The state agency in charge of marketing Hawaii as a tourist destination should go back to the drawing board and seek new bids from firms wanting to promote the state to the key mainland U.S. market, Gov. David Ige’s economic development chief told a Senate panel on Monday. But a key Senate leader said tourism board officials should decide what to do next.

Mike McCartney, director of the Hawaii Department of Business, Economic Development and Tourism, said he prefers to cancel a previously awarded contract, valued at $34 million over two years, that’s been on hold pending a protest that McCartney is in charge of sorting out under procurement law.

The contract battle has pitted the Hawaii Visitor and Convention Bureau, the state’s long-time marketing agency, against the Council for Native Hawaiian Advancement, a tourism marketing upstart that has previously worked to provide economic stability and opportunities for Native Hawaiians.

Instead of going through a litigious protest process, McCartney said, he wants the Hawaii Tourism Authority to cancel the current contract and issue a new request for proposals that could effectively result in two contracts: one to market Hawaii, which would play to HVCB’s strengths, and the other to manage Hawaii as a tourist destination, which would more likely fall to CNHA.

“That’s going to be my recommendation,” McCartney said.

That would be a stunning possible reboot of a contentious, year-long procurement process engineered by McCartney’s department, with support from Hawaii Tourism Authority staff. During Monday’s informational briefing before the Hawaii Senate Ways and Means Committee, it became apparent that the process had been not just irregular, but potentially at odds with state procurement law.

Ways and Means Chair Donovan Dela Cruz recommended that McCartney let the tourism authority board decide what to do next – something McCartney said he would “take under advisement.”

“My suggestion is to ask the board if they want to start all over,” Dela Cruz said. “That way there’s some transparency.”

Sen. Lorraine Inouye, a Ways and Means Committee member who asked tough questions during the briefing, said she was pleased the committee made public the flawed process McCartney had been following.

“It just was a crazy process,” she said. “There were so many things we heard today that were improper.”

The selection process began in October 2021, when the tourism authority issued a request for proposals for the contract. Coming out of the pandemic, the contract provided the opportunity for HTA to shift from not simply marketing Hawaii but also managing the tourists who came to the islands.

An overabundance of tourists and the negative side effects of tourism had led residents increasingly to call tourism “an extractive industry,” a term economists use to describe activities like oil drilling and metals mining. The idea was to use the contract to nurture tourism that was not merely “sustainable” – the previous buzz word – but “regenerative” instead of “extractive.”

The HVCB initially won the contract, but CNHA protested the award. However, rather than move forward with the protest, HTA said it would reissue the RFP again. This time, CNHA won the contract, and HVCB protested.

That was in June. Since then the contract has been in limbo, with HVCB getting repeated contract extensions so Hawaii could continue to market to mainland tourists.

Procurement Officer: Earlier Idea Was Not Appropriate

Although independent, the HTA is administratively attached to DBEDT, which made McCartney the head of the procuring agency for the contract. As such, he would be in charge of the administrative process involving HVCB’s protest.

But, during Monday’s hearing, it became apparent that rather than going through the standard protest process, McCartney sought to bring CNHA and HVCB together and mediate a solution.

In October, McCartney announced the two sides “worked tirelessly and collaboratively during this time and have found a way forward in partnership.”

DBEDT’s press release quoted both John Monahan, president and chief executive of the HVCB, and CNHA’s chief executive, Kuhio Lewis.

“We look forward to having a seat at the table alongside HTA, the visitor industry, HVCB and the people of Hawaii to achieve a regenerative model that protects and perpetuates our precious community, resources and aina,” Lewis said.

While the idea of splitting the contract in half with each party getting some of the work might have seemed well-intentioned, McCartney on Monday explained that the Hawaii Attorney General’s Office raised questions about the plan when the office saw the press release covered in a newspaper.

Meanwhile, Bonnie Kahakui, acting administrator of the State Procurement Office, on Monday told lawmakers that after she was informed of McCartney’s path forward she emailed him to explain “this is not an appropriate solution.”

Lawmakers also sought to determine who was making key decisions about the procurement processes, including whether to move forward despite protests. Although DBEDT had delegated procurement authority to HTA, it turned out HTA still was deferring to McCartney to make key decisions.

When Dela Cruz asked whether dividing procurement decisions in such a piecemeal way was appropriate, Kahakui said, “That would be very unusual for an agency to piecemeal it.”

Finally, Kahakui said, while it would be possible to award multiple contracts under one request for proposals, the original request for proposals must state this. So the parties could not have split the HTA contract into two separate contracts even if the parties had agreed to.

“It is possible to award multiple awards under a contract, but it needs to state that in the solicitation,” she said.

While the procurement reboot is not yet official, it appears to have support of key tourism industry players.

Kekoa McClellan represents most of Hawaii’s major hotels as a spokesman for the American Hotel and Lodging Association and the Hawaii Hotel Alliance. He said that hotels have long supported the principles of regenerative tourism, and the destination management that has been part of the Hawaii Tourism Authority’s recent mission.

“There is a clear need to resource destination management, as our hotels have been advocating for many, many years,” he said.

McClellan said new RFP could not only allow HVCB and CNHA play to their strengths but also better quantify measures of success for destination management. This could help please a public that has begun to grow tired of a glut of tourists.

“The real winner is all the kamaaina who are looking to HTA for leadership,” he said.