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The eleventh-hour decision to rescind the multimillion-dollar award for the state’s top U.S. tourism contract by the outgoing director of the state Department of Business, Economic Development and Tourism is likely to stand, thereby prompting a third solicitation as the controversial procurement process heads into a second year.
Persistent questions, which have loomed over the procurement process for the contract since the start, have lawmakers calling for procurement reform and questioning the role of the Hawaii Tourism Authority and its board system of governance. Some lawmakers are discussing whether a tourism department under DBEDT might better serve the state’s needs.
After speaking Monday at a state Senate Committee on Ways and Means informational briefing, Deputy Attorney General Gregg Kinkley told the Honolulu Star-Advertiser that former state DBEDT Director Mike McCartney’s decision to rescind an award to the Council of Native Hawaiian Advancement was “legal and binding.”
On June 2, HTA awarded its U.S. brand management and global support services award — worth more than $34 million during the first two years — to CNHA in a second attempt at procurement for the U.S. tourism contract.
HTA had originally selected the Hawaii Visitors and Convention Bureau for the U.S. tourism award — worth $22.5 million in the first year — on Dec. 2, 2021. McCartney rescinded the move following an unresolved protest from CNHA. When HTA embarked on a second round in the request-for-proposals process, HVCB lost to CNHA and filed its own protest.
On Dec. 6, CNHA protested McCartney’s latest decision.
Finding a solution now falls to the HTA board and new DBEDT Director Chris Sadayasu, who has the backing of Gov. Josh Green’s administration. Time is of the essence both from a public-confidence standpoint and to avoid disruption in tourism marketing and destination management.
If the island chapter and global support contracts aren’t extended before year’s end, some of the work for the U.S. tourism market will stop, and jobs will be in jeopardy for about 20 HVCB staff work who work at the neighbor island bureaus and provide support for four Destination Management Action Plan coordinators. The current U.S. tourism contract held by HVCB ends March 31.
During the WAM briefing Monday and an earlier one on Nov. 28, it was noted that McCartney played an unusually large role in HTA’s U.S. tourism procurement. While HTA board Chairman George Kam was involved, other HTA board members seemingly were left out of the process.
Sen. Donovan Dela Cruz (D, Wahiawa-Whitmore- Mililani Mauka) told the Star-Advertiser following Monday’s briefing that he questions HTA’s importance given that, in his view, the state agency’s staff and board allowed DBEDT to essentially take over.
“Why do we need them then, if they are just going to be aloof, if they aren’t included? It’s the largest contract. It’s all being handled in DBEDT,” said Dela Cruz, who serves as the WAM committee’s chair. “We could create a tourism division (under DBEDT).”
HTA President and CEO John De Fries told the Star-Advertiser on Tuesday that he disagrees with the idea of dissolving HTA and is “committed to working diligently” to gain support from Dela Cruz and his Senate colleagues.
“Over the past 2-1/2 years, Hawaii experienced and survived a massive economic collapse thanks to a coordinated effort between the private and public sectors,” De Fries said. “In concert with our partners and stakeholders, and led by our Senate-confirmed board of directors, HTA has been guiding and supporting the recovery of our tourism industry, which has helped resuscitate Hawaii’s overall economy ahead of projections.”
Still, lawmakers have become increasingly critical of HTA, and recent actions already have made the agency less autonomous. In 2021, Hawaii lawmakers used the gut-and-replace tactic to take away transient accommodations taxes as the source of HTA’s funding and removed its state procurement exemption.
The unresolved outcome of the U.S. tourism contract — HTA’s first procurement under state law since its exemption was removed — has invited more scrutiny.
Neither HVCB nor CNHA has indicated its next steps, which lawmakers worry could involve litigation. CNHA has said its attorneys do not agree with the Attorney General’s Office and would like to see a reversal of McCartney’s decision.
Both nonprofits have stated a preference for mediation rather than a third solicitation. Since HTA already has released their proposals, it’s possible that another offeror could emerge in the third round and have a competitive advantage.
Meanwhile, procurement irregularities continue to surface. During the latest WAM briefing:
>> HTA staff revealed that they had extended HVCB contracts during the protest period without a board vote, which is required for any piece of business worth more than $250,000.
>> Sen. Glenn Wakai (D, Kalihi-Salt Lake-Aliamanu) noted that three questions were removed from a boilerplate offeror’s qualifying form between the first request for proposals and the second. HTA staff were unable to provide Wakai with an immediate answer when he asked who had removed the questions, which pertained to failing to complete work on a state contract.
>> Wakai also questioned why HTA allowed the Kilohana Collective, CNHA’s tourism arm, to serve as paid sponsor of a reception held during HTA’s annual conference, held last week.
“None of you on staff thought it would be improper to ask a potential contractor embroiled in this back and forth to pay for your tourism conference reception,” Wakai said before advising HTA to return Kilohana’s money.
De Fries told the Star-Advertiser on Tuesday that Kilohana had committed to a $3,000 sponsorship. “They did not transmit any payment, and we informed them not to,” he said.
The new HTA allegations follow a Dec. 4 Star-Advertiser story, 808ne.ws/HTAemails, that detailed possible interference from HTA staff during the evaluation committee’s decision-making process, and possible leaks before a procurement debriefing.
Senators at the Monday briefing directed Bonnie Kahakui, acting administrator of the state Procurement Office, to provide suggestions to improve the state procurement law. Dela Cruz said the goal is for Kahakui’s suggestions to lead to a bill to be weighed during the 2023 legislative session that strengthens the procurement law and holds people more accountable.
Sen. Kurt Fevella (R, Ewa Beach-Iroquois Point) said, “How can we change the law going forward so this kind of stuff doesn’t happen in the future? We need to change something here. It seems like the best interest of the state and the people is not enough.”
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