WSLCB - Work Group - Traceability 2.0
(October 9, 2020)

Friday October 9, 2020 10:30 AM - 12:00 PM Observed

The Washington State Liquor and Cannabis Board (WSLCB) Traceability 2.0 Work Group is composed of industry stakeholders and agency staff vetting the next generation of cannabis supply chain transparency in Washington state.

[WSLCB Deputy Director] Megan [Duffy] would like to schedule a meeting with this group in the next few weeks to discuss where we are on the traceability approach.

WSLCB Email (Sep 16, 2020 1:50pm PT)

Proposed Agenda

  • Look back at February meeting
  • Between February and now
    • External factors impacting agency/work
      • COVID
      • State budget 15% reductions
      • Furloughs
      • Hiring freeze
    • LEAF System
      • No code releases
      • Workaround efforts
  • Moving ahead in current environment
    • Existing system – continue to pursue work arounds
    • LCB work on identifying future approach, considering concepts and high level stakeholder requirements gathered to-date
    • Future report back to workgroup

Observations

Members confirmed WSLCB remains “stuck between a rock and a hard place” but sought answers about lab results, the open data portal, license renewal fees, and legislative outreach.

Here are some observations from the Friday October 9th Washington State Liquor and Cannabis Board (WSLCB) Traceability 2.0 Work Group meeting.

My top 2 takeaways:

