The Auckland-based Moana Pasifika bid and a Fiji-led delegation are NZR's preferred partners to join a 12 team Super competition in 2022, alongside the existing five teams from New Zealand and five from Australia.
The Moana Pasifika group is backed by former All Blacks Sir Bryan Williams and Sir Michael Jones and the head of the New Zealand Rugby Players Association Rob Nichol.
But Kanaloa Pasifika Rugby claim NZR has breached the formal tender process and is demanding it be appointed as the lead entity to form a new Pasifika team.
In a letter to the New Zealand Rugby Board of Directors, Kanaloa CEO Tracy Atiga said NZR breached its own process by appointing Moana Pasifika as a Primary Partner when the group did not participate in the formal tender process.
"Moana Pasifika was invited to participate in the process but declined. NZRPA, Moana Pasifika and NZ Rugby all confirm that no bid was submitted. Kanaloa Pasifika submitted a full application and met all conditions as required in accordance with the different phases of the process."
The Kanaloa bid, which was backed by several former All Blacks including Jerome Kaino and Joe Rokocoko, stepped away from plans to join the American Major League Rugby competition in 2021 and turned its focus to Super Rugby.
It claimed Moana Pasifika was compromised by having at least two New Zealand Rugby employees involved with their bid, including a current Board member who was involved in the decision making process.
Kanaloa also questioned NZR's decision to seek the endorsement of the New Zealand Rugby Players Association when it was heavily involved in the Moana Pasifika bid.
"NZRPA are compromised as they represent the best interests of NZ Rugby contracted players not PI Nations players. Therefore, any process involving NZRPA in respect to Pasifika is a direct conflict of interest."
Tracy Atiga also criticised NZR's decision to decline Kanaloa Pasifika's tender application because of concerns the group did not have the necessary financial backing.
"Nigel [Cass] and Brent [Impey] were already aware that we had various parties willing to invest in Kanaloa, but we would not be able to provide a letter of commitment until the terms of the licence were put in writing," she wrote.
"We urged NZ Rugby to put the terms of licence in writing and/or provide a letter of intent to appease our investor groups but to no avail."
Pacific Rugby Players Welfare has also expressed concern around NZR's Super Rugby expansion process.
PRPW CEO Dan Leo said the involvement of NZR employees, Board members and the Players' Association with the Moana Pasifika bid appears to be a clear conflict of interest.
The former Manu Samoa international said PRPW has been in consultation with a number of groups throughout the bidding process and its belief is that a Pasifika team should be for the development and benefit of Pacific players, unions, national teams, and wider communities first and foremost.
Tracy Atiga said if NZR did not reverse its decision and award Kanaloa Pasifika Rugby a licence to compete in the the new Super Rugby competition it would have no choice but to take legal action.