County cancels $3.845 million ARPA contract for Hilo crisis unit; fund to be repurposed for Pahala wastewater project

The Communications Reports and Council Oversight Committee reviewed the termination and closeout of a $3,845,000 contract awarded under American Rescue Plan Act (ARPA) funding to Hawaii Island Community Health Center to operate a 24/7 crisis stabilization unit in Hilo.

Deputy Director Dennis Lin of the Department of Research and Development told the committee the county issued RFP 4575 on Sept. 6, 2024, to establish a community-based mental health center with a crisis stabilization unit and awarded the contract Dec. 2, 2024. An initial payment of $576,750 was made. Lin said the award expected completion date was Oct. 31, 2026.

The health center informed the county on March 7 that it had not obtained the lease for the proposed facility. After a series of follow-up meetings and a stop-work order, the county and the health center entered a supplemental agreement signed June 11 to mutually terminate the contract because the applicant said it could not be operational as a 24/7 unit by the ARPA completion deadline and was seeking funding outside the RFP scope. Lin said the health center agreed to refund $498,248.84; the county received that payment Sept. 19, 2025. "We agreed that some of the things were done in good faith, you know, such as some hires that they did as well as some training," Lin said.

Council members questioned whether the RFP and scope of work had been sufficiently developed, and whether the county—traditionally not a direct provider of health services—had adequate internal review before issuing an RFP of this size. Diane Nakagawa of the Finance Department said that among ARPA contracts issued in 2024, this was the only one that required termination. Nakagawa and Lin said the county reviewed allowable expenses with corporation counsel and approved payment for allowable ramp-up costs (salaries, wages and travel) but declined to pay other items outside the RFP scope, such as specialized furniture.

Committee members pressed staff on next steps to deliver the services promised to the public. Lin said the county did not plan to return the $3.8 million to the federal government and instead plans to reallocate those ARPA dollars to the approved Pāhala collection system wastewater project, a capital project the department said is on track to finish by next year. Lin told the committee the county reviewed ARPA allowances with counsel and that reappropriation to the wastewater project is allowable and under discussion with the departments that manage the ARPA contracts.

The committee voted to close the file on communication 5‑12. The motion to close the file was moved by Council Member Dennis Inaba and seconded by Council Member Aaron Onishi; the committee recorded the motion as passed.