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McCartney: 'I take responsibility' for mishandling HTA contract award

mike mccartney dbedt
DBEDT Executive Director Mike McCartney at the Ways and Means committee hearing on Nov. 28, 2022.

The Committee on Ways and Means held a hearing Monday that discussed the Hawaiʻi Tourism Authority's marketing contract for the state's largest visitor market — the continental U.S.

Mike McCartney, the director of the state's Department of Business, Economic Development and Tourism, said he's sending the process back to its starting point. This will be the third time in a year the Hawai'i Tourism Authority will issue a Request For Proposals, one of the first steps in the selection process, for the U.S. branding and marketing contract.

At the heart of the dispute was the Council for Native Hawaiian Advancement and the Hawaiʻi Visitors and Convention Bureau. The HVCB has held HTA's marketing contract for the domestic market since the 1990s.

"I've determined that we need to stop the procurement, and then issue two RFPs," McCartney told committee members.

"I take responsibility for where we're at," he said Monday. "What I'm recommending is the most sustainable option to avoid further challenging, because this process is going to keep — if we stay with the existing one, it could not be resolved for over a year or more."

The announcement came near the end of a three-hour meeting, with intense questioning from senators trying to understand the decisions made by HTA executives and McCartney.

"We're doing it because there were mess-ups in the beginning," said Senator Donna Mercado Kim.

"People screwed up and made this process bad because they didn't follow the law . . . You made it worse. I'm sorry, I have to say that," Kim said.

The hearing is the culmination of actions dating back to October 2021. At the time, HTA had issued a request for proposals for the U.S. marketing and branding contract, worth $34 million over two years with an option to extend for another two. This is a mandatory process under state law.

HVCB was awarded the contract last December, but it was rescinded after CNHA challenged the decision. This then restarted the RFP process, where the second RFP was then awarded to CNHA in June 2022.

Protests from HVCB led to McCartney extending HVCB's contract for 90 days, spending an additional $4.5 million, in order to create time to resolve disagreements among HVCB, CNHA and the HTA.

DBEDT and HTA announced last month the contract was to be split between HVCB and CNHA for $20 million each. HVCB would handle the marketing efforts, and CNHA would be in charge of destination management and community engagement.

Throughout the year, decisions were marred in controversy. First, the awarding of the RFPs was mostly determined by the same people. And according to HTA officials, there were several changes made to the RFP after the initial award.

State senators questioned HTA's procurement process, its management, and the changes executives made throughout the process.

HTA Chief Brand Officer Kalani Kaʻanāʻanā told the committee the agency deferred the procurement to McCartney due to a lack of resources.

Sen. Glenn Wakai said that he is familiar with DBEDT's attached agencies, but "in no other attached agencies to DBEDT have they relinquished all of their procurement to DBEDT."

HTA President and CEO John De Fries seconded Kaʻanāʻanā's statement, saying the authority has been understaffed recently. And while the authority is responsible for awarding the contract, De Fries said McCartney was responsible for handling any disputes.

"At the time of protest, [McCartney] would, in fact, have the final say on it," said De Fries.

"I'm astonished at where we are here," said Wakai. "It sounds like you've kind of just relinquished all of your powers and responsibilities. I mean, the staff and the board seem to have absolutely no authority to contract out whatever is necessary to recalibrate tourism."

McCartney defended the actions of HTA executives and its board, saying the authority is now governed under state procurement laws.

He said that prior to this, HTA had an internal process. "So if you had a complaint, or somebody went and had a complaint, it would go to the CEO — which I used to be."

"Then if the CEO couldn't resolve it, then it would go to the board for a vote. So under the procurement law, it's a little different process. We're all learning as we go, to try and get stuff done as quickly as possible."

Although HTA officials have received training from the state procurement office, McCartney told the committee the authority is still getting used to a new way of handling procurements. He admitted he could have done a better job in training those with direct participation.

McCartney vowed he will clearly outline the next steps and actions for the authority in how it handles the next RFP. But he also suggested more participation by lawmakers and the next administration.

"After Dec. 5, the next director, under the law, has the authority," he said. "So you guys might want to look at inserting some special provision in 103-D, related to marketing contracts."

However, senators called for McCartney to consult with the HTA board and stakeholders for transparency.

"Why not go to the board and ask them — do you want to stick out with this process? Or should we cancel? Because right now it's unilaterally being decided," said Sen. Donovan Dela Cruz.

Casey Harlow is an HPR reporter and occasionally fills in as local host of Morning Edition and All Things Considered. Contact him at charlow@hawaiipublicradio.org or on Twitter (@CaseyHarlow).
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