Patients of Pennsylvania – this is a Code Red Watch.
The PA Department of Health, in full-blown transparency mode, has provided the results of their extensive review of seed-to-sale cannabis software. As it turns out, BioTrackTHC submitted a cost proposal that was apparently infinitely more expensive than their competitor of ill repute, MJ Freeway. That’s right, BioTrackTHC’s proposal, despite receiving a perfect 500/500 technical score, was apparently so expensive that they received a cost score of zero, which ultimately cost them the contract. If you buy this narrative, God help you.
To put this in perspective, here is the cost score formula that was used:
Since MJ Freeway submitted a cost proposal with the lowest total cost ($10,400,000), they received the full 300 points that were available in the cost score category. That’s reasonable.
However, in order for BioTrack to receive a cost score of zero, their cost proposal would have to be twice that of MJ Freeway, a whopping $20,800,000.
The state has yet to release BioTrack’s cost proposal, though it seems unlikely that they would propose such a high dollar amount, especially considering the value of previous contracts that they have won. Here’s a sample from what we could find with a quick google search.:
Washington (2013) – $750,000
Hawaii (2016) – $159,000
The full report with this absurd scorecard was linked to as part of a 4/20 press release on the Department of Health’s website. Remember that date, stoners.
Hang on. This is just the tip of the iceberg.
We should start off by pointing out the obvious for the folks at home – ain’t no one messing around with MJ Freeway these days. They are basically industry pariah. MJ Freeway was mega hacked back in January, halting the operations of 1000’s of marijuana businesses across the country. To better illustrate the severity of this recent outage, here’s a message from earlier this year brought to you by MF Freeway CEO and Cofounder, Amy Poinsett:
Hilariously, after MJ Freeway was announced as the winner, Department of Health Spokesperson April Hutcheson was quick to point out that they were well aware of the recent data breach, and that it was really nothing to worry about.
“We are aware of the system failure MJ Freeway experienced in January during the procurement process, and that it has resolved any issues surrounding the breach,” she said, in a written statement. “MJ Freeway submitted the strongest proposal and was selected on those merits.
Resolved huh? I gues we’ll just have to take it from MJ Freeway cofounder, Amy Poinsett:
“I think I can confidently say we are the most secure cannabis company in this particular industry,”
WTF IS GOING ON HERE?
MJ Freeway should have been eliminated from the running once it became known that their systems were hacked. I don’t think this point really needs to be made to reasonable people. HIPPA concerns aside, This is a $10.4 million dollar contract we are talking about.
Similarly, you can see on this modified scorecard that BioTrackTHC probably would have won if the cost score was calculated reasonably. Unfortunately, when it comes to showing us how they arrived at the cost score, the DOH isn’t that transparent. In reality, BioTrackTHC was most likely priced comparably to MJFreeway. That’s why BioTrackTHC is used by states such as Washington, New Mexico, Illinois, New York, Hawaii, and Delaware – and with much lower price tags…
Prior to the big win in PA, MJ Freeway had just one government contract. The state of Nevada got a much better deal ($603,393 for 5 years) for what the software company has described as “essentially an off-the-shelf system”
Pennsylvania’s tracking system is an adaptation of software — “essentially an off-the-shelf system,” Poinsett said — that was prepared for Nevada’s marijuana industry.
Nonetheless, the Department of Health has assured us that they have done their due diligence, even releasing a technical diagram showing what seed-to-sale software does. I’ve added a unique feature of the MJ Freeway system that they missed for reference.
Follow The Money
We know that MJ Freeway’s reputation has obviously suffered as a result of the hack earlier this year. Bad reputation=lost customers=lost revenue. Someone is losing money as a result.
Interestingly, the hack happened just as MJ Freeway was in the middle of what is known as “Series B Funding.” This is when investment firms inject money into businesses that have established themselves as more than just a concept. MJ Freeway was pumped full of cash based on the assumption that they were a major player in the marijuana seed-to-sale software market. Then they got hacked…someone’s investment turned sour.
So, who has a stake in MJ Freeway? In other words, who really loses money when MJ Freeway fails? The press release linked to above lists, among others, a private equity firm called Tao Capital Partners.
Here’s Where Things Get Really Fishy
Remember that date that I told you to remember?
It just so happens that the very next day, MJ Freeway announced that they had received an additional $3 million in investments to reach a total of 11 million in Series B funding. This money came from existing investors, including Tao Capital Partners. However, surely this is just a coincidence, right? According to Managing Director of Tao Capital Partners, Joby Pritzker:
With the expectation that the cannabis market is set to more than double by 2018, we chose to invest additional capital with MJ Freeway,” said Joby Pritzker, Managing Director of Tao Capital Partners and Chairman of the Marijuana Policy Project, the largest organization in the United States focused on marijuana policy reform.
A little more digging has yielded even more questionable relationships. Looks like The Arcview Group (investment) and the National Cannabis Industry Association (Lobbying), are also in the mix of strange bedfellows. Dear Lord, even MJ Freeway’s executives are intertwined into the web of political influence. Shoutouts to the hustlas!
That’s not how its supposed to work…
WE ARE WATCHING