Metrc might be dominating the legal cannabis track and trace market, but Colorado’s state auditor wants to know why the company did not have to compete for its state contract in 2018.
Colorado state auditor Kerri Hunter released a report on Aug. 7 on the state’s Marijuana Enforcement Division (MED), which oversees the legal cannabis market and is part of the state’s Department of Revenue (DOR). That report primarily focused on the state’s lack of enforcement to prevent underage sales, but the report also noted concerns with the fact that Metrc received its second state contract with Colorado as a “sole source” procurement without a bidding process.
Colorado originally granted Metrc a contract to build its cannabis track and trace system in 2011, one year before voters would convert the state’s medical cannabis program into the nation’s first adult-use market through a ballot measure. Seven years later, in 2018, the state granted Metrc a new contract without making the company endure an open-bidding process.
The state argued that no company other than Metrc could fulfill the requirements of the contract, but the state auditor said that there was a lack of documentation to support that claim.
“The Department’s documentation justifying its decision to award a sole source contract in 2018 for the ongoing support, licensing, and hosting of the METRC system did not address why METRC was the only system on the market that could meet the Department’s needs and why the Department did not need to pursue a competitive bidding process, as required,” said the report.
In response to the auditor’s report DOR argued that they were unable to find any other company that could meet its Marijuana Enforcement Division’s needs.
“Research showed that there were no equivalent systems in the market,” said the response, which was included in the auditor’s report. “There were vendors that offered RFID compatibility point of sale systems to marijuana stores, which is different from the ability to offer RFID technology. There were no competing systems identified that could provide a regulatory seed to sale tracking system coupled with RFID technology as required in Rule 3-805.”
Rule 3-805 of the state’s cannabis regulations defines a mandated inventory tracking system that operates as “a web-based tool coupled with RFID [radio frequency identification] technology that allows both the Inventory Tracking System User and the State Licensing Authority the ability to identify and account for all Regulated Marijuana.”
Plant-touching businesses in Colorado, with the exception of licensed Marijuana Hospital Businesses, are required to attach tags on seedlings that are maintained until the plant can be made into a final product and sold. Those tags must use RFID to allow wireless tracking.
Rules require licensees to use RFID plant and package tags for regulatory monitoring and to support the division’s ability to trace the origin of inventory – for example, in cases of adverse health events, testing compliance issues, and evidence of diversion responsive to federal priorities.
In recent years, the market for track-and-trace software has tightened into pretty much two different companies. BioTrack has contracts with 10 different states, while Metrc has contracts with 15 states and with Washington D.C. BioTrack’s website states that it can work with existing systems that use RFID, without further explanation of how it might use the technology.
Alleaves, which owns BioTrack, did not respond to emailed requests for comment.
In light of the auditor’s report, the DOR said it would implement new standards of documentation for procurement contracts as soon as January 2024.
“The Division intends to propose amending rules to allow for broader consideration of track and trace technology beyond RFID,” said the department’s rebuttal, which was included in the report.
Metrc’s no-bid contract in Maine
The year after Colorado granted Metrc a second contract, the track and trace company was battling rival BioTrack to secure a contract with Maine, which was preparing to launch its own adult-use market years after legalization won at the ballot box in 2016.
Maine’s Office of Cannabis Policy (then known as the Office of Marijuana Policy) announced in February 2019 that Metrc had been selected to provide track and trace services to the state’s impending adult-use market.
OCP decided to forgo a bidding process and instead followed Alaska’s lead, which conducted its own bidding process in 2016 before choosing Metrc, formerly known as Franwell, for a one-year, $150,000 deal.
“The State of Maine’s agreement with Franwell comes by way of a competitive procurement conducted by the State of Alaska,” said the Feb. 19, 2019, press release from Maine’s Department of the Administrative and Financial Services (DAFS) announcing the new deal. “Given the timeline available, the complexity of the service needed, and the requirement that industry stakeholders utilize the system, DAFS opted to piggyback off of an existing procurement, allowing the State of Maine to proceed immediately and without the risk of undue delay.”
One month later, that contract was rescinded and OCP conducted a new bidding process which resulted in BioTrack winning the three-year contract for $275,000. Eight months after that, the state had to again cancel its track and trace contract after BioTrack reportedly failed to meet a key deadline in the development of its system for the state. At that point, Maine’s OCP went back to Metrc, signing a six-year contract for $540,000.
