Analysis of Risk Management and Internal Control Implementation in the Procurement of Construction Goods/Services in the Area of Probolinggo City Government, East Java Province

Procurement of construction material or services within Probolinggo City Government gradually implemented through electronic way (e-procurement) since 2012 and make the opportunity of potential fraud due to transparency lackness in the procurement process is minimized. The government agency who responsible for procurement policy also stated the conventional way of goods or service procurement is frail to many unfair activities such as kickback, bribe, mark-up price (the supplier setting higher price for their commodities) or project manager intended to hide or not announcing the procurement plans, and non-transparent procurement process. These activities can result in losses for the state and/or the community that involved in the construction project. However, the e-procurement implementation does not necessarily eliminate probability of risks to occur. Therefore, identifying risks in the government procurement process in particular for construction service is very important to build an understanding about causes that trigger the emergence of risk event. By understanding the causes of a risk, it is expected to be able to take action to minimize risk occurrence from its source. Analysis method selected in this study is Failure Mode and Effect Analysis or FMEA. The qualitative research method was used to identify risks and determine risk mitigation, meanwhile the quantitative method was used to test data from questionnaire results and calculate the RPN value for assessing the magnitude of the risk value. The result of the study found that risk analysis using FMEA showed type of risk with highest RPN value was “Delayed payment due to incomplete supporting documents” (RPN: 318,01) which has big impact and high probability of risk. There are 11 highest priority risks require immediate control to avoid procurement failure, delays and/or budget losses.