  • The work group convened for the first time since February to verify an uncertain future for any collaborative effort to re-envision traceability given the unfolding effects of the pandemic on state government.
    • Since the switch to traceability vendor MJ Freeway in early 2018, Leaf Data Systems---the software responsible for tracking the state’s legal cannabis---had been fraught with problems. MJ Freeway was rebranded Akerna in October 2018 through a reverse merger for the purpose of becoming a publicly traded company on the NASDAQ exchange in June 2019The last update to Washington’s version of Leaf was long-delayed release 1.37.5 in July 2019.
    • The WSLCB formed a Traceability Advisory Committee in January 2017 to discuss cannabis supply chain transparency in Washington state as the agency committed to switching from BioTrackTHC to a new vendor. The Committee was composed of agency staff, traceability software vendor representatives, industry stakeholders, a representative from the Washington State Office of the Chief Information Officer (WA OCIO), and a quality assurance vendor. As the State’s relationship with MJ Freeway/Akerna declined, so did participation in the Advisory Committee and it was disbanded in August 2019. Several agency and industry participants from that entity continued with the work group.
    • Formed in September 2019, the Traceability 2.0 work group was intended to be a forward-looking collaboration between WSLCB and stakeholders vetting the next generation of cannabis supply chain transparency in Washington state. The last group meeting was on February 24th; a scheduled meeting for March 23rd was cancelled.
    • Duffy told attendees the meeting’s purpose was “largely to check in” and went through introductions of staff and stakeholders (audio - 4m).
    • WSLCB staff in attendance:
      • Megan Duffy, Deputy Director
      • Kendra Hodgson, Cannabis Examiner Manager
      • Mary Mueller, Chief Information Officer (CIO)
      • Justin Nordhorn, Chief of Enforcement and Education
      • Amy Lyn Ribera, Executive Assistant to Deputy Director Megan Duffy
    • Work group members in attendance:
    • Deputy Director Megan Duffy provided an update on environmental factors impacting the agency’s traceability work. She prefaced that the coronavirus outbreak in Washington had created the need for WSLCB to work remotely, deal with “stakeholder requests that came in,” incorporate staff furloughs, and accept a hiring/contracting freeze with “some exceptions.” She said the agency had cut approximately 10% in the “existing budget to help deal with an over $4 billion [statewide] shortfall in this biennium.” WSLCB also cut 15% from their planned budget for fiscal years 2021-23, an amount Duffy commented that would only be met by “impacting staff.” The agency was waiting on a determination by the Washington State Office of Financial Management (OFM) on its proposed budget, which would be incorporated in a proposal put forward by the Governor to the Legislature leading Duffy to qualify: “there isn’t necessarily certainty around what we’ve put forward.” The environment meant WSLCB staff had already sacrificed their ability “to do all things on all cylinders” (audio - 6m).
    • Turning to the status of LEAF, Duffy said the agency had entered into a “service contract” in December 2019 which was “based on four six-month extensions, so, in essence, six month chunks where we would renew if we need to.” She confirmed that the contract had “been extended once now” on June 2nd. Pressed on whether stakeholders could expect any changes over the coming year, Duffy said it didn’t “mean that we’re not thinking about ‘are there ways to address these issues in that environment.’” There was agreement on “no code releases” without WSLCB approval, and such approval would only be issued to deal with problems “drastic [enough to] require a code change.” Duffy said “when new code is released, it causes significant instability and is highly problematic” for both licensees “and the public at-large at this point.” She closed by saying that agency staff was looking for “what we can actually influence and modify within our control” with a workaround for “licensing interface issues” being one example (audio - 5m).
    • Mueller pointed out that WSLCB’s “ability to influence the code is very limited” as agency staff lacked direct access to the vendor’s codebase. Staff sought workarounds “that provide a benefit” without putting “the stability of the market at risk.” In addition to the licensing issue, there were "a couple of other ones that we're looking at but have not been scheduled yet" (audio - 1m).
    • Later in the conversation Duffy looked ahead, saying that while the WSLCB had been impacted by “the budget and the COVID situation,” agency staff were still looking to make progress in the work group. She mentioned the traceability workflow discussed at prior meetings which described a potentially “less complex approach to traceability” which her team was still developing. As “workflows differ” between licensees, WSLCB wanted to bring a revised approach to the group “and say ‘what would you think?’” WSLCB employees on the call “were anxious” to reach that point, she observed, and added that “the end result” of the group’s work remained a “wide open table” (audio - 5m).
      • Jerry Tindall of Soro Software asked for clarification on what kind of presentation stakeholders could expect, and Duffy answered it would be “something that you guys could actually see and look at.” Tindall went on to describe difficulties with MJ Freeway/Akerna which “causes a lot of heartache for us as integrators” and hindered “compliance data.” He said most integrators wanted “a consistent code base that’s well documented and does exactly what it's supposed to do.” Tindall explained, “if everything worked in Leaf, it still wouldn’t be great, but it would be much better than it is now” because “if the technical execution is bad, the workflow doesn’t really matter, right?” Mueller assured him that agency staff were working to address things within their control, and had heard repeated calls not to have a new release. She acknowledged her personal and professional experience of the software development adage “despite hundreds and thousands hours of testing, what happens in Prod[uction] is not the same thing as happens in test.” While her staff were “stuck in this in-between,” their goal was to determine “how do we have releases that are stable” and “what are the alternatives?” (audio - 5m)
