Exclusive: Report finds Washington state rushed into launching marijuana tracking system, fixes needed

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An independent report commissioned by Washington marijuana regulators found the state and MJ Freeway were forced to rush out a new cannabis seed-to-sale traceability system earlier this year despite technical problems that cost cannabis businesses tens of thousands of dollars in lost sales.

The study, performed by a leading tech and research consultancy and obtained by Marijuana Business Daily, called the system “unstable” and noted that it crashed “several times.”

It recommended the state take steps to root out the problems and that MJ Freeway improve its seed-to-sale platform to prevent the system from failing altogether.

The report comes after the Washington State Liquor and Cannabis Board (LCB) earlier this year hired Gartner Consulting, a Connecticut-based global research and advisory firm.

The firm’s marching orders: Conduct an eight-week assessment of the February rollout of Denver-based MJ Freeway’s Leaf Data Systems platform.

Gartner spread the blame for the botched launch, noting that the LCB went live last Feb. 1 with an imperfect system while MJ Freeway’s platform wasn’t ready to handle the complex job.

“The state went live with a solution that would have failed typical tests,” Gartner noted in its 177-page report. “The solution (Leaf Data Systems) was not mature enough for launch.”

One MJ industry executive, meanwhile, said the fault lies more at the feet of the LCB than MJ Freeway, “purely because it was (the agency’s) decision to go live, not MJ Freeway’s decision.”

“The LCB was responsible for the system, the integrity of the data and pulling the trigger to say it’s going live,” said Lindsay Short, operations manager for Seattle-based infused product maker Db3. Short is also a member of the Traceability Advisory Committee, a panel advising the state about the system.

Multiple problems flagged

In its report, Gartner concluded:

  • Similar projects typically take a year or more to implement, underscoring the complexity of the Leaf Data Systems rollout. “The state and MJ Freeway were forced into an impossible deployment schedule,” Gartner wrote.
  • The need to customize the Leaf Data Systems platform for the Washington market was “underestimated.”
  • The methods used to develop and implement the project failed to follow “best practices.”
  • “Security concerns are persistent.”

Gartner also said the situation isn’t beyond repair and that improvements have been made since earlier this year.

The consultancy spelled out a “10-Step Project Rescue Checklist” that the LCB could follow to remedy the situation, including identifying the root causes that triggered the problems.

The state could also hire an “experienced” systems integrator to help provide software solutions.

In addition, Gartner noted that MJ Freeway “should be able” to provide software that conforms to “industry best practices.”

Alternatively, Gartner said, the state could “consider canceling the project and implementing a robust workaround.”

Launched with imperfections

MJ Freeway CEO Jessica Billingsley defended her company’s performance and noted the seed-to-sale system was deployed in “record” time under trying circumstances.

MJ Freeway was tapped for the seed-to-sale contract in June 2017 because BioTrackTHC’s contract with Washington state was slated to end Oct. 31, 2017.

“Let’s remember, this is an entirely new undertaking, and each state is learning as they go,” Billingsley told MJBizDaily. “Even with the state’s evolved requirements … we launched Leaf Data Systems in a record 32 weeks from vendor selection to launch.”

Regarding security concerns going forward, Billingsley said MJ Freeway has taken steps that address authentication and encryption. The company also retained cybersecurity firms to perform regular security audits and is in good financial shape to make further improvements.

“Many of the final technology issues as outlined in the Gartner Report were addressed during and shortly after completion of the evaluation for the report,” she said.

“Additionally, MJ Freeway just completed a $10 million oversubscribed Series C financing. The financing will continue to accelerate advanced technological build-outs in real time.”

Brian Smith, spokesperson for the LCB, admitted the Leaf Data Systems platform went live with known problems.

“Ultimately, the LCB Traceability Steering Committee had to weigh the impacts to the industry against launching a software system with defects,” Smith wrote in an email to MJBizDaily. “The decision was made to launch the system even with some imperfections and additional coding needed.”

The industry representatives provided input that regulators considered during the decisionmaking process, Smith noted.

Representatives for small growers, for example, said sales were suffering because of a stopgap reporting system companies used before the launch of Leaf Data Systems. In particular, MJ retailers weren’t accepting product from growers who were using the stopgap contingency system, according to Smith.

That apparently factored into launching the Leaf Data Systems platform in February.

Smith also noted that progress has been made since that initial launch. Gartner itself has highlighted the improvements, relabeling issues it earlier flagged as “high risk” to either “moderate risk” or “low risk,” according to Smith.

The Gartner report also noted that “communication between the state and the MJ Freeway team has improved since staffing changes occurred.” Moreover, “the roles of the state team are better defined.”

Building the plane as its flying

Short, the Db3 executive who is a member of the advisory panel, said “the report does not look good.”

“It shouldn’t be a surprise to MJ Freeway or the LCB,” she added.

The advisory committee has been meeting monthly since last year’s handoff between MJ Freeway and BioTrackTHC.

Nothing on this report shocked anybody in the industry,” Short said. “What was frustrating for us was, if it was that obvious to us and it was that obvious to Gartner, why was it not obvious to the state?

“They chose to go live with a system that was basically half-baked.”

She, along with about a half-dozen others in the industry, helped to test the system before its February launch, and the list of the critical fail items was “long.”

Short said that system tests showed major failures, and the state moved ahead anyway.

“It was just asking for chaos,” she added.

Making it work

Steve Fuhr, the owner of Toucan Farms in Shelton, said Leaf Data Systems is functioning in a more usable fashion.

“What’s making it usable are constructed workarounds,” Fuhr said.

During the transition, according to Fuhr, without third-party software providers, there would have been a complete meltdown of the traceability system.

“It’s due to the actions of my third-party traceability provider providing consistent patches and workarounds that has caused Leaf Data Systems to be more functional,” he added.

He is still experiencing issues with tracing lot numbers from cultivation to lab testing to retailers.

“It’s costing us efficiencies at the testing level, bringing the product in, sending the product out, correlating with retailers test results for specific lots,” Fuhr said. “At every step, it costs us more time.”

Bart Schaneman can be reached at barts@mjbizdaily.com