Gov. David Ige’s administration has awarded a $25 million no-bid contract to Hawaiian Telcom to deliver broadband to eight underserved areas of the state after Hawaiian Telcom submitted an unsolicited proposal for the project to the state Department of Transportation.
The unusual contract raises questions about whether Ige had any role in the deal because the governor worked for Hawaiian Telcom for 18 years, and for a time was the company’s lobbyist. He has also received nearly $18,000 in campaign donations from Hawaiian Telcom in the past decade.
But a spokeswoman for Ige said the governor was not involved in the procurement exemption in any way, and did not discuss the matter with Hawaiian Telcom staff or executives before the award.
Transportation officials justified the no-bid contract in a filing with the State Procurement Office by asserting that Hawaiian Telcom “is the only provider in the state to own and operate broadband capacity on the Inter-Island fiber network.”
However, a spokesman for Charter Communications countered that “of course the contract should have been competitively bid. Hawaii residents deserve the best products at the lowest price, especially when tens of millions of public dollars are being spent.”
Charter offers broadband, cable and other services in Hawaii as Spectrum, and competes with Hawaiian Telcom.
“Spectrum has the capability and network assets to provide the desired services,” said Charter spokesman Dennis Johnson. “We operate and manage broadband networks serving more than 31 million customers, including 467,000 in Hawaii.”
When asked if Charter intends to challenge the procurement exemption for Hawaiian Telcom, Johnson replied that “we are reviewing the situation, and don’t have anything to add right now.”
Ige used his State of the State address on Jan. 25 to underscore his commitment to expanding access to broadband, explaining that “the pandemic has highlighted the digital inequity in Hawaii.”
In the same speech, Ige announced he had instructed DOT Deputy Director for Highways Ed Sniffen “to accelerate his pilot project to connect rural communities to broadband service. He will be leveraging federal funds with state and private sector resources.”
That “pilot project” is focused on improving or extending service in Puna and Kau on Hawaii island; in Hana, Maui; in Nanakuli, Waianae, Waimanalo and Kalihi on Oahu; and in Kapaa, Kauai.
Sniffen said Hawaiian Telcom sent an unsolicited proposal to DOT shortly after the State of the State address, and transportation officials then began discussions with the company.
On Feb. 16, which was three weeks after Ige’s speech, the State Procurement Office received a request from the Highways Division seeking an exemption from state procurement requirements. It sought permission to hire Hawaiian Telecom without competitive bidding to do the pilot project under a contract for up to $25 million.
The procurement office granted “conditional approval” to that request, provided a number of requirements are met, and a notice of award of the contract was posted Feb. 25.
Developing a formal request for proposals or RFP for the project would have allowed other vendors to try to bid competitively for the contract, but “the difficult thing for us would be to build out that RFP now, to cover that pilot, mainly because of the time it takes for procurement,” Sniffen said.
“Procurement time frame is like a year, minimum, and a year, that’s the time frame especially now when everybody needs that service,” he said. “So, it’s better for the state and its residents for us to move forward very quickly. The procurement exemption gives us that, in spades.”
Ige agreed, saying in a written statement that “the pandemic accelerated the need for children doing remote learning and parents working from home to have connectivity to the internet.”
“Procurement using normal processes would have taken at least a year to develop the scope of work and the RFP, then another 6 months to go through the procurement process,” Ige said in the statement.
“The exemption allowed us to work directly with a provider to hammer out the details of service provision and run through iterations that would not be allowed by the bid process,” he said in the statement. “This process is a feasible and prudent approach to a pilot project which will inform the direction of the future full builds for the state.”
“As a result of using this process, we will start up installation in Kalihi, one of the 8 pilot communities, by July of this year,” Ige said.
Sniffen also stressed the “pilot project” nature of the deal, in which the state will start with a limited scope project and then expand later.
“We don’t know all the barriers, we don’t know the best methodology to put out those types of services, so we wanted to make sure that we piloted first,” Sniffen said.
At this point the state doesn’t know how to incorporate the project’s issues and challenges into a larger request for proposals or RFP that could be used in competitive bidding.
“Best case scenario, what I would love to do is put out a statewide RFP to cover all unserved and underserved areas,” Sniffen said. “I don’t know how to design an RFP like that. I don’t know how to design the facilities yet. I don’t know what the barriers and challenges are.”
Timing is also important because the state has a deadline to spend the federal money.
In the written submittal seeking the exemption from competitive procurement, state transportation officials said the department received $42 million in COVID-19 relief funds from the Federal Highways Administration, and the federal pandemic relief money must be spent by September 2024.
The broadband project grows out of a larger initiative to wire up rights of way and intersections to connect them to a network so that signal lights, cameras and data collection devices can all be controlled remotely.
Wiring up the highway system also allows the state to install signaling equipment for the autonomous vehicles of the future, Sniffen said.
“Procurement using normal processes would have taken at least a year to develop the scope of work and the RFP, then another 6 months to go through the procurement process.” — Gov. David Ige
The system the state is building along the roadways will pass by or into underserved communities, offering an opportunity to improve broadband service in those areas, he said.
“We thought it was a really good connection … to utilize the infrastructure that we’re building out to push more service into communities,” he said.
Sniffen said that under the state’s partnership with Hawaiian Telcom, the company will string lines within rights-of-way belonging to the Highways Division, expanding the reach of broadband service. When the contract is finished, Hawaiian Telcom will own the fiber and other wiring it installed, he said.
Wi-Fi equipment will then be installed under a separate contract to provide broadband service in the targeted underserved communities, which include the Towers at Kuhio Park public housing complex in Kalihi, formerly known as Kuhio Park Terrace.
Under the contract, Hawaiian Telcom will provide the communities in the pilot project with free, managed Wi-Fi service for three to five years.
The infrastructure that will be installed to do that will remain in place when the contract ends, and community members can then use that wiring to hook up to the service providers of their choice, Sniffen said.
That state partnership with Hawaiian Telcom is preferable to a competitively bid procurement because the company can “manage the broadband network, end-to-end,” according to the submittal to the State Procurement Office.
“Without working with a vendor with end to end ownership of the system, the state would need to work with multiple vendors, when issues arise, resolution may not be as timely nor as cost efficient,” according to the submittal seeking the procurement code exemption.
But Johnson of Charter Communications disputed that statement, suggesting ownership of an interisland cable should not be a requirement.
“Spectrum is fully responsible for addressing issues for its customers, and the state would not have to engage another vendor, even if a problem arose with interisland or transpacific fiber-optic cables,” he said.
“Spectrum provides broadband internet to hundreds of thousands of residential customers and small business and enterprise clients in Hawaii without having to own inter-island or transpacific fiber, and has previously won multiple bids from the state,” Johnson said.
Sniffen noted the state posted a notice that DOT was seeking the procurement exemption, “and when we did that, nobody came back with any questions, comments, concerns or any pushback.”
However, the State Procurement Office did instruct DOT to submit more information about the actual costs of the Hawaiian Telcom service in a document called a “Memorandum for Record — Price Reasonableness Determination” before any services are provided.
Sniffen said DOT has not actually executed the contract with Hawaiian Telcom, and “if we come up with something that’s not the best deal for the state, then we won’t go forward. If it is the best deal, then we’re moving forward on it.”
Sniffen said there is no written scope of contract available that would spell out what Hawaiian Telcom will do, because that is still being developed. But he said that “their scope is to provide a system, a service, in the areas that we’ve selected.”
The time frame for providing service in each area is still being negotiated, he said.
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