    • In closing, Mueller looked forward to “the next phase of traceability,” and confirmed the State wanted to have integrators handle sales and transfers in a way “that doesn’t have the State right in the middle of that.” She hoped that stakeholders would remain engaged to develop that future (audio - 2m).
  • Throughout the call, staff responded to questions about the traceability system, the vendor contract, fees, and the future of the State’s cannabis reporting system.
    • Tindall asked whether the work group could see a list of issues or workarounds under consideration. Duffy replied that the list could be shared to the WSLCB’s restricted integrator site, but some issues still needed staff “analysis and discovery first.” Hodgson indicated that an older list of issues had been shared during the work group’s February 24th meeting, but Duffy indicated staff had “not been posting those materials” as consistently (audio - 2m).
    • Oliver wanted to know about laboratory result (LR) codes which were forbidden from inclusion on cannabis testing documentation on May 1st, as she’d been hearing from WSIA members “that that’s impacting them.” She said licensees were finding “multiple lots that are sent in on one manifest” resulted in “improper linking, or failure to link to the test results” in Leaf, a situation compounded by different implementations by each software integrator. Hodgson told her that a “break between the lab results that have been entered” should be addressed by filing a “Leaf customer service ticket, and if it has to be escalated to us, it would be.” Doubling down, she said that “the risk of falsifying data is so large...that there is no way that we’re going to rescind that guidance” because the agency had seen examples of licensees attempting to “bypass the safety that those lab results provide” (audio - 3m).
      • Foster followed up to ask about the responsiveness of Akerna support and asked if the agency was receiving any data from the vendor about service calls. Hodgson had heard complaints about unresponsive staff, but felt the statistics provided by Akerna didn’t indicate “a volume that would prevent response times from being really reasonable.” She admitted that when support staff at Akerna “escalate a ticket, it goes into a view that we cannot see.” Mueller said WSLCB was working to be able to see “all the views on all the tickets.” Foster asked if the agency could publish the support statistics provided by the vendor, and Mueller suggested agency staff would need to talk to their legal counsel “on whether or not that information can be shared.” Mueller assured participants that WSLCB didn’t “take anything on faith” from their vendors after “some really hard lessons in that area” (audio - 4m).
      • Oliver confirmed licensees were expected to file a Leaf Data Systems support ticket with MJ Freeway/Akerna when their products could not be transferred due to failed linkage of lab results (audio - 1m).
    • At the beginning of the call, Foster asked for an update on the status of WSLCB’s open data portal, known as the Marijuana Dashboard.
      • See the October 5th Week Ahead for Cannabis Observer’s assumptions about a Notice of Intent to Sole Source a contract with Socrata.
      • Mueller said “there is a sole source being published for Socrata” which was an “administrative formality.” She explained that WSLCB had chosen Socrata in 2016 “as an offshoot of the State’s contracts.” The agency was expected to “republish” their notice “because it's been renewed three times” and “after a certain number of times it has to be reposted.” Mueller divulged that “our Socrata license is being given up in the budget reductions” and the agency would be “adopting M365” instead which featured Power BI. Mueller said WSLCB had “very few reports that are used on our instance of Socrata.” Ten reports, “primarily used by Enforcement,” were being moved to Power BI and “the State’s instance of the open data is going to remain.” Foster asked for confirmation that M365 and Power BI would be internally facing, and not accessible to the public. Mueller confirmed and indicated the agency system would be “the source of the centralized data, and then that will be integrated with the public portal that’s hosted by [Washington Technology Solutions (WATech)].” She promised that it would include “more data sources as soon as we complete the implementation of the licensing and enforcement systems replacement” (audio - 3m).
      • Cannabis Observer’s interpretation of this exchange is that WSLCB’s neglected Marijuana Dashboard will be retired, and eventually data from WSLCB’s internal traceability system of record will be exported to the State’s aggregate open data portal.  Presumably, that work would be encompassed in the notice of intent to sole source, which was scheduled to begin on November 1st for a period of one year.
    • Towery inquired about the next potential six-month contract extension with MJ Freeway/Akerna. Duffy replied that the next contract extension in January 2021 was all but certain (audio - 1m).
    • Foster noted the agency was stuck between “a rock and a hard place” with regards to traceability. Duffy concurred with his comments “a hundred percent” and said the “main takeaway” was that “despite the increased challenges, that doesn’t mean that we stop trying to move forward” (audio - 5m).
    • Foster questioned the Leaf subscription service fee of $50,000 per month and whether licensees were the source of funds forked over to Akerna (audio - 14m) .
      • In the spring of 2017 during the regular legislative session, lawmakers passed SB 5130 to add a "nonrefundable additional fee" of $480 assessed by WSLCB during license renewals through June 2018 "to be used for the replacement of the board's traceability system." The bill also stipulated that beginning in July 2018, a general purpose $300 fee was added to all cannabis license renewals, raising their cost from $1000 to $1300 per year.
        • Subsequently, an additional $81 was tacked on as part of HB 2334 in 2018, a bill on extra-502 cannabidiol (CBD) which the agency subsequently implemented into rule.
      • Based on licensee data from mid-June, Cannabis Observer tallied 1,830 active or pending producer, processor, producer/processor, retailer, transporter, and research licenses. While not specifically earmarked for on-going traceability expenses, the on-going $300 license renewal fee increase generated $549,000 annually, or $45,750 per month - very close to the $50,000 monthly Leaf subscription fee.
      • Foster noted that in HB 2870, agency request social equity legislation passed into law on March 31st, WSLCB originally envisioned waiving the renewal fee to offer some financial relief for social equity applicants. This concession was later amended out of the bill by Senator Curtis King who led Senate Republican opposition to the bill.
      • Tindall was supportive of Foster’s comments, saying it “sucks to be paying money for things that we have no control over that don’t serve our needs.”
      • Duffy said she wanted to look into some of Foster’s “assumptions” but noted that WSLCB had “program costs within the agency itself for traceability, too.” Foster reiterated his understanding that the additional $300 fee in SB 5130---a bill focused on generating revenue to fund procurement of a new traceability system---was not specifically earmarked like the $480 fee - but nearly $550K per year was coming in the door at WSLCB from the added licensee fee while $600K was shipped back out to Akerna.
      • Tindall then asked about “businesses that are struggling” in the current market and whether the agency had seen evidence of license “consolidation” or “trending any kind of specific direction” in the 502 “ecosystem.” Hodgson said that generally, “sales have grown exponentially, month over month, since March, and as of right now, do not appear to be slowing.” Growth had been “more than double-digit percentages,” compared to the same month in 2019. Relocating businesses, new ownership, and sales of licenses had “not slowed either, we have seen no marked downturn.” Duffy expressed empathy that the “state of this application is not acceptable” but said it couldn’t be disentangled “because of how tightly wound it is with the industry.”
    • Towery asked about any internal changes on traceability requirements or expectations since they last were discussed. Duffy believed that “reexamining” the requirements was a possibility and staff were “seeing where we can be flexible...we’re just not there yet” (audio - 2m).
    • Oliver inquired about traceability Impacts on the Quality Control (QC) Testing and Product Requirements rulemaking project, specifically asking if “QC rulemaking is being impacted by the limitations of this traceability system?” Hodgson said that her Cannabis Examiner’s staff was working with Policy and Rules Manager Kathy Hoffman’s team “pretty closely” and had “created a lightweight test plan” in an attempt to “validate whether or not what we believe we can do is going to work.” WSLCB was considering how to “take those rules and make them real in traceability, possibly without a code change,” she reported. Hodgson insisted that LEAF limitations “did not drive the policy” in QC rulemaking. Foster followed up to note that during the introduction of a supplemental CR-102 for the QC rulemaking project on September 30th, and in relation to the incremental shift of lot size from five to ten pounds, Hoffman said agency staff had “looked at what our traceability system could tolerate, and this proposal reflects that.” But Hodgson confirmed the change in lot size was a policy choice rather than a traceability limitation (audio - 4m).
    • Hines asked how the group could provide assistance on other issues “still outstanding.” Duffy remarked that the agency would “continue to utilize and solicit the expertise and input from this group.” She also felt Hoffman's Policy and Rules team would appreciate the work group’s continued involvement as well as the agency’s newly formed External Outreach group. Overall, “having conversations, coordinated, kind of deliberate conversations” where stakeholders could keep educating agency staff, was something Duffy expected would continue (audio - 4m).
    • Foster took the opportunity to congratulate Chief Nordhorn on his new role as Policy and External Affairs Director, and asked if he could clarify whether he would be responsible for the agency’s legislative outreach. Nordhorn responded that he’d work “side by side” with Director of Legislative Relations Chris Thompson to deal with legislation, but that Nordhorn himself would be responsible for “policy oversight issues and external affairs issues.” He anticipated “a lot of crossover” between policy and legislative work. Nordhorn would also be studying “policy and interpretation” by agency employees as well as legislative intent before publishing position statements so that policies were “applied consistently across the state” (audio - 3m).
    • Duffy closed out the meeting telling the group how much she appreciated their past and future participation, as well as how she hoped to “keep moving” ahead on traceability. Asked by Mueller about the next Traceability 2.0 gathering, Duffy said it would necessitate an internally developed timeline which would then be shared with stakeholders (audio - 1m).

Information Set