Hawaii Visitors and Convention Bureau files protest over tourism contract award

It’s turnabout time.

The Hawaii Visitors and Convention Bureau filed a protest Tuesday alleging that the Hawaii Tourism Authority violated state procurement when awarding its largest piece of business, the U.S. brand management and global support services contract, to the Council for Native Hawaiian Advancement.

The bureau, which has always had the U.S. job and holds the current contract, was originally chosen by HTA in a narrow win over CNHA to retain those duties in December in what was expected to be a multiyear, $100 million deal. But after CNHA protested the decision, Department of Business, Economic Development and Tourism Director Mike McCartney rescinded HVCB’s contract, which was worth $22.5 million the first year.

McCartney issued a new solicitation and CNHA won. Now it’s HVCB’s turn to protest.

HVCB President and CEO John Monahan did not respond to the Honolulu Star-Advertiser’s request for comment. However, on Tuesday, Monahan sent a communication to HVCB members, saying, “I want to inform you that today HVCB filed a formal protest of HTA’s decision to award the US Leisure contract for re-solicited RFP No. 22-01 to the Council for Native Hawaiian Advancement (CNHA). Our protest is allowed under both HTA’s RFP specifications and HRS § 103D and HAR § 3-126-4.

“Although I can make no additional comments at this time I wanted to thank you for your continued support as we work through this process,” he said. “I will update you further as soon as I am able.”

McCartney said he had received the protest and would “be conducting a comprehensive review of its contents.” “It is my role as the (head of the purchasing agency) to fully investigate the nature of the complaint and determine if the award is fair and advantageous to the overall interest of the state,” he said.

“I must remain impartial and objective during this next phase of the process and therefore must intentionally and respectfully refrain from making any public comments. Once the process is complete and a contract is executed and/or when the protest is resolved I will be able to comment and answer any questions.”

Sources familiar with HVCB said it likely questioned whether changes that HTA made during the second contract solicitation to the request for proposal parameters and the procurement process were fair.

They said HVCB could have made a case that questioned HTA’s decision to adjust the scoring model so there was less emphasis on marketing during the second procurement. The sources pointed out that HTA significantly changed the makeup of the evaluation committee in April when it re-solicited the contract. They said HVCB also could challenge the overall qualifications of the second selection committee and of CNHA’s team.

The second request for proposals committee, which did not include any hoteliers, picked CNHA over HVCB by a wide margin, according to public documents obtained by the Star-Advertiser. The average score among the committee members for HVCB in the second round was 77.51 out of 100, and was 90.5 for CNHA.

During the second solicitation, three of the eight judges scored CNHA above 90. HTA senior brand manager Iwalani Kuali‘i-Kaho‘ohanohano gave the team a perfect score. HTA Chief Brand Officer Kalani Ka‘ana‘ana rated CNHA at 95. Mahina Paishon-Duarte, a social entrepreneur with two Hawaii-based businesses and co-founder of Waiwai Collective, rated CNHA at 99.

HVCB supporters are asking how Ka‘ana‘ana, Paishon-Duarte and Kuali‘i-Kaho‘ohanohano could have given CNHA perfect scores in the category for overall qualifications of its firm and personnel, when the organization’s contract proposal left key jobs vacant and listed some transition team members, who later said CNHA misrepresented their involvement, most notably Hawaii Hotel Alliance President Jerry Gibson.

The second selection committee for the U.S contract changed dramatically from the first round. There were seven committee members for the first contract solicitation, including Karen Hughes, a past HTA vice president of marketing and product development; Laci Goshi, who was serving at the time as HTA brand manager for the U.S. market; Ka‘ana‘ana; HTA board Chair George Kam; HTA board member David Arakawa; HTA brand manager Maka Casson-Fisher; and Paishon-Duarte.

Scoring was tight during the first round where judges awarded HVCB an average score of 83.04, and CNHA had an average score of 82.29.

CNHA’s protest letter argued that Hughes gave it a low outlier score of 57, which it said skewed the results by nullifying the choice of five committee members. CNHA also alleged that Hughes had a conflict of interest as a former HVCB executive.

Hughes, however, wasn’t the only committee member to issue a really low score in round one. David Arakawa, an HTA board member, issued HVCB a score of 62.3.

Arakawa was brought back to judge the second evaluation process, though Hughes was not.

Now HVCB supporters are claiming that the committee in the second round favored CNHA. There were eight committee members for the second contract solicitation. Arakawa, Kam, Ka‘ana‘ana and Paishon-Duarte returned to serve on the second RFP evaluation committee. New evaluators included state Harbors Administrator Davis Yogi; Kualoa Ranch President and owner John Morgan; Nalani Brun, director of Kauai County’s Office of Economic Development; and Kuali‘i-­Kaho‘ohanohano.

Casson-Fisher also was replaced during the second procurement, as was Goshi, who left her job at HTA after the first procurement for the U.S. contract. Goshi had rated HVCB at 91.33, the same as Hughes.

HVCB supporters have questioned HTA’s decision to allow the participation of Kuali‘i-Kaho‘ohanohano, who gave CNHA a perfect score during the second process. She recently worked for Hawaiian Airlines, and former Hawaiian Airlines executive Ann Botticelli is among the leadership that CNHA has tapped to work on the HTA contract.

CNHA’s contract, which came with an option to extend for an additional two years, was slated to begin June 30 and end Dec. 31, 2024. The protest means the contract, worth more than $34 million during the first two years, may remain in limbo until the state sorts out HVCB’s allegations.

HTA President and CEO John De Fries said in a statement last week that if the new contract is not in place before June 29 when HVCB’s current contract expires, then HTA would “fill the gap in brand management and visitor education for the U.S. market in-house using existing funding.”

“Contingency planning is occurring at this time, which may include temporary reassignment of staff, emergency temporary hires, emergency procurement, and convening members of the HTA Board in an advisory capacity,” the statement said.

McCartney, who is heading the HTA procurement, has the authority through Hawaii Revised Statutes Chapter 103D, the Hawaii public procurement code, to attempt to resolve the protest by mutual agreement or to make a decision to uphold or deny the protest.

If McCartney denies HVCB’s protest, the bureau may pursue an administrative review, which according to state law “shall commence 21 calendar days from the receipt of the request.”

To start an administrative review HVCB would have to pay a filing fee of $1,000, and would have to put down $343,881, or 1% of the $34.3 million contract’s value.

The administrative review would be decided by several hearings officers appointed by the director of the state Department of Commerce and Consumer Affairs. HVCB would have the burden of proof, which requires a preponderance of evidence.

During the review, parties may present oral or documentary evidence, conduct cross-examination, and present arguments on all issues involved.

The hearings officers will decide if the chief procurement officer or designee acted in accordance with the “Constitution, statutes, rules, and the terms and conditions of the solicitation or contract and shall order such relief as may be appropriate.”

The hearing officers have the power to issue subpoenas, administer oaths, hear testimony, find facts, make conclusions of law and issue a written decision not later than 45 days from the receipt of the request.

If HVCB loses an administrative review, it also loses its 1% payment to the state’s general fund. If HVCB wins, it gets the 1% back. If it is determined that HVCB’s proposal should have won, HVCB also would be entitled to the actual costs reasonably incurred in connection with the solicitation, including bid or proposal preparation costs but not attorney’s fees.

If the administrative review upholds HVCB’s protest, but cannot determine which entity should have won, then it would be entitled to recover bid preparation costs.

The decision of administrative review hearings officers is final unless it is appealed in circuit court.

The continued uncertainty is creating angst for Hawaii’s visitor industry, which relies on the top U.S. market to supply the majority of the visitors that come to Hawaii. The U.S. has always been the state’s top source of visitor arrivals. Since the pandemic, domestic arrivals have grown in importance. In 2019, the record year for Hawaii tourism arrivals, more than 6.8 million U.S. visitors came to Hawaii. Last year there were more than 6.4 million U.S. visitors.

HVCB, whose legacy in tourism has roots going back to the early 1900s, has always been part of HTA, which was established in 1998 through a legislative act.

HVCB, which has about 55 employees, still has a $9.4 million contract with HTA to oversee community programs, including Destination Management Action Plans on each major Hawaiian island. That contract expires May 31. The bureau also has a $4.5 million contract to run HTA’s global meetings, conventions and incentives marketing through at least 2025.

Based in Kapolei, CNHA describes itself as a nonprofit with a mission to enhance the cultural, economic, political and community development of Native Hawaiians. The group says its services include financial counseling and providing grants and loans targeting underserved communities in Hawaii.

According to the proposal that CNHA submitted to HTA, the nonprofit intends to form a consortium of Native Hawaiian and community and tourism leaders, and industry and marketing agencies called the Kilohana Collective to handle the U.S. contract.