Sand Island Treatment Center, which for years has won state contracts to treat people facing drug and alcohol addiction, missed a February deadline to bid for a new infusion of state cash. The deadline was on a Friday, but Sand Island didn’t turn in its paperwork until the following Monday.

A state regulation specifies that bids “shall” be rejected if they’re late.

But somehow, the facility was nonetheless awarded about $2 million over two fiscal years, the amount it requested.

Now, the state has decided the award was a mistake and rescinded it, saying Thursday that Sand Island was incorrectly allowed to respond to a revised RFP even though it blew the original deadline.

Sand Island Treatment Center.
Sand Island Treatment Center, a longtime state contractor, missed the February deadline for submitting a bid to the state. Cory Lum/Civil Beat

The $42 million contract is for an array of substance abuse services to be split between a number of providers, with 36 submitting applications asking for about $200 million — almost five times what the state had budgeted.

The original request for proposals included a deadline of Feb. 5. The first few pages of the 197-page RFP state repeatedly that bids will not be considered if they are submitted after that deadline. Sand Island did not submit its paperwork, however, until Feb. 8.

The snafu of Sand Island being awarded money anyway seems to have occurred after the state issued an addendum, updating some of the technical language in the RFP and inviting bidders to submit proposals taking into account these tweaks, said Deputy Director Edward Mersereau.

The new deadline was March 5.  A handful of the original 36 bidders put in revised paperwork. But so did Sand Island, even though it had missed the original deadline.

“Wires just got crossed, I think,” Mersereau said.

The Alcohol and Drug Abuse Division, which administers the contract, is limping by with about half its positions vacant. “Between that and COVID, I think it’s fairly understandable to see that kind of stuff happen,” Mersereau said.

He said the error was detected about two weeks ago, when staff was reviewing the anticipated awards leading up to the formal execution of the contracts. That happens to be around the same time Civil Beat asked why Sand Island was getting money when it had missed the deadline. But Mersereau said the state had discovered the error independently and taken action to correct it.

He discounted the possibility that someone at the health department came up with the RFP revision as a way for Sand Island to bid after the fact, “but if in the course of evaluating this, that comes up … we will definitely take the necessary steps to address that as well.”

The health department consulted with State Procurement Office and Attorney General Clare Connors’ office before deciding on Thursday to rescind the award. The decision impacts the state’s strategy for dealing with substance abuse, removing a longtime provider that treats people with entrenched addictions, including many referred by the judicial system. A Civil Beat story last year, which evaluated Sand Island’s success rate, found that some judges considered it the best program in the state and overall sent 275 defendants there in one fiscal year.

“Yes, they provide a service, but they need to follow all the rules and guidelines like everyone else.” — Sandy Ma, Common Cause Hawaii

It is an impact for sure,” Mersereau said in an interview before the final decision. “But more of a concern and more of a priority would be to make sure the procurement process is adhered to.”

Sand Island issued a statement saying, “We are saddened that treatment-resistant clients will not benefit from Sand Island’s long-term continuum of care. The Center is one of a very few long-term care treatment facilities in the state that specialize in the needs of the clientele placed through ADAD (the Alcohol and Drug Abuse Division.)

“The Center is proud of its many decades of work with ADAD in treating members of our community who suffer from severe alcohol and drug dependency, which is often accompanied by mental health issues, homelessness, and resistance to treatment. We look forward to working with ADAD on other projects in the future.”

The state’s rescinding of the award of about $1 million a year for two years delivers a blow to the facility’s finances. Sand Island’s 2018 tax return, the most recent available on the charity tracker Guidestar, shows total revenues of $4,435,671.

The incident leaves lingering questions about how the mistake occurred in the first place.

Sandy Ma, executive director of Common Cause Hawaii, who used to work in state procurement, called it “kind of mind boggling.” An abundance of safeguards in state procurement, she said, require many people to review the process, which is why it takes so long.

“That’s why it’s kind of hard to imagine how something like that could happen,” she said.

While the division may be short-handed, she said, “I would not accept that as an excuse from our government. We are all under extraordinary stress.”

As for losing Sand Island as a provider, she said, “Yes, they provide a service, but they need to follow all the rules and guidelines like everyone else.”

How The Process Is Supposed To Work

One question raised by a situation such as this is whether someone at the contracting agency, in this case the health department, wanted to reopen the bid to help a favored bidder, said Scott Amey, general counsel for the Project On Government Oversight. POGO is a nonprofit, nonpartisan organization in Washington, D.C., that investigates waste, corruption and the abuse of power.

“Is there coziness or conflict of interest inside the awarding agency, that they wanted that company to receive a portion of the award?” Amey asked.

One way to tell, he said, is the justification for reopening the bid. “They should make sure the reopening process wasn’t a way to steer a portion of a contract to a specific company,” he said.

Mersereau said it is common for the department to issue an addendum to an RFP. In this case, the revised RFP is eight pages, compared to 197 for the original. Some of the changes merely reflect the new deadline. Others add the title “early intervention specialist” to the list of “other services” the contractor is supposed to provide, delete definitions of some positions or, in one case, adds a link to a health department website on credentialing. A longer section added the required credentials for contractor employees providing certain services.

Just four of the original 36 bidders put in revised proposals in response to the eight-page addendum, apparently concluding that the changes were significant enough to warrant additional information.

Since 2019, Civil Beat has published several stories about Sand Island. One found that executive director Mason Henderson had made as much as $500,000 a year, far beyond the salaries of top workers at other Hawaii drug rehabs. Salaries for some counselors were well over $100,000, approaching three times the going rate for drug and alcohol counselors in Hawaii and the U.S.

After that story, Attorney General Clare Connors’ office revealed that in 2017, two years earlier, it had reached an agreement with Sand Island to make reforms, such as paying Henderson less. Henderson was also supposed to return some of his compensation, but failed to do so until after Civil Beat’s article and a new demand from the attorney general’s office. Henderson had intended to pay back the money, the facility said, but got “distracted.”

Henderson as an individual has contributed about $45,000 to Hawaii political campaigns since 2007.

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