The Hawaii Tourism Authority has called a special board meeting for Wednesday to discuss extending the U.S. tourism contract while it sorts out a procurement protest and other irregularities a week after a secret meeting with the outgoing governor and the director of the state Department of Business, Economic Development and Tourism.

As the battle for HTA’s largest piece of business, the U.S. tourism contract, heads into its second year, it’s left a lot of losers in its wake. Both the Council for Native Hawaiian Advancement and the Hawaii Visitors and Convention Bureau have spent hundreds of thousands of dollars on efforts to procure HTA’s largest piece of business, leading to a risk that one or both could sue.

HTA on June 2 awarded its U.S. brand management and global support services contract to CNHA. The new contract, worth more than $34 million in the first two years, was expected to start June 30 and is slated to end Dec. 31, 2024. The contract comes with an option to extend for an additional two years.

The solicitation was originally awarded in December 2021 to HVCB as a multiyear U.S. tourism contract worth $22.5 million the first year. It was later rescinded following an unresolved protest from the CNHA. When HTA embarked on a second round in the request-for-­proposals process, HVCB lost to CNHA.

The closed-door meeting is drawing broad criticism from members of Hawaii’s visitor industry, given that the process thus far has been mired by a lack of transparency. Critics say the eleventh-hour timing also is questionable given that Gov. David Ige’s term and DBEDT Director Mike Mc­Cartney’s appointment will have ended before the HTA board takes a vote.

HTA Public Affairs Officer Ilihia Gionson said in an email, “The meeting was legal, permissible under HRS section 92-2.5(f), an exemption from sunshine law requirements for disclosure, agendizing and minutes-taking. Under that statutory provision, the purpose and matters discussed are confidential. No board action was taken at this meeting with the Governor.”

Gionson said no official action was taken on the contract during the meeting with Ige. The subject is on the agenda for a special board meeting on Wednesday (bit.ly/3ulDNBc).

Given the agenda, it’s likely that during the closed-door meeting McCartney updated the HTA board members who were present on his plan to cancel CNHA’s award and issue a third request for proposals for the lucrative contract — this time for two separate contracts, with one focused on destination management and the other on brand management or marketing.

It was revealed Nov. 28 during a Senate Committee on Ways and Means information briefing that McCartney had been working on a deal to up the procurement award for the U.S. tourism contract to $40 million and split it into a destination management contract for CNHA and a branding contract for HVCB.

But Bonnie Kahakui, acting administrator of the state Procurement Office, told WAM that the award could not be split into two contracts since the solicitation had been for only one award.

Gov. Josh Green, who is taking office today, said whatever processes Ige chooses are between him and his team, although Green said he would prefer that Ige’s administration leave the large decisions for the incoming team.

He told the Honolulu Star-Advertiser that he still believes that mediation can provide a pathway forward for CNHA and HVCB to work together.

“I appreciate all the parties being willing to work together under the new leadership that we hope to bring,” Green said. “I’ve already asked my nominated director of DBEDT, Chris Sadayasu, to confer with the Hawaii Tourism Authority, our incoming Attorney General team, the procurement team and, if necessary, the legislative leadership so that we can make sure that we do it well under the rules in a fair way and also hopefully through mediation. I don’t want to delay a solution, and we need to have these teams actively promoting Hawaii.”

It’s unclear whether Mc­Cartney’s push to rescind CNHA’s U.S. tourism contract award and move toward a third solicitation will stick or whether Sadayasu, the new head of purchasing agency for DBEDT, will manage to mediate an agreement between HTA and the offerers.

Green said it will be Sadayasu’s role to make sure that procurement rules are followed and that DBEDT and HTA are positioned well for promotion of Hawaii and proper tourism management.

“The first salvo will be having a new director and deputy director of DBEDT. Everyone deserves a second chance to get things right. But we are going to have very high standards, and we are going to try to avoid these conflicts that result in delay, litigation and ultimately a lot of waste,” he said. “I hate waste, and I’m going to make sure people are accountable.”

He said he chose Sadayasu because he has 17 years of experience in economic development at DBEDT, has been attached to HTA and has worked for some of the development entities before.

“He is a very amicable guy, and I wanted someone that could broker peace when necessary,” Green said.

He said he has asked Sadayasu to work to put “old conflicts” to rest and has pledged the full support of his Cabinet.

“We are going to have his back all the way,” Green said. “I don’t want a conflict between CNHA and HVCB. I want them to actually be partners and learn from one another.”

CNHA CEO Kuhio Lewis said Thursday in a statement that the nonprofit is encouraged by Green’s recent media comments “expressing his preference to broker an expeditious resolution to the dispute.”

“We agree with (Gov.) Green that the state cannot afford to continue to waste time and resources delaying the execution of this contract, which serves as a critical tool to bringing U.S. tourists to Hawaii and to minimizing the impacts of visitors to the islands,” Lewis said.

Moreover, he said McCartney’s proposed decision is unlawful.

“The law requires that CNHA, as the awardee, receive the contract. Hawaii law does not support the rescission of an award without a finding that the award was in violation of the law,” Lewis said. “CNHA intends to ensure that the law is followed and is prepared to respond decisively to any legally unwarranted efforts to undo the award to CNHA.”

HVCB still has an active protest from June 21, and HVCB President and CEO John Monahan declined to comment.

However, sources close to HVCB have told the Star-Advertiser that the nonprofit wants to pursue the “collaborative partnership” with CHNA that was discussed in a news release issued by DBEDT on Oct. 5.

There was a statement from Monahan in that news release, which said, “We also look forward to collaborating with HTA and CNHA to collectively achieve a regenerative tourism model that positively impacts Hawaii’s natural resources and benefits residents statewide.”

A year has passed since HTA began procurement for the U.S. tourism contract. The lack of transparency in the process as well as the potential depth of the change has become distracting and divisive within Hawaii’s visitor industry. It’s also caused HTA staff to fall short of their other procurement obligations, which require timely solicitations for major market areas.

The HTA board at its special meeting is slated to discuss extending four other major market area contracts in addition to the U.S. tourism contract, which is currently held by HVCB and expires March 31. Possible extensions also are on the table for the Island Chapter Support Services Contract, which ends Dec. 31; the Canada Leisure Marketing Contract, which ends Dec. 31; the China Leisure Marketing Contract, which ends Dec. 31; and the Global Support Services Contract, which ends March 28.

The only major competitive procurement that HTA has managed to complete was the award for Brand Marketing &Management Services for Japan Major Market Area. HTA selected a.link LLC on Nov. 15 for a $26.5 million three-year award, which has moved past the protest period. The contract is expected to start Jan. 1.

It’s unclear what the loss of the U.S. tourism contract would mean for HVCB or CNHA. HVCB, a private, member-­based organization, has been serving Hawaii and the tourism community and residents for over 100 years. As of December, HVCB was down to five contracts with HTA worth $35.6 million. All but $14.7 million of these contracts is due to expire this year or in the spring; however, several extensions are on the table.

The bureau’s latest employee count is not available, but in 2019 it had about 66 full-time staff. According to HVCB’s proposal for the U.S. tourism contract, it planned to dedicate more than 20 employees to that endeavor.

Uncertainty over the procurement has made it difficult for HVCB to attract and keep employees. Recent key departures have included Ross Birch, executive director of the Island of Hawaii Visitors Bureau; Joyce Bernardo, Oahu Visitors Bureau director of marketing; Marissa Nakama Wong, HVCB social marketing manager; and Susie Kim, HVCB director of content development.

The future of the HVCB-owned island chapters, including the Oahu Visitors Bureau, the Kauai Visitors Bureau, the Maui Visitors &Convention Bureau and the Island of Hawaii Visitors Bureau, is undetermined. There also might be a trickle-down hit to HVCB’s longtime vendors and contractors — businesses that provide the bureau with creative, strategic and technical services.

Losing the contract also would be a big blow for Kapolei-based CNHA, which had been relying in part on the tourism contract to sustain its growth after the tens of millions of dollars’ worth of COVID-19 pandemic relief programs that it has managed come to an end. CNHA’s nonprofit filings show its annual grants and contributions increased to $70 million in 2021 from just over $1 million annually in 2018.

Lewis told the Star- Advertiser during an interview this summer that the nonprofit’s full-time staff also had grown to about 100 from 26 prior to the pandemic.

To assist with the tourism contract, CNHA formed an expert consortium, the Kilohana Collective. The outcome of the dispute also could affect consortium partners including Los Angeles-based Wondros, Core Group One (formerly Ogilvy &Mather), KHON, Nexstar Media, Solutions Pacific, Ward Research and Pae ‘Aina LLC/Island Agency.