private partnership (PPP) projects or large-scale infrastructure projects.
In addition, some projects that use the Design-Build or EPC scheme also require a Payment Bond as additional collateral.
The legal basis refers to:
- Civil Code Articles 1820–1850 concerning guarantee agreements (borgtocht).
- OJK Regulation No. 68/POJK.05/2016 concerning Guarantee Business.
- Presidential Regulation No. 16 of 2018 concerning Government Procurement of Goods/Services (in the context of contract guarantees).
Thus, Payment Bonds can be legally issued by insurance companies or guarantee institutions registered with the OJK.
Why is Payment Bond Relevant to SP2D?
Although the SP2D guarantees government payments to contractors, there are still administrative risks and time delays that can hinder disbursement.
Payment Bonds can be a risk mitigation solution in situations such as:
- 📑Delay in issuing SP2D due to document validation or revision.
- 🏛️There is budget refocusing or payment delays.
- ⚙️Temporary liquidity problems in work units.
In such circumstances, the Payment Bond serves as a temporary guarantee for the contractor that payment will still be received — either through the SP2D or a guarantee claim.
Illustration of the Relationship Flow between SP2D and Payment Bond
- Government Contract → Work Completed → SP2D not yet disbursed →
- Payment Bond active → Guarantor replaces payment →
- SP2D is finally disbursed → The guarantor is reimbursed by the employer.
With this scheme, contractors do not lose cash flow, while the government still has time to complete the SP2D disbursement process.
Benefits of Having a Payment Bond for Contractors
💰 Guarantee smooth cash flow.
No need to wait long for SP2D disbursement to continue the next project.
🛡️Protects against the risk of late payments.
Both due to administration and budget refocusing.
🤝Increase credibility in the eyes of banks and vendors.
Contractors with Payment Bonds are seen as more professional and secure.
⚙️Speed up the tender process or follow-up contracts.
The government has more confidence in contractors who have complete financial guarantees.
Case Study: Delayed SP2D, Contractors Remain Safe Thanks to Payment Bonds
A national contractor working on a road project worth IDR 150 billion experienced a 6-week delay in the SP2D due to revisions to the DIPA documents.
However, because the contractor has a Payment Bond worth IDR 10 billion, the guarantor company pays the agreed amount first.
After the SP2D is issued, the funds are returned to the guarantor as agreed.
The result: the project continues to progress, subcontractors are paid on time, and the contractor’s reputation remains intact.
Comparison of Payment Bond vs SP2D
| Aspect | SP2D | Payment Bond |
| Publisher | KPPN (Government) | Insurance/Surety Company |
| Objective | Disbursing project funds | Guaranteeing contractor payments |
| Uptime | After SPM is verified | Since the contract is running |
| Risks borne | Government administration risks | Risk of late/default payments |
| Beneficiary party | Contractor | Contractor/Subcontractor/Vendor |
The two complement each other: SP2D ensures official payments from the state, while Payment Bond ensures contractors remain protected in the event of disbursement issues.
Who Needs a Payment Bond?
Payment Bond is suitable for:
- 🏗️Main contractor for government and state-owned enterprise projects.
- 🧱Subcontractors or main material vendors.
- 🏦EPC company with multi-level payments.
- ⚡Supplier of heavy equipment and technology for APBN/APBD projects.
With this guarantee, the entire project payment chain becomes more secure and credible.
Payment Bond Issuance Process Through L&G Insurance Broker
As an OJK-licensed insurance broker and expert in the field of surety bonds, L&G Insurance Broker assists contractors in every stage of Payment Bond issuance:
- Contract analysis and collateral requirements.
- Selection of an official guarantor company (insurance or surety company).
- Preparation of complete documents (contracts, SPK, company profiles, SPM, etc.).
- Negotiate the best premium rate.
- Maximum guarantee issuance within 24 hours.
L&G also ensures that the guarantee documents comply with the format recognized by the government and KPPN, so as not to result in administrative rejection.
How much is the Payment Bond Premium?
The amount of the Payment Bond premium is usually around:
0.4% – 0.8% of the guarantee value per year, depending on the contractor profile and project duration.
Example:
If the contract value is IDR 20 billion and the Payment Bond is 10%, then the guarantee value is IDR 2 billion.
Premium = Rp2 billion × 0.5% = Rp10 million per year.
Compared to the potential delay in SP2D which could reach billions of rupiah, this cost is very small for such a large protection.
The Risks of Not Having a Payment Bond
Without a Payment Bond, contractors face the risk of:
🚫The delay in SP2D caused a liquidity crisis.
⚠️Late payment of subcontractors or vendors.
💼Decreased reputation and trust from employers.
🧾Unable to participate in the next big tender due to cash flow problems.
In long-term projects, one late payment can be fatal to the continuity of the business.
The Strategic Role of L&G Insurance Brokers in Payment Assurance
As an official and professional partner, L&G Insurance Broker not only issues guarantees, but also:
🔍Analyze the risk of SP2D delays based on project type and agency.
📄Develop Payment Bond wording that aligns with government contracts.
🧠Providing legal and administrative consultations so that claims can be accepted.
🤝Bridging communication between contractors, PPK, and guarantors.
With over 20 years of experience, L&G ensures contractors are not only protected formally, but also financially.
Conclusion: SP2D and Payment Bond — The Perfect Protection Combination
- In the government project finance system, SP2D guarantees that payments are made, but Payment Bond ensures that the contractor remains safe even before the SP2D is disbursed.
- Payment Bond is not a substitute for SP2D, but rather a complement that ensures the project’s cash flow is not hampered.
- With the help of L&G Insurance Broker, contractors can:
- Preparing a valid and efficient Payment Bond,
- Securing project liquidity,
- And maintain a professional reputation in the eyes of employers.
- In the era of accelerated development, contractors cannot simply rely on SP2D.
Protect your business continuity with a Payment Bond from L&G Insurance Broker — a trusted guarantee partner for government projects.
DON’T WASTE YOUR TIME AND SECURE YOUR FINANCES AND BUSINESS WITH THE RIGHT INSURANCE.
HOTLINE L&G 24 JAM:0811-8507-773(PHONE – WHATSAPP – SMS)
Website: lngrisk.co.id
Email: halo@lngrisk.co.id
