The state of Washington has recourse to apply liquidated damages to its cannabis traceability provider, MJ Freeway, after the company missed a Nov. 6 deadline to implement its second Leaf Data Systems software release.
The Washington State Liquor and Cannabis Board (WSLCB) issued an emailed letter to its cannabis licensees Oct. 31, informing them that the release, 1.37.5, would not be in place by the deadline.
“We continue to work with MJ Freeway on testing and we are seeing progress on addressing fixes,” the letter said. “We’ve asked MJ Freeway to provide us with the date when we will receive the final release for our teams to test. Once we’ve received that date, we will revise the entire project timeline and communicate that to you.”
The state can apply liquidated damages to its vendors for missed deadlines as part of its vendor management plan, as well as incentives for releases completed ahead of schedule.
“In the case of 1.37.5, liquidated damages will be applied after the missed deadline,” the letter continued. “This is necessary to ensure our vendor is incentivized to quickly resolve issues and prepare the release for implementation.”
“They would pay up to $17,000 a week for a missed deadline,” Brian Smith, WSCLB spokesman, told Cannabis Business Times. “That was worked into the contract, and there are also incentives for early delivery.”
This is the first time the state would apply liquidated damages to a vendor, Smith added.
The WSLCB issued a second bid for a traceability system after the state outgrew the availability and size of its original system, Smith said. When MJ Freeway was awarded the contract, it began developing and implementing its Leaf Data Systems software in a series of releases.
“[The system] is scheduled to … be completed by the end of the year, but we’ll see if that’s going to happen,” Smith said.
The 1.37.5 release was largely focused on bug fixes, he added, and the WSLCB has been in constant communication with MJ Freeway during the project.
“So, it’s not like it was a surprise to us,” Smith said. “We’re constantly working together.”
MJ Freeway merged with MTech in mid-October, a move that “has infused the company with additional capital and allowed them to add additional resources,” according to WSLCB’s letter. “We’ve seen increased collaboration and steps to ensure the product meet business needs.”
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