Project: Indonesia Procurement Modernization Evaluation-Based CBA

Modernizing Procurement, Maximizing Impact: MCC’s Indonesia Procurement Modernization Project Delivers Strong Economic Returns.

An independent analysis by Limestone Analytics finds that MCC’s investment in public procurement reform is yielding long-term efficiency gains for the Indonesian government.

As part of its $474 million Compact with the Government of Indonesia (GoI), the Millennium Challenge Corporation (MCC) invested $69.2 million in the Procurement Modernization Project (PMP) to strengthen public procurement systems. The project aimed to enhance efficiency, reduce costs, and improve the quality of government procurement through the professionalization of procurement units and support for policy reform.

To measure its economic value, MCC commissioned Limestone Analytics to conduct an evaluation-based cost-benefit analysis (ECBA). Incorporating updated economic data, evaluation insights, and global literature, Limestone’s ECBA found an 18.8% economic rate of return (ERR)— above MCC’s 10% threshold and higher than the 10.6% estimated at project closeout.

Key benefits of the PMP that were valued within ECBA included:

• Improved value-for-money (VfM) in government procurement processes
• Fewer time overruns in construction contracts, thanks to higher-quality vendors

Limestone’s analysis also corrected methodological gaps in the original cost-benefit model, included new benefit streams such as reduced construction delays, and applied real GDP growth to capture future procurement trends.

This analysis demonstrates how investments in governance and systems reform—often overlooked—can generate meaningful, measurable economic returns. MCC’s support for procurement modernization has equipped Indonesia with tools for more effective, transparent public spending.

Link to publication on MCC / UMichigan website: https://mcc.icpsr.umich.edu/evaluations/index.php/catalog/26592