Hawaii hydrogen fund contract disputed
By Sean Hao
Advertiser Staff Writer
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The state's recent selection of a manager for an $8.7 million hydrogen technology investment fund is being challenged by a losing bidder.
Kolohala Holdings LLC has lodged an official protest against the Department of Business, Economic Development and Tourism's recent decision to award the contract to H2 Energy LLC. H2 Energy is a partnership involving HiBEAM and merchant bank Sennet Capital. HiBEAM is an organization of venture capitalists that raises money for its client companies.
Although the consortium was the winning bidder, it was the lowest-ranked choice of an evaluation committee that reviewed three qualifying proposals. Kolohala was the committee's highest-ranked bidder.
The decision to go with H2 Energy already is being reviewed by the State Procurement Office and is the focus of a legislative hearing scheduled for tomorrow.
The hydrogen energy investment fund, created by lawmakers in 2006, is designed to provide financing for companies working to develop clean-burning hydrogen fuel from renewable resources such as wind and water.
Kolohala, which is a partnership involving UH Angels and the Hawaii Natural Energy Institute, is basing its protest on two main points:
"The Kolohala Ventures proposal to run the hydrogen fund was and is very strong," said Kolohala in written statement. "We are extremely disappointed to learn we had the highest-ranked proposal but were not awarded the management of the hydrogen fund. We would still like the opportunity to represent the fund."
State procurement law states that contracts should be awarded to a proposal judged as "the best value" based on the evaluation of a committee or a procurement officer.
A DBEDT evaluation committee ranked three qualifying bidders for the management contract, with Kolohala Holdings LLP placing first, followed by Enterprise Honolulu second and H2 Energy third. The ranking was based on criteria laid out in the agency's request for proposals.
DBEDT Director Ted Liu, who is the agency's procurement officer, said his decision was based on the ability of bidders to deliver on promises made in their proposals. He said while the selection committee did rank the bidders, it didn't recommend a winner.
PROTEST UNDER REVIEW
DBEDT said it is reviewing Kolohala's protest.
"I am aware of Kolohala Holdings' communication of a protest," Liu wrote in an e-mail to The Advertiser. "The protest is being reviewed and evaluated. There is a process and procedure by which such protests are handled."
Under state law, aggrieved parties have five calendar days to protest after the posting of a contract award. DBEDT picked H2 Energy in early August, but Kolohala maintains it was not aware that DBEDT's choice of H2 Energy was a "final award decision" until last week. If Kolohala's protest is valid, the company can request an administrative proceeding to review the matter.
Apart from Kolohala's protest, the state Procurement Office and the Senate Tourism and Government Operations Committee are looking into DBEDT's choice of H2 Energy to manage the hydrogen investment fund. Given these concerns, DBEDT should immediately halt any ongoing efforts to go forward with H2 Energy as the fund's manager, said Senate Vice President Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights).
"I believe prudence should be exercised here and that the department should cease and desist in pursuing this contract until all questions are answered," said Kim, who's also vice chairwoman for the Tourism and Government Operations Committee.
While details of H2 Energy's contract have not been settled, the company could receive up to $385,000 in consulting fees, along with 2.75 percent of the fund's value and a share of fund profits.
Reach Sean Hao at shao@honoluluadvertiser.com.
