Lucrative Hawaii tourism marketing contract rescinded again

The outgoing director of a state agency Monday informed two nonprofit organizations wrestling over a multimillion-dollar Hawaii tourism marketing contract that the disputed contract award is rescinded.

Mike McCartney, whose term heading the state Department of Business, Economic Development and Tourism ended at noon Monday, said in two letters that his decision is “final and binding” and that he is confident the Hawaii Tourism Authority, the state agency that solicited bids and awarded the contract, will solicit new bids that split the desired work in two pieces.

McCartney’s letters to the Hawai‘i Visitors and Convention Bureau and the Council for Native Hawaiian Advancement were dated Dec. 5, except for the second page of one letter that had a Nov. 28 date. The letters state that McCartney, as overseer of purchasing for DBEDT, has the authority to cancel HTA’s request for contract bids along with the agency’s most recent award to CNHA after an initial award to HVCB. Each nonprofit contested the award to the other.

CNHA, which in June received a contract worth more than $34 million in the first two years of a potential four-year deal, called McCartney’s action unlawful and said it was taken “just minutes before” his term expired along with the term of Hawaii’s most recent governor, David Ige.

“CNHA won the award based on a fair and thorough procurement process. But the state, led by Mr. McCartney, has refused to allow CNHA to provide its services to the people of Hawai‘i,” Kuhio Lewis, the organization’s CEO, said in a statement.

Lewis referenced a line in McCartney’s letter where McCartney said his rescission decision “should not be considered a ruling on the protest filed by HVCB” against the award to CNHA.

“To cancel a solicitation after an award, a state agency must determine that the award or (request for proposals) ‘is in violation of law.’ Mr. McCartney violated Hawaii procurement law by purporting to cancel the RFP and rescind the award without making that determination,” Lewis said in his statement.

HVCB contested the contract award to CNHA after HTA originally sought bids in October 2021 for work largely focused on visitors from the mainland, representing HTA’s largest segment of business and most lucrative contract, which was supposed to start at the beginning of this year.

HTA selected HVCB in December 2021 for the multiyear award worth $22.5 million the first year. But after a challenge from CNHA, McCartney rescinded HVCB’s award, and HTA solicited new bids in April and picked CNHA for the work in June.

While HVCB’s protest against the award to CNHA was pending, HTA had twice extended HVCB’s old contract for U.S. brand management and global support services. The current extension expires in March.

CNHA supported the prior extensions but now bristles at HTA plans to contemplate a third extension with State Procurement Office approval at an HTA board meeting scheduled for today.

“This is again flatly contrary to law and deprives the state of the services of the superior provider, as determined by the procurement process,” Lewis said. He also said CNHA looks forward to working with newly inaugurated Gov. Josh Green and his DBEDT leadership team “to find an expeditious resolution to this dispute.”

The action by McCartney on Monday followed efforts he made to broker, with the help of mediator and retired Hawaii Family Court Judge Michael Broderick, a mutually agreeable deal for CNHA and HVCB to split elements of the contract where CNHA would provide destination management and HVCB would handle marketing.

That effort, however, appeared quashed by Bonnie Kahakui, the State Procurement Office’s acting administrator, who recently told the state Senate Ways and Means Committee that HTA’s contract award could not be split in two after HTA sought competitive bids for only one award.

The Legislature in 2021 passed a bill that in part repealed HTA’s exemption from state procurement law, taking away the agency’s procurement autonomy and making HTA subject to regulations under state procurement code. Also under the procurement code, HTA’s procurement power is derived from the DBEDT director.

McCartney, in his Monday letters, said Hawaii and its people won’t be best served by one contract that calls for both marketing Hawaii and managing Hawaii’s resources as a visitor destination.

“We must have two contracts,” McCartney said in his letters, “one for marketing communications and travel trade and one for destination brand management, communication, education, and community-based economic development. A single contract would not only put us at a competitive disadvantage in the market but also in dealing with the community.”

HVCB President and CEO John Monahan said in a statement Tuesday that the organization is disappointed that its contract award protest remains unresolved and that a mediated resolution to share the work sought by HTA could not be adopted despite agreement from HTA, CNHA and HVCB.

“We look forward to hearing the direction that HTA will take under the new administration of Governor Josh Green and we remain committed to doing our part to ensure its success,” Mon­ahan said.

In a written statement Tuesday responding to McCartney’s letters, HTA President and CEO John De Fries said, “My staff and I look forward to discussing this rescission and cancellation at our board meeting on Wednesday and we will work with our board, new DBEDT Director Chris Saday­asu, the State Procurement Office, and Governor Josh Green to explore viable options and align our direction going forward